Disclaimer: This article is for informational purposes only and is not a substitute for professional tax or legal advice. The rules surrounding the federal solar tax credit are complex and depend on your individual financial situation. You should consult with a qualified tax professional to determine your specific eligibility.
“I thought I was getting thousands back this tax season… what happened?”
You’ve made the leap into solar energy — planning your budget around the federal solar Investment Tax Credit (ITC). Your installer even highlighted it during their sales pitch. But now, your tax preparer delivers the bad news:
- “You can’t claim the credit this year.”
- “Your system doesn’t qualify under IRS rules.”
- “The paperwork from your installer is incomplete.”
Suddenly, what you counted on as thousands of dollars in tax savings feels like it’s slipping away. You might even feel blindsided — especially if your installer promised that “you’ll get the credit” without walking you through the finer details.
At Bennett Legal, we speak with homeowners every tax season who are shocked by these denials. Sometimes the issue is just timing or a misunderstanding of IRS rules. Other times, paperwork mistakes or sales misrepresentations cause you to miss out entirely.
In this guide, we’ll cover:
- The legitimate reasons the tax credit might not apply this year.
- The IRS eligibility rules every homeowner should know.
- The mistakes and delays that push claims to the next tax year — or eliminate them altogether.
- What you can do: if you suspect misrepresentation by your solar company.
Why the Solar Tax Credit Might Not Apply This Year
The federal solar ITC applies to the tax year in which your system is considered placed in service — meaning it is fully installed, connected, and ready to generate electricity.
That’s the part many homeowners don’t realize:
- It’s not about when you signed the contract.
- It’s not about when you made your first payment.
- It’s not even about when the panels were delivered to your house.
For the IRS, placed in service usually means the system has passed final inspections, has utility interconnection approval, and is operational.
If that milestone happens in January instead of December, your eligibility shifts to the next tax year. Similarly, if there are delays with permitting, backordered components, or inspection scheduling, your claim may get pushed forward — no matter what your installer led you to believe.
Eligibility Basics
Before you can claim the ITC, you must meet all IRS requirements. These rules aren’t hidden in fine print — they’re part of the federal tax code — but many homeowners still miss key points.
Here are the core eligibility rules, explained in plain language:
1. You Must Own the Solar System
Owning the system doesn’t necessarily mean you bought it outright with cash — financed purchases qualify, too — but leases and PPAs typically do not.
- Qualifies: You purchased the system with cash or through a loan where you hold title to the equipment.
- Does not qualify: You signed a lease or power purchase agreement (PPA) in which a third-party owns the panels and sells you the electricity. In these cases, the system owner (often the solar company) claims the credit — not you.
Example: A homeowner in Texas financed a system with a solar loan. Even though they’re making monthly payments, they hold title to the panels — so they’re eligible. By contrast, their neighbor signed a $0-down lease; the installer owns the system and takes the credit.
2. The System Must Be Placed in Service
The federal credit only applies to systems that are complete and operational in the claimed tax year. This typically includes:
- Passing all building and electrical inspections.
- Receiving permission to operate (PTO) from your utility provider.
- Having all related system components (like inverters) installed and functioning.
A partially installed system — even if 95% done — does not qualify until it meets the IRS definition of being placed in service.
3. The System Must Be Located at a U.S. Residence You Own
The credit applies to:
- Primary residences.
- Secondary homes.
It does not apply to rental properties you don’t personally use for at least part of the year. However, different IRS rules may allow separate credits for rental business use — a tax professional should evaluate that scenario.
4. Qualifying Equipment
The ITC covers the full cost of eligible solar property, including:
- Solar photovoltaic panels or cells.
- Inverters.
- Mounting equipment and racking.
- Wiring and electrical connections.
- Energy storage (batteries) if charged exclusively by the solar system.
Cosmetic upgrades to your home or unrelated electrical repairs are not eligible. For example, replacing your entire roof is not covered — unless you’re installing a solar shingle roof designed as part of the PV system.
5. You Must Have Tax Liability
The ITC is non-refundable — meaning it can reduce what you owe the IRS to zero but cannot generate a refund beyond your tax liability.
If your tax bill is smaller than the credit amount, the unused portion can usually be carried forward to future years. However, if you have no tax liability, the credit cannot be claimed.
Example: A Florida homeowner with a $1,500 federal tax bill in 2024 and a $6,000 solar credit can apply $1,500 this year and carry forward the remaining $4,500.
6. Meeting IRS Filing Requirements
To receive the credit, you must file the proper forms:
- Complete IRS Form 5695 for the tax year your system was placed in service.
- Include all required documentation — invoices, manufacturer certificates, and PTO proof — in case the IRS requests them.
Missing or incorrect filing can result in a denied credit, even if you’re otherwise eligible.
If you miss on any of these criteria — ownership, timing, qualifying property, tax liability, or proper filing — the IRS will not allow you to claim the credit for that year.
7 Common Reasons You Can’t Claim the Solar Tax Credit
Even if you meet the IRS’s general eligibility rules, certain pitfalls can push your claim to the next tax year — or block it outright. Here’s what often goes wrong, and the actions you can take now.
- Your Installation Was Completed After December 31
The IRS bases eligibility on when your system is placed in service — fully installed, inspected, and approved. If this milestone happens after December 31, your claim moves to the following tax year.
What you can do:
- Confirm PTO (Permission to Operate) and completion dates on your documentation.
- File for the credit in the correct year.
- If delays were due to the installer’s mismanagement and cost you financially, consult a professional to assess possible claims.
- You Have a Leased System or PPA
If you don’t own the system, you can’t claim the credit — leasing and PPA agreements assign ownership (and the credit) to the solar company.
What you can do:
- Review your agreement to confirm ownership status.
- If you were told you would own the system but the contract says otherwise, this may be misrepresentation — a situation in which a legal review can help.
- You Filed Your Taxes Incorrectly
Missing IRS Form 5695, using the wrong tax year, or failing to include eligible costs will result in denial.
What you can do:
- Refile with an amended return if the mistake was on your end.
- A tax preparer familiar with solar credits can correct errors and ensure all paperwork is in order.
- The System Wasn’t Fully Placed in Service
Partially installed systems, or those waiting on final inspection or utility approval, aren’t eligible yet.
What you can do:
- Work with your installer to complete outstanding tasks.
- Once placed in service, claim in the next tax year.
- Ownership Paperwork Was Incomplete
If the system title or purchase agreement wasn’t finalized before filing, the IRS won’t process the credit. This happens in home purchases with solar or builder-installed systems.
What you can do:
- Finalize all transfer-of-ownership documents as soon as possible.
- If a seller or installer is withholding documentation, legal assistance can help cut through stalling or refusal.
- You Don’t Have Enough Tax Liability
The ITC is non-refundable — it can only offset what you owe. If your liability is lower than the credit amount, you can’t get a cash refund for the unused balance. Think of your tax liability as a $1,000 bill at a restaurant. The solar tax credit is like a $5,000 gift card. It can cover your entire bill, leaving a $4,000 balance on the card for your next visit (the carry forward), but the restaurant won’t give you $4,000 in cash back.
What you can do:
- Claim as much as you can this year and carry the remainder forward, up to the IRS’s allowed time limit.
- A tax professional can help you maximize carryover benefits.
- Your Installer Made Paperwork Errors
The federal solar tax credit relies heavily on accurate, timely paperwork from your installer. The IRS wants proof that your system is eligible — and that proof almost always comes from the company that sold and installed the panels.
The key documents include:
- Itemized invoice showing all eligible equipment and installation costs.
- Proof of ownership (sales receipt, signed loan agreement, or system title).
- “Placed in service” completion date that matches inspection and utility records.
- Manufacturer certification statements for equipment.
- Utility Permission to Operate (PTO) documentation.
If any of this information is wrong, missing, or inconsistent, your tax credit claim can be denied — even if your system itself is perfectly eligible.
What you can do
- Request corrected or missing documents from your installer immediately.
- If they refuse or delay, you may need experienced help to compel compliance quickly, especially if IRS filing deadlines are near.
Timing Pitfalls and How to Avoid Them
| Timing Pitfall | Why It Causes the Credit to Be Missed | How to Avoid It |
| Late-Year Installation Start | If permits, delivery, or weather delays push completion past December 31, your tax credit moves to the next year. | Sign contracts early in the year; factor in at least 60-90 days for permitting and installation. |
| Slow Utility Interconnection Approval | PTO (Permission to Operate) from the utility is required for “placed in service” status; delays here mean no current-year credit. | Submit interconnection applications promptly; follow up regularly with the utility and installer. |
| Permit or Inspection Delays | Required inspections not scheduled or passed before year-end block the credit claim that year. | Confirm inspector availability early; request expedited inspections if deadlines are tight. |
| Installer Scheduling Backlogs | High demand (especially after incentive announcements) can push installations past deadlines. | Book your installation immediately after contract signing; ensure installer commits to a completion date in writing. |
| Backordered Equipment | Missing components (inverter, batteries) prevent system from being operational. | Ask installer to secure equipment before project start; consider alternate brands/models if delays arise. |
| Weather Interruptions | Extreme conditions can halt work, delaying completion beyond the tax year. | Begin installation in fair-weather months; have contingency plans if storms occur. |
What to Do If You Missed the Credit This Year?
- Confirm if you can claim it next year.
- Amend your return if filing error caused denial.
- Get missing or corrected documentation.
- Consult a tax professional to safeguard carryover credits.
- If installer misrepresented eligibility, seek a legal review to assess damages or recovery.
When Tax Credit Denials Cross From Confusion to Misrepresentation
Most homeowners who miss out on the solar tax credit don’t do anything wrong — they’re misled, rushed, or misinformed by the companies that sold them the dream of “free solar.”
At Bennett Legal, we’ve seen a pattern across dozens of cases:
Installers promise guaranteed credits, misstate IRS timelines, or fail to file essential documentation. The result? You lose thousands, and the company moves on.
That’s where we step in.
Our legal team helps homeowners:
- Investigate whether your installer misrepresented eligibility or timing under federal or state consumer protection laws.
- Review contracts and marketing materials to determine if misleading claims were made about ownership, “guaranteed” credits, or refund promises.
- Demand accountability and recovery — including refunding lost incentives or damages for deceptive sales practices.
- Collaborate with tax professionals to correct filings, restore documentation, and secure any credits still recoverable.
Many of these situations start as “misunderstandings” — but if your installer assured you of a benefit you legally couldn’t receive, that’s not a clerical mistake. It’s potential misrepresentation under Texas and federal law.
At Bennett Legal, we hold solar companies to the same standards they sell — transparency, accountability, and truth in energy savings.
Because when tax season exposes what the contract hid, you deserve more than an apology — you deserve answers and action.
While a qualified tax professional is the expert to help you correctly file for and claim the credit you are owed, Bennett Legal steps in when an installer’s false promises or failures are the reason you’ve lost out on those savings.
