You made the leap, installed solar panels, and were pumped about saving on energy—and even more excited about that 30% federal solar tax credit. But then tax time came… and your refund? Way smaller than expected.
If you’re scratching your head and wondering what went wrong, you’re not alone.
Let’s break it down in plain English—what the solar tax credit really is, why you might not have gotten the full amount, and most importantly, what you can do to fix it (or make the most of it moving forward).
First Thing’s First: What Is the Solar Tax Credit?
The Solar Investment Tax Credit (ITC) is a federal incentive allowing you to claim 30% off the cost of your solar panel system on your taxes. This covers the cost of the panels, batteries, labor, and necessary equipment.
Thanks to the Inflation Reduction Act, this 30% deal is available until 2032—which is great news if you’ve just gone solar or are going solar soon.
Just a quick note: this isn’t a refund check. It’s a tax credit, which means it only reduces the amount you owe on your federal income taxes
If your federal tax liability is low, your credit may be low, too.
📚 Want official info? Here is an IRS page and a helpful outline from Energy.gov.
5 Common Reasons You Didn’t Get the Full Credit
1. You Didn’t Owe Enough Taxes
This is the big one. If your tax liability is low—say you owe $3,000—but your solar credit is $7,000, you’ll only get to use $3,000 of it this year. The rest doesn’t disappear, though. You have the option to carry it forward for as long as 10 years.
Example:
John, who lives in Arizona, went with a $30,000 system. He planned on using a $9,000 credit but only owed $6,000 in taxes. So, he claimed $6k and is carrying over the other $3k. What to do: Make sure to leverage options like TurboTax or figure out with your accountant your total tax liability before you file. You Leased the System or Signed a PPA If you own your panels through leasing or signed a Power Purchase Agreement (PPA), you do not get the credit, it goes to the solar company. Leasing may have given you an inexpensive option, however, you do not die with your system.
What to do: If you’re still early in your contract, consider refinancing or switching to a loan where you own the panels and can qualify for the credit.
Fix: Estimate your tax liability using tools like TurboTax’s solar credit guide.
2. You Leased the System or Signed a PPA
If you lease your panels or sign a Power Purchase Agreement (PPA), the credit goes to the solar company—not you. Leasing can lower your initial costs, but it also means you won’t actually own the system.
What to do: If you’re still early in your contract, consider refinancing or switching to a loan where you own the panels and can qualify for the credit.
Tip: “If you lease, you’re basically renting the benefits too,” says the team at Palmetto Solar.
3. You Claimed the Credit in the Wrong Year
Your system has to be fully operational (not just installed) to claim the credit for a specific tax year. If your solar panels were installed in December but didn’t become operational until January, you’ll need to claim the tax credit on your tax return for the following year.
What to do: Double-check your system’s activation or PTO (permission to operate) date before filing.
Common mistake: One Reddit user shared that they missed their credit because their system wasn’t “live” by December 31.
4. You Forgot to File IRS Form 5695
Even if everything else is right, if you skip Form 5695, the IRS won’t apply the credit. They won’t call you up to fix it, either—it’s on you to get it right.
What to do: If you missed it, no worries! You can submit a correction to your tax return by filing Form 1040-X.
5. You Included Costs That Don’t Qualify
The credit covers the solar system and its installation—but not extras like roof repairs, landscaping, or unrelated home upgrades.
What to do: Look at your installer’s invoice and make sure you’re only counting eligible items: panels, inverters, batteries, wiring, and labor.
Not covered: new roof (unless solar panels are integrated into it), tree trimming, painting, or adding a patio to admire your panels. Sorry!
Quick Fix Table: How to Get Back on Track
| ❌ What Went Wrong | ✅ How to Fix It |
| Tax bill too low | Carry unused credit forward up to 10 years |
| You leased the system | Refinance into a solar loan if possible |
| Wrong tax year | File based on activation date, not install date |
| Missed IRS Form 5695 | File a 1040-X amendment and include the form |
| Included non-eligible items | Recalculate using only eligible solar expenses |
“But What If I Still Can’t Use It All?”
Don’t panic—there are still ways to make the most of your credit:
Carry it forward – You’ve got up to 10 years to use it all. No special forms needed; just track it year to year.
Increase your taxable income – Converting a traditional IRA to a Roth, taking capital gains, or adjusting withholdings can help.
Talk to a tax pro – Seriously, this stuff gets complicated fast. An experienced CPA can put you in a stronger financial position.
FAQ: Your Top Solar Tax Credit Questions
Q: Can I claim this for a rental property?
A: Only if it’s also a vacation or secondary home. Rentals alone don’t qualify.
Q: What if I install batteries later on?
A: Yes! As long as they’re charged only by solar, batteries qualify—whether you install them with the system or afterward.
Q: Can I use state and federal incentives together?
A: Absolutely. Just subtract your state or local rebates before calculating the 30% federal credit.
Q: Is there a cap on the credit amount?
A: Nope! No maximum—just make sure your system qualifies and you owe enough taxes to use it.
Final Thoughts
Going solar is a smart move—but understanding the tax part is just as important as choosing the right panels.
So if your refund wasn’t as high as you thought, don’t stress. Chances are you just missed a step or two—and now you know how to fix it.
Still feeling stuck? That’s what we’re here for
Ready to Claim What You’re Owed?
Book a free consultation with a solar-savvy tax expert
Download the Solar Tax Credit Checklist PDF
Drop your questions in the comments—we’ll walk you through it!
About the Author
Alex Carter is a certified tax preparer and solar consultant who’s helped over 500 homeowners unlock the full value of their green energy investments. When he’s not talking tax codes or nerding out over kilowatts, he’s hiking with his dog and drinking way too much cold brew.
Disclaimer
This article is for educational purposes only and is not legal or tax advice. Please consult a qualified tax professional about your specific situation before filing your return.
