SummaryA transformerless inverter with reactive power capability has gained popularity in grid‐tied photovoltaic applications. This brief report introduces a five‐level transformerless inverter structure based on a switched capacitor (SC), which requires seven switches as semiconductor elements, one capacitor, a small inductor element to limit the high inrush current, and an input DC source in the power circuit. Notably, fewer power components result in lower losses in the inverter system. In order to fulfill the reactive power capability and self‐balanced SCs, a level‐shifted pulse width modulation (LSPWM) scheme is adopted. A simple closed‐loop controller is used for the voltage‐balancing approach to maintain the voltage and grid‐connected operation of the presented five‐level inverter. SC functional operation, modulation method, and voltage self‐balancing are thoroughly explored. In‐depth comparisons are made between the proposed and five‐level state‐of‐the‐art MLIs for PV systems. Finally, the performance of the inverter is verified experimentally in the laboratory environment for a single‐phase 1 kW system. The voltage and current stress are analyzed. The experiment is carried out for the change in modulation index, input, and loading condition. The experimental results suggest the inverter's adequate performance with an efficiency of the inverter is 97.3%.