The residential battery storage tax credit is still claimable on your 2025 federal return if your system was installed and operational by December 31, 2025. Congress repealed the Section 25D Residential Clean Energy Credit for any expenditures made after that date under P.L. 119-21. Systems placed in service in 2026 or later do not qualify. Unused credit amounts from prior years still carry forward.
The December 31, 2025 Cutoff
The 30% credit for standalone home battery storage under Section 25D was cut short by P.L. 119-21. Any qualifying expenditure made on or before December 31, 2025 remains eligible; anything after that date does not.1Internal Revenue Service. Residential Clean Energy Credit
What matters is when the system was placed in service, not when you signed the contract or paid a deposit. If installation wrapped up in 2025, you claim the credit on your 2025 return. If the crew finished the job in January 2026, the credit is gone even if you ordered the equipment months earlier.2Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit
The carryforward rule in Section 25D(c) survived the repeal. If you claimed the credit in a prior year but couldn’t use the full amount against your tax liability, the leftover balance rolls into 2026 and forward until it is used up.3Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit
What Qualified
To claim the credit, the battery had to meet a short list of requirements under Section 25D:
- Capacity of at least 3 kilowatt-hours.
- Installed at a dwelling in the United States that you use as a residence. Primary homes and second homes you personally use both count; investment rental property does not.
- Integrated into your home’s electrical system. Portable power stations and standalone generators that aren’t wired into your panel don’t meet the definition.
- Owned by you. The taxpayer has to make the expenditure, so leases and power purchase agreements where the installer keeps title mean the installer claims the tax benefit, not you.2Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit
The ownership point is the one that trips people up most often. If you signed a lease or PPA, the credit is not yours to claim.
How the Credit Is Calculated
The credit is 30% of qualifying costs, with no dollar cap.1Internal Revenue Service. Residential Clean Energy Credit Eligible costs include the battery itself, onsite labor for preparation, assembly, and installation, and the wiring, mounting, and related equipment needed to connect the system to your home.4Internal Revenue Service. Instructions for Form 5695 A $20,000 system produces a $6,000 credit. A $40,000 system produces $12,000.
Utility rebates come off the top before you apply the 30%. A $2,000 utility rebate on a $15,000 installation drops your qualifying cost to $13,000 and your credit to $3,900. The IRS treats these rebates as a reduction in purchase price rather than as income.5Internal Revenue Service. Notice 2013-70 – Q&A on Tax Credits for Sections 25C and 25D State energy incentives generally are not subtracted from qualifying costs unless they specifically qualify as a rebate or purchase-price adjustment under federal tax law, and some state payments may themselves be taxable income. If you received state money, ask a tax professional how it should be handled.1Internal Revenue Service. Residential Clean Energy Credit
The credit is nonrefundable. It can reduce your federal income tax to zero but cannot generate a refund on its own. If your tax liability is $4,000 and your credit is $6,000, your tax goes to zero and the remaining $2,000 carries into next year automatically under Section 25D(c).3Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit That carryforward keeps running year after year until the full credit is absorbed, even though no new installations qualify after 2025.
Home Offices and Mixed-Use Homes
If part of your home is used for business, the credit adjusts based on how much:
- 20% or less business use: claim the full credit on the entire cost.
- More than 20% business use: claim the credit only on the residential portion.
- 100% business use: no credit under Section 25D.
If 30% of your home is business space, the 30% credit rate applies to 70% of your battery costs. On a $20,000 system, the credit is calculated on $14,000, not the full amount.1Internal Revenue Service. Residential Clean Energy Credit
Filing on Your 2025 Return
You claim the credit on IRS Form 5695 (Residential Energy Credits). Battery storage costs go on line 5b, and the form walks through the 30% math and any carryforward from a prior year.4Internal Revenue Service. Instructions for Form 5695 The resulting credit transfers to Schedule 3 of Form 1040 under nonrefundable credits and reduces your total tax. Line numbers can shift between years, so check the current instructions.
You’ll need a manufacturer’s certification statement confirming the battery meets the 3 kilowatt-hour minimum. Don’t send it with your return; keep it in your files in case the IRS asks.4Internal Revenue Service. Instructions for Form 5695 Also hold on to itemized invoices separating hardware from labor, proof of the installation completion date, any rebate paperwork, and a copy of your filed Form 5695.
Keep everything for at least three years from the date you filed the return claiming the credit.6Internal Revenue Service. How Long Should I Keep Records If you’re carrying an unused balance forward across multiple returns, keep the records until you’ve used the full credit and the statute of limitations has run on the last return that touched it.