As energy costs climb and sustainability becomes a bigger priority for homeowners, more people are exploring ways to add renewable energy solutions to their home improvement plans. One of the most impactful incentives available is the federal solar tax credit, often referred to as the Investment Tax Credit, or ITC. This program can significantly reduce your tax bill when you install a qualifying solar energy system as part of your renovation.

The federal solar tax credit allows homeowners to deduct 30% of the total cost of installing a solar system from their federal income taxes. This rate remains in place through 2032 before it’s scheduled to gradually decrease. The credit applies to solar photovoltaic panels as well as solar roofing products that actively generate electricity.

To qualify, your solar installation must meet a few key requirements. First, the system must be designed to produce electricity for a residential property. It also must be purchased—either paid in full or financed—but leased systems aren’t eligible. The property must be used as either your primary or secondary residence, so rentals don’t qualify. And importantly, the system needs to be installed and operational within the same tax year that you plan to claim the credit.

Homeowners planning exterior renovations can make smart use of this credit by integrating solar components into their upgrades. For instance, if you’re replacing your roof, you can opt for solar-integrated roofing shingles from manufacturers like GAF Energy or Tesla. These shingles function like traditional roofing but also generate electricity, and they qualify for the tax credit. Adding standard rooftop solar panels during a roofing project or exterior remodel is another practical way to increase efficiency and savings.

While small solar-powered outdoor lights aren’t eligible for the credit, larger solar systems that provide energy to the home are. If you’re incorporating a solar energy system into your remodel, consider adding battery storage as well. When paired with solar panels, batteries also qualify for the credit and allow you to store excess energy for use when the sun isn’t shining.

To claim the credit, you’ll need to complete IRS Form 5695 when filing your federal tax return. It’s important to hold onto all documentation, including invoices, contracts, and proof of the completed installation. These records will support your claim in the event of an audit or review.

Beyond the federal incentive, many states and local utilities offer additional programs that can further offset the cost of solar installations. These may include rebates, tax credits, or net metering programs that give you credit for the electricity your system sends back to the grid. Checking into your state or utility provider’s options can help you stack savings on top of the federal credit.