The federal solar tax incentive, also known as the Investment Tax Credit (ITC), is a solar panel incentive that allows homeowners to deduct a percentage of the cost of installing a solar panel system from their federal income taxes. Here's a general overview of how the federal solar tax credit works:

1. Homeowners that buy solar panel systems can claim a tax credit of up to 30% of the total cost of the system.

2. The solar panel system must be installed on a property owned by the taxpayer, and the system must be used to generate electricity for the property.

3. The federal solar tax incentive is a dollar-for-dollar reduction of the taxpayer's federal income tax liability, meaning that for every dollar of tax credit claimed, the taxpayer's tax liability is reduced by one dollar.

4. If the taxpayer's tax liability is less than the amount of the tax credit, the remaining credit can be carried forward to the following year.

​

The federal solar tax credit is a significant financial incentive for homeowners to invest in solar panel systems, and it can help to reduce the overall cost of the system. However, it's important to note that the tax credit is subject to certain restrictions and limitations, and it may not be available to all taxpayers. Additionally, the availability and specific details of the federal solar tax credit can vary from year to year, so it's important to check with a tax professional or the Internal Revenue Service (IRS) to understand the current requirements and benefits of the tax credit.