Can You Claim Solar Panels on Your Taxes: Eligibility, Costs, and Filing

Yes, you can claim solar panels on your taxes. Homeowners who buy and install a qualifying solar energy system can take the federal Residential Clean Energy Credit, which cuts your federal tax bill by 30% of what the system cost.¹ The 30% rate applies to systems placed in service from 2022 through the end of 2032, and there is no annual or lifetime dollar cap on how much you can claim.²

How Much You Get Back

Multiply your total qualified solar costs by 0.30. Spend $20,000 on a qualifying system and the credit is $6,000. Spend $30,000 and it’s $9,000. The credit reduces the tax you owe dollar for dollar, so a $9,000 credit means $9,000 less in federal tax.³

The 30% rate holds through 2032 and begins phasing down in 2033.² You can also claim the credit in more than one tax year if you add eligible improvements later.

Who Can Claim It

You have to own the system. Paying cash or financing with a loan both count—either way you’re the owner. If you lease your panels or sign a power purchase agreement where a third party owns the equipment on your roof, the company that owns the system takes the tax benefit, not you.²

The system has to be at a home you live in. A primary residence qualifies, and so does a second home you use. A rental property you don’t live in does not, and neither does a property used entirely for business.²

You claim the credit for the year the system is “placed in service”—when installation is finished and the equipment is ready to generate electricity for your home.⁴ Panels wired up and operational by December 31 go on that year’s return. Installation that spills into January goes on the following year’s return.

Costs That Count

The credit applies to the equipment plus the work of putting it in. Qualifying expenses include:

Solar panels or solar shingles that generate electricity for your home, including solar roofing tiles that replace ordinary shingles²
Contractor labor for site prep, assembly, and installation⁴
Wiring and piping to connect the array to your home’s electrical system and the grid⁴
Mounting and racking hardware
Battery storage with a capacity of at least 3 kilowatt-hours, even if you add it later without new panels⁴
Sales tax charged on any of the qualifying expenses above

Traditional roofing materials don’t qualify. Standard shingles, trusses, and structural supports are excluded even if your roof needs work to hold the panels.² If a single invoice covers both roofing and solar, only the solar-specific charges go into your credit calculation. Loan interest, financing fees, and extended warranties are also out. Financing a system doesn’t change the credit—it’s based on the purchase price of equipment and installation, not what you’ll pay over the life of the loan.

How Rebates and Incentives Change the Number

Money that lowers your purchase price generally lowers your credit. Money that rewards you for producing energy generally doesn’t.

A utility subsidy toward buying or installing the system—paid to you or straight to the installer—gets subtracted from your qualified expenses before you apply the 30%.²
A manufacturer, distributor, or installer rebate tied to the cost of the equipment also gets subtracted from qualified expenses.²
A state tax credit for installing solar does not reduce the federal credit. The two run independently.
Net metering payments from your utility for surplus electricity you send back to the grid do not reduce your qualified expenses.²

If You Run a Business From Home

A home office doesn’t necessarily disqualify you. If business use is 20% or less of the home, you can claim the full credit on the whole system cost. Above 20%, you can only claim the credit on the personal-use portion of the costs.²

How to File

You calculate and claim the credit on IRS Form 5695, Residential Energy Credits.⁵ The form walks through your qualified costs by category, applies the 30% rate, and the resulting credit transfers to your Form 1040. Tax software will ask about residential energy improvements and generate the form for you. On paper, attach the completed Form 5695 to your return.

File Form 5695 even if the credit is bigger than your tax bill—it’s what creates the record for carrying the unused portion forward.⁶

Keep your paperwork. That means contractor and supplier invoices, receipts, and proof of payment such as canceled checks or credit card statements. Also get a manufacturer’s certification statement, a signed document from the equipment maker confirming the product qualifies for the credit.⁷ You don’t submit it with your return, but you hold onto it in case the IRS asks.

When the Credit Is Bigger Than Your Tax Bill

The credit is nonrefundable. It can bring your federal tax down to zero, but it won’t produce a refund on its own.⁶ If your credit is $9,000 and you owe $6,000 in federal income tax, you don’t get a $3,000 check.

The unused $3,000 carries forward to the next tax year. You apply it on next year’s Form 5695 against next year’s tax, and you keep doing that until the full credit is used up.⁶ Save each year’s Form 5695 so you can track the running balance. A homeowner with a smaller annual tax bill may need two or three years to absorb the whole credit, but none of it is lost to the carryforward.

1
Internal Revenue Service. Residential Clean Energy Property Credit – Qualifying Expenditures and Credit Amount
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Internal Revenue Service. Residential Clean Energy Credit
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Internal Revenue Service. Tax Credits and Deductions for Individuals
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Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit
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Internal Revenue Service. About Form 5695, Residential Energy Credits
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Internal Revenue Service. Instructions for Form 5695 (2025)
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Internal Revenue Service. Energy Efficient Home Improvement Credit Qualified Manufacturer Requirements