The Inflation Reduction Act passed in 2022 allocated a lot of money to help homeowners install rooftop solar on their homes.

It allows households installing solar panels to deduct 30% of the cost of each project from their federal taxes. It also includes a 30% deduction for an electrical panel upgrade if needed.

There is no upper cap on this incentive. If your federal tax liability is less than the 30%, you can roll the remainder over to next year.

For example, if you pay $20,000 for equipment and installation, you can claim $6,000 off your federal taxes. If, however, you only owe $4,000 in federal taxes, you can claim the $4,000 this year and the $2,000 the following year, up to 5 years. Read more about how tax credits work.

To claim the tax credit, you'll fill out Form 5695 with your federal taxes.