How to deduct your solar system from tax: The ultimate guide for 2026

Investing in your own photovoltaic (PV) system or a compact balcony power plant is more worthwhile today than ever before – both from an ecological and economic perspective. But while technical components are becoming increasingly efficient, a crucial question arises for many owners and prospective buyers: What about the tax component? Can a solar system be tax-deductible, and what legal framework currently applies?

First, the good news: in recent years, the legislator has implemented profound reforms to drastically reduce bureaucratic hurdles for private households. Many complex obligations that previously made operating a solar system difficult have been completely abolished. At the same time, this also means that the classic tax deduction has fundamentally changed. Where depreciation and input tax refunds used to dominate, modern flat-rate regulations and full tax exemptions now apply. In this comprehensive guide, you will learn in detail how to get the most out of your solar system and what tax privileges you are entitled to.

1. Solar systems are considered environmentally friendly investments: The legal framework

To massively accelerate the energy transition in the private sector, the German legislator has enshrined comprehensive tax relief in the Income Tax Act (EStG). The central foundation for this is the extensive exemption from income tax, which was passed by the Annual Tax Act and fully applies.

According to § 3 No. 72 EStG, income from the operation of photovoltaic systems on, at or in single-family houses (including garages, carports and outbuildings) up to a gross nominal output of 30 kWp (kilowatt-peak) is completely exempt from income tax. For multi-family houses and mixed-use properties, the limit is even 15 kWp per residential or commercial unit, but a maximum of 100 kWp per taxpayer. This tax exemption is mandatory and covers all forms of income:

• Financial compensation for feeding surplus solar power into the public grid (feed-in tariff).

• Direct self-consumption of self-generated electricity in one's own household or for charging an electric vehicle.

• Income from the direct marketing of electricity to tenants or third parties (e.g., in tenant electricity models).

Since the income is exempt from income tax, as an operator, you are not obliged to submit a complex income surplus calculation (EÜR) to the tax office. This not only saves a lot of time with the annual tax declaration but also completely eliminates the risk of additional tax payments on solar profits.

In addition, there is a far-reaching exemption from trade tax according to § 3 No. 32 GewStG. Systems up to an output of 30 kWp no longer lead to a commercial infection of your income. This means specifically: You do not have to register a trade with the local public order office and will not be a mandatory member of the Chamber of Industry and Commerce (IHK). This bureaucratic relief applies without exception also to modern mini-PV systems, better known as balcony power plants.

Recently, operators of photovoltaic systems can also feed the entire generated electricity into the public grid without any tax disadvantages. The legislator thus rewards the contribution to grid stability.

2. Tax deduction for solar systems: These 5 key points you should know

Although the income tax exemption leads to enormous relief, it has a downside: Where no taxable income is generated, the acquisition costs in the purely private sector can no longer be depreciated classically through the annual tax declaration. Nevertheless, there are effective and legal ways to noticeably reduce your tax burden. The following five key points summarize the most important tax levers:

1. The zero VAT rate: For the purchase and installation of PV systems, a VAT rate of exactly 0% applies (§ 12 para. 3 UStG). This means that the dealer or craftsman does not even charge you the statutory VAT of 19%. This "zero rate" applies to all essential components such as solar modules, inverters, electricity storage, energy management systems, as well as for all mounting accessories and balcony power plant brackets. The cumbersome detour via the so-called "standard taxation" for the refund of input tax is thus a thing of the past.

2. Tax bonus for craft services (§ 35a EStG): If you have the solar system or balcony power plant installed, extended or maintained by a professional specialist company, you can claim the labor costs for tax purposes. According to § 35a para. 3 EStG, 20% of the pure labor, travel and machine costs can be deducted directly from the tax liability. The maximum deduction amount is 1,200 euros per year (20% of a maximum of 6,000 euros). Important: This applies exclusively to the labor service, not to the installed material. In addition, the invoice must have been paid without cash (by bank transfer).

3. Deduct ongoing operating costs (for rental): If the system is operated outside of purely private use (see section on rental), operating costs such as the rent for the electricity meter, regular cleaning of the solar modules, maintenance fees, and insurance premiums for the PV system can be claimed as income-related expenses or operating expenses.

4. Use financing costs for tax purposes: If you take out a targeted loan for the purchase of the photovoltaic system, the accrued loan interest can be deducted for tax purposes under certain conditions (especially when used as a landlord) and reduce the taxable rental income.

5. Linear depreciation (AfA) for investors and landlords: Those who operate a PV system on a rental property can linearly depreciate the net acquisition costs over the official useful life of 20 years at 5% annually (depreciation for wear and tear, or AfA for short). This is possible from the month of commissioning and represents a powerful tool for reducing the ongoing tax burden on rental income.

An important legal note: If you have already received direct public subsidies (e.g., a non-repayable grant from the municipality or federal state) for your solar system or balcony power plant, you may not claim the tax bonus for craft services according to § 35a EStG for the same measure again. A cumulation of direct financial support and tax support for identical cost components is legally excluded!

Expert tip for practice: Since tax details can vary greatly depending on individual circumstances, marital status, and the exact technical design of the solar system, it is advisable to consult a tax advisor in case of doubt. Through clever combinations of VAT exemption, craftsman bonuses, and regional funding programs, the amortization period of your system can often be shortened by several years.

3. What landlords should consider when deducting a solar system for tax purposes

For landlords, the tax situation is more differentiated than for owner-occupiers. If you, as a landlord, sell the generated solar power to your tenants (so-called tenant electricity) or use the electricity for general lighting and the heat pump of the rented property, you are economically acting as an entrepreneur.

Despite the general income tax exemption for systems up to 30 kWp, landlords can take into account the acquisition and installation costs within the scope of income from renting and leasing. Here, linear depreciation (AfA) over 20 years applies, provided it can be proven that the system serves to generate income (even if tax-exempt or partially tax-exempt) or permanently increases the attractiveness of the property.

For the tax office to recognize the tax deductions smoothly and without delay, complete and structured documentation is absolutely necessary. Landlords should carefully keep the following documents:

Type of document	Relevance for the tax office / purpose
Purchase contract and main invoice	Proof of the investment amount and verification of the correct 0% VAT rate.
Detailed installation invoice	Proof of professional installation; essential for the breakdown of labor values according to § 35a EStG.
Bank statements (proof of payment)	Proof of cashless payment for craft services (cash payments are not tax-deductible).
Commissioning protocol	Documents the exact date of the first electricity feed-in; defines the start of the depreciation period.
Registration confirmations	Proof of legal registration with the grid operator and in the market master data register of the Federal Network Agency.
Technical documentation	Proof of technical performance data (kWp limits) for verification of tax exemption.

4. Reducing your own tax burden specifically: Private ownership vs. rental

The tax implications depend essentially on the type of use. A strict distinction must be made here between purely private use and commercial or rented use:

Scenario A: Purely private use

If you install a solar system on your self-occupied single-family home to cover your household electricity needs, you cannot deduct the acquisition costs through depreciation (AfA) or as income-related expenses. Since the legislator has completely exempted your solar income from income tax through § 3 No. 72 EStG, tax law mirror-wise does not allow any deduction of the associated expenses as operating expenses. Your primary tax lever here is the VAT exemption (0% VAT) on purchase and the craftsman bonus according to § 35a EStG for installation.

Scenario B: The rental property

Here you benefit twice: The income from electricity sales to your tenants remains income tax-free within the exemption limits, while the investment costs can simultaneously be used to reduce the tax burden of your regular rental income. Through annual linear depreciation, you reduce the taxable profit from property rental, which leads to a direct and noticeable reduction in your annual income tax liability.

5. Funding programs: Optimal combination of state subsidies

In addition to tax benefits, attractive financial funding programs are available to operators. These help to massively reduce initial investment costs.

The nationwide KfW funding: The Kreditanstalt für Wiederaufbau (KfW) supports the energy transition through the established program "Renewable Energies – Standard (270)". This involves low-interest loans that can be used not only for classic large rooftop systems but also, under certain conditions, for larger balcony power plant combinations with integrated electricity storage. Up to 100% of the effective investment costs are subsidized. The program call is aimed equally at private individuals, companies, and public institutions. Important to know: The funding application must be submitted through your house bank, and it must be done before the official start of the installation measures or the purchase of the system.

Regional funding programs: Many federal states, districts, and cities have launched their own funding for the purchase of balcony power plants and PV systems. These vary greatly: While some municipalities grant flat-rate subsidies of 50 to 200 euros for mini-PV systems, other federal states offer percentage subsidies for the purchase of battery storage. However, received subsidies can affect the tax deductibility of acquisition and installation costs. It is important to consider the subsidy amounts when claiming costs for tax purposes. Close coordination with a tax advisor is recommended to clarify the individual implications.

6. How tax-attractive a balcony power plant is

Balcony power plants have evolved from a niche product to a true mass product. The tax treatment is designed to be maximally consumer-friendly and can be summarized in four concise key points:

• VAT-free: When you buy a balcony power plant from a specialist dealer (such as "Kleines Kraftwerk"), you pay 0% VAT. This applies to the ready-to-plug-in complete set as well as to subsequently purchased storage units or brackets.

• Income tax-free: Since balcony power plants are well below the 30 kWp limit (the legal limit for the feed-in power of inverters is 800 watts), all savings from self-consumption as well as any minimal feed-ins are absolutely income tax-free.

• Acquisition costs: Since it concerns private living expenses, the pure material costs for the balcony power plant cannot be deducted from taxable income or depreciated.

• Craftsman costs: If you have the outdoor socket necessary for the balcony power plant (Wieland or Schuko socket) installed by an electrician, you can claim these labor costs for tax purposes up to a certain extent according to § 35a EStG.

You don't own a balcony power plant yet? The advantages are clear: you generate your own solar power independently, cleanly, and without bureaucracy directly on your balcony, terrace, or in the garden. Since this electricity immediately covers your basic load in the household (refrigerator, WLAN router, standby devices), you noticeably reduce your electricity bill from day one. A balcony power plant is therefore the perfect, tax-free investment for tenants and homeowners alike!

The most important questions for taxpayers

1. Do I have to register my solar system or balcony power plant with the tax office?

No, generally no longer, provided the system does not exceed the 30 kWp limit. Due to the general income tax exemption and the zero tax rate, the obligation to notify and register with the tax office for pure private individuals no longer applies. However, registration is still required in the market master data register of the Federal Network Agency and with the responsible local grid operator. These registrations are purely grid-technical and statistical in nature and have no tax implications.

2. Does the 0% VAT rate also apply if I install my solar system myself?

Yes. The zero tax rate is tied to the product and the installation location, not to the person performing the installation. If you purchase the components from a specialist retailer and install them yourself on your roof or balcony, you still purchase them with 0% VAT. The only prerequisite is that the system is installed on or near a residential building. You usually only have to digitally confirm to the retailer during the purchase that you meet the legal requirements.

3. Can I deduct a solar system for tax purposes if I install it on a rented house?

Yes, as a tenant you can operate a balcony power plant or a PV system. Since you bear the acquisition costs privately, the same rules apply to you as to owners: You benefit from 0% VAT and tax exemption of the income. If you have the system installed by a craftsman, you can claim the labor costs through your private tax return according to § 35a EStG and thus reduce your tax burden.

4. What happens tax-wise if I sell electricity to my tenants (tenant electricity)?

Selling solar power to tenants is an entrepreneurial activity. Provided the total system is under 30 kWp, the income from it remains income tax-free for you. However, you must keep an eye on the VAT component. Since you supply electricity to third parties, a VAT-taxable turnover exists. However, the small business regulation (§ 19 UStG) usually applies here, provided your total turnover in the previous year did not exceed 22,000 euros. This means you do not have to charge VAT on the electricity price and do not have to pay it to the tax office.

5. Can I deduct the purchase of a battery storage system for tax purposes retrospectively?

For the subsequent purchase of a battery storage system: You also purchase the retrofitted storage system with 0% VAT for VAT purposes, provided it is permanently connected to the PV system. An income tax deduction of the acquisition costs in the private sector is not possible due to the general tax exemption of the income. However, the pure craft costs for the subsequent connection by an electrician can again be claimed according to § 35a EStG.

6. Is there an obligation to submit Schedule G with the tax return?

No. Schedule G is used to declare income from commercial operations. Since PV systems up to 30 kWp are completely exempt from income tax and no longer trigger commercial infection, you no longer need to fill out Schedule G for your solar system. The operation runs completely independent of your other income tax return, which massively simplifies annual bureaucracy.