State solar tax credits are specified amounts of money that can be used to offset against a tax liability. Therefore, the federal Investment Tax Credit (ITC) that applies to solar can be claimed on federal income taxes for 30% of the cost of a solar photovoltaic (PV) system. To receive this tax credit, the system must be installed during the tax year and it must be generating electricity. There is no maximum threshold amount that can be claimed if the solar PV system was installed in or after 2009.
There are also state solar tax credits available. Fortunately, these credits generally do not affect the federal tax credit available. So, if your system costs $20,000 and your state offers a $1,000 one-time tax credit, your federal tax credit will generally still be 30% of $20,000 (not $19,000). Each state offers different incentive programs; a comprehensive look at each state’s solar incentives programs can be conveniently found on the Database of State Incentives for Renewables & Efficiency.