Hawaii State & Federal Solar Tax Credits
Learn about the tax benefits of solar.
Solar Tax Credits
With Hawaii State tax credit set at 35% and the federal solar Investment Tax Credit (ITC) expanded to 30%, there is no better time to go solar than now!
In August 2022, Congress passed an extension of the ITC, raising it to 30% for solar installations for 10 years.
⚠ Unfortunately recent proposed legislation may make this advantage disappear soon — this legislation could phase out the full 30% ITC by December 31, 2025.
You can find updates here.
Read below to learn more about what the current tax credits are, how to claim your credits and any upcoming changes.
Hawaii State Energy Tax Credit
Originally enacted in 1976, the Hawaii Energy Tax Credit allows individuals to claim an income tax credit of as much as 35% of the cost of equipment and installation of a residential photovoltaic (PV) system. The credit is capped at $5,000 per “5 kW system,” and multiple systems may be installed on one home. Systems must be fully installed and capable of operation by the end of the the year in which you are claiming the tax credit. If your credit is more than what you owe in that year, the credits may be rolled forward to subsequent years. Hawaii also offers a “refundable credit” for PV system owners who do not have sufficient state tax liability; the refundable credit is 30% less than the normal tax credit, but state cuts a check directly to the system owner.
30% Federal Solar Tax Credit
Where the Solar Tax Credits Stand — and Why Now is the Time to Act
Right now, both homeowners and businesses can claim a 30% federal tax credit for the cost of a solar photovoltaic (PV) system through the Investment Tax Credit (ITC). These credits are still available abd we are encouraging property owners to take advantage of this financial benefit before it disappears.
⚠ Proposed changes to current legislation could significantly impact both residential and commercial tax credits.
For residential systems, if changes are signed into law new proposals would require projects to be fully installed by December 31, 2025 to qualify for the 30% federal credit.
For commercial systems, proposed legislation could reduce the federal tax credit from 30% to 18% in 2026 and just 6% in 2027 — cutting deep into expected ROI for larger projects. To secure today’s higher incentives, we recommend “Safe Harboring” your project now to lock in 30% or more.
Now is the time to act.
When you go solar in Hawaii, you can get back up to 65% of your system cost through tax credits — but it’s not an instant discount. Here’s how it works:
⚠️ Reminder: You don’t get cash back — these credits reduce what you owe in taxes. If your tax bill is lower than the credit amount, you may carry over the savings to future years.
You may claim the state or federal tax credits for a residential solar panel system by consulting with your CPA or licensed tax advisor regarding the proper way to fill out the forms designated by the State of Hawaii and the IRS for their respective credits.
The specific amount of tax credits you are able to claim in a given tax year may vary depending on your individual circumstances.
⚠️ Important Note: We are not tax professionals and are not authorized to provide tax advice to individuals. For formal advice regarding the solar tax credit, please consult with a tax professional. The information provided above is from generally applicable, public sources.
How Do the Tax Credits Work?
1. Federal Tax Credit (ITC) – 30%
2. Hawaii State Credit – 35% (up to $5,000)
Real Example
Item
Amount
System Cost
$25,000
30% Federal Credit
$7,500
35% Hawaii Credit
$5,000 (capped)
Total Credits
$12,500
Net Cost
$12,500
How Do I Claim the Residential Tax Credit?
