Advanced Tax Strategies – Solar Investing
Looking for a way to reduce your tax bill and make a smart long-term investment? Solar investing might be your solution.
Beyond the environmental benefits, solar investing is quickly gaining popularity among individuals and business owners for its powerful tax advantages. If you’re in a high-income year or planning significant capital investments, this could be a timely opportunity to reduce your tax liability while increasing property value and decreasing future energy costs.
Here’s what you need to know.
The Federal Solar Tax Credit
One of the biggest financial incentives tied to solar is the federal solar investment tax credit (ITC)—currently at 30% of the total system cost. This is not a deduction, but a dollar-for-dollar credit against your tax liability.
For example, if your solar installation costs $30,000, you may receive a $9,000 reduction on your federal income taxes. This credit applies to both residential and commercial installations and is one of the most accessible energy tax incentives available today.
You can learn more directly from the IRS about the Residential Clean Energy Credit and how it works.
Additional Tax Benefits for Business Owners
Business owners can layer in several additional tax advantages beyond the federal credit. These include:
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Bonus Depreciation: Currently at 60% in 2025, allowing a large portion of the installation cost to be deducted in the first year.
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Section 179 Expensing: Offers immediate deductions for qualifying equipment (like solar systems) placed into service.
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State and Local Incentives: Many jurisdictions offer rebates, property tax exclusions, or additional credits.
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Utility Cost Reductions: While not a tax benefit, lower ongoing energy expenses support long-term ROI.
More detailed information about business-related solar credits is available in IRS Form 3468: Investment Credit and IRS Publication 5886: Clean Energy Tax Incentives for Businesses.
With the right combination of incentives and planning, many businesses see a net reduction in solar project costs of 50–70%.
How the Process Works
Getting started with solar as part of a tax strategy doesn’t have to be complicated. Here’s a general outline of the steps:
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Evaluate whether solar is a good fit for your home or business based on energy use, property setup, and goals.
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Request a proposal from a reputable solar provider and review the potential return on investment.
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Discuss the tax implications with your CPA (we’re happy to help!) to ensure the numbers align with your broader financial plan.
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Once you move forward with installation, be sure to claim all applicable credits and deductions when you file.
For those applying credits to residential installations, the IRS Instructions for Form 5695 explain how to properly claim these credits.
Timing Matters
These incentives won’t be around forever. The federal credit is scheduled to phase down in the coming years, and bonus depreciation continues to decline annually, hitting 40% in 2026 and tapering further by 2027.
If you’re thinking about installing solar, it’s smart to start early in the year. This ensures you have time for installation and qualification before filing deadlines and avoids scheduling delays during peak season.
Is Solar Investing Right for You?
This strategy isn’t one-size-fits-all. But if you’re expecting a higher-than-average tax year, planning a business expansion, or looking for ways to invest in your property while reducing your tax burden, solar is worth exploring.
We help clients evaluate if solar investing aligns with their tax position and long-term goals—and structure it in a way that captures the maximum benefit available under current law.
Let’s Talk About It
If you’re ready to explore whether this advanced tax strategy fits your situation, we’d be happy to run the numbers and walk you through the next steps. Reach out to schedule a tax planning session with our team today.
