At the federal level, there is a 30% credit for parts and labor. The credit is claimed in the year the system is installed, inspected and turned on, using the full price of the system, even if you are paying over time. If the credit is more than your tax liability, any unused credit will carry forward to next year. This can be confusing. Your tax liability is what the government keeps at the end of the year after all other credits and deductions. For example, if you have $6000 of withholding and get a $1000 refund, your liability was $5000. Likewise, if you have $4000 of withholding and owe an extra $1000, your liability was $5000. If your solar credit was more than $5000, you would get $5000 this year (meaning all your withholding would be refunded) and the rest would carry forward.
There may be a state credit, you would need to check with your state or let us know what state you live in.
If you get a local utility rebate or other state cash incentive, you claim any federal or state tax credits based on the net price. For example, if the system is $20,000 and you get a $2000 rebate from your utility or other state program that is not a tax credit, then the price you would report on your tax return is $18,000.
