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Federal Investment Tax Credit

The Maryland Energy Administration does not issue tax advice, but the federal Investment Tax Credit (ITC) is a major element to consider when determining the costs of installing a solar system. 

ITC is a tax credit and not a rebate. You can only take a tax credit to the extent that you have a tax liability during the tax filing year. This also means that you will normally benefit from the ITC in the calendar year AFTER you install the solar system. Unused tax credits can be rolled over for up to 5 years. You must file an Internal Revenue Service (IRS) Form 5695 to claim the ITC. The receipt of state or other incentives may also affect the tax credit calculation. In addition to the IRS form instructions, there are numerous websites that explain the tax credit, including what can be included in the system cost. 

Understanding how the federal ITC works is important to avoid unwarranted expectations. Solar salespersons will often quote the total cost of the system including potential  savings from the ITC when calculating the cost to the consumer. However, if the consumer does not have a tax liability, then the customer will not be able to claim the federal ITC. If you are not familiar with the previously referenced form or need help on this topic, you may request the help of a qualified tax preparer or an accountant.