The federal solar tax credit is still available, but only for systems placed in service on or before December 31, 2025. If your solar equipment was fully installed and operational by that date, you can claim 30 percent of the cost on your 2025 return using IRS Form 5695, and roll any unused portion forward to future years.1Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit Systems placed in service in 2026 or later get nothing under current law.
The 2025 Cutoff
The Inflation Reduction Act of 2022 had set the Residential Clean Energy Credit at 30 percent through 2032, with a step-down running through 2034. Budget reconciliation legislation signed in 2025 cut that timeline short and restored the credit’s termination date to December 31, 2025.1Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit The statute now provides no credit for expenditures on property placed in service after that date.
“Placed in service” means the system is fully installed and operational, not simply purchased or delivered. For a new-construction home, the placed-in-service date is generally the date you move in.
Who Qualifies
Three conditions have to line up.
You need to own the equipment. If you lease your panels or signed a power purchase agreement with a third-party provider, the leasing company holds the right to claim the credit, not you.
The system must be installed on a home in the United States that you use as a residence. Your primary home qualifies. So does a second home or vacation home you live in part of the year. A property you rent out to tenants and never occupy yourself does not qualify.2Internal Revenue Service. Home Energy Tax Credits
You need federal income tax liability to use the credit. This is a nonrefundable credit, so it can zero out what you owe but cannot generate a refund on its own.3Internal Revenue Service. Residential Clean Energy Credit If your total tax bill for the year is $4,000 and your credit is $7,500, you use $4,000 this year and carry the remaining $3,500 forward.1Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit
The same rules and the same December 31, 2025 deadline apply to other technologies the credit covers: small wind turbines, geothermal heat pumps, solar water heaters (where at least half the energy comes from the sun), fuel cells, and battery storage with a capacity of at least 3 kilowatt-hours.1Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit
What the 30 Percent Applies To
The credit is based on the full cost of the system. Qualified expenses include the solar panels or other clean energy equipment, all labor for onsite preparation and installation, and the wiring and piping to connect the system to your home.3Internal Revenue Service. Residential Clean Energy Credit
Solar roofing tiles and solar shingles qualify because they generate electricity, even though they also serve as roofing material. Standard roofing that only supports the panels — trusses, decking, ordinary shingles beneath a rack-mounted array — does not.4Internal Revenue Service. Instructions for Form 5695 – Residential Energy Credits If your contractor bundled roof work with your solar install, make sure the invoice separates the two.
Loan interest, origination fees, extended warranties, and permit fees are excluded from the calculation. If you financed the system, though, you claim the credit on the full price you are contractually obligated to pay — not just any down payment.5U.S. Department of Energy. Homeowners Guide to the Federal Tax Credit for Solar Photovoltaics A $25,000 system paid for entirely with a home equity loan still produces a $7,500 credit.
How Rebates and State Credits Change the Math
Utility rebates reduce your qualified expenses before you calculate the credit. On a $25,000 system with a $2,000 utility rebate, the credit is 30 percent of $23,000, or $6,900.3Internal Revenue Service. Residential Clean Energy Credit
Net-metering payments — money your utility pays you for excess electricity you send back to the grid — do not reduce your qualified expenses.3Internal Revenue Service. Residential Clean Energy Credit
State tax credits generally do not reduce the federal credit either. A state credit and the federal credit run on separate tracks, and you can typically claim both. The one indirect effect is that a state credit lowers the state income tax you paid, which can slightly reduce your federal itemized deduction for state taxes.
How to Claim It on Your Return
File IRS Form 5695, Residential Energy Credits, with your 1040. Part I handles clean energy credits. You enter the address of the home where the system is installed and report your total qualified solar electric costs on Line 1. If you also installed battery storage, a wind turbine, or another covered technology, separate lines handle each category.4Internal Revenue Service. Instructions for Form 5695 – Residential Energy Credits The form multiplies your total by 30 percent, then compares the result against your tax liability to determine how much of the credit you can use this year.
The final credit amount from Line 15 of Form 5695 transfers to Line 5a of Schedule 3 (Form 1040).6Internal Revenue Service. Form 5695 – Residential Energy Credits7Internal Revenue Service. Schedule 3 (Form 1040) – Additional Credits and Payments
Carrying Unused Credit Forward
Any credit that exceeds your tax liability rolls automatically to the next tax year.1Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit Line 16 of Form 5695 calculates the carryforward amount, which you enter on Line 12 of next year’s form.6Internal Revenue Service. Form 5695 – Residential Energy Credits You can keep rolling it forward until it is used up.
This is important now that the credit is closed to new installations. If your 2025 credit is larger than your 2025 tax bill, you still carry the excess into 2026 and beyond. The carryforward survives the credit’s expiration. You are using up a credit you already earned, not claiming a new one.
Records to Keep
Before you file, gather itemized invoices showing equipment and labor costs separately, your contract or purchase agreement, and receipts for any additional qualifying components like battery storage or wiring upgrades. A manufacturer’s certification statement is worth keeping in your file, though the IRS does not require you to submit it with the return.
Record the system’s total kilowatt capacity and the date it became operational. If the IRS ever questions the return, clear documentation of the cost and the placed-in-service date is what protects the claim. Hold on to these records for at least three years after filing the return that claimed the credit, and longer if you are still carrying credit forward.
Two Things the Credit Does Not Cover
Upgrading your electrical panel to handle a solar install is not part of the 30 percent solar credit. Panel upgrades fall under a separate incentive, the Energy Efficient Home Improvement Credit, which covers 30 percent of the upgrade cost up to $600, and only if the new panel is at least 200 amps and installed alongside qualifying energy equipment.8ENERGY STAR. Electric Panel Upgrade Tax Credit Both credits get reported on Form 5695, but in different sections.
There is no recapture if you sell the house. Claim the full 30 percent and sell six months later, and you owe nothing back to the IRS. The credit was tied to the expenditure, not to continued ownership.