How to Get the Solar Tax Credit: Deadline, Form 5695, and Carryover

The federal solar tax credit lets you subtract 30 percent of the cost of a qualifying home solar installation directly from your federal income tax. It still applies if your system was installed and operational on or before December 31, 2025. The One Big Beautiful Bill Act, signed on July 4, 2025, terminated the credit under 26 U.S.C. § 25D for any expenditure made after that date, so installations completed in 2026 or later no longer qualify regardless of when you signed a contract or paid a deposit.¹

The December 31, 2025 Cutoff

The amended statute states that the residential clean energy credit “shall not apply with respect to any expenditures made after December 31, 2025.”² The IRS has clarified that the “expenditure” is dated when installation is completed, not when you paid. A check written in November 2025 for a system finished in January 2026 does not qualify.¹

For a newly built home, the expenditure is treated as made when you first begin using the completed structure. If you moved into new construction with solar panels in 2026, the credit is unavailable even if the builder began the project in 2025.¹

Everything that follows assumes your system was placed in service on or before December 31, 2025.

Who Qualifies

You must own the system outright. That means you bought it with cash or with a loan in your name. Lease arrangements and power purchase agreements, where a solar company owns the panels and sells you the electricity, do not qualify because the company holds the tax benefits.³

The equipment must be installed at a U.S. home you use as a residence. Primary homes, vacation homes, condominiums, mobile homes, and houseboats all count.² Properties used purely as rentals do not qualify. You don’t have to live there year-round, but you have to use it yourself.

There is no income limit and no dollar cap on the credit itself.³ Whether you earned $50,000 or $500,000, the full 30 percent applies as long as you meet the ownership and residency rules.

What Costs Count

The 30 percent applies to the total cost of eligible clean energy property, and the equipment must be new. Used or refurbished panels are out.³ Qualifying items include:

Solar electric (photovoltaic) panels that generate electricity for the home.
Solar water heaters, where at least half the energy used to heat water comes from the sun, certified by the Solar Rating and Certification Corporation or a comparable state-endorsed entity.²
Battery storage with a capacity of at least 3 kilowatt hours, even if installed separately from the panels.³
Labor and installation, including site preparation, assembly, wiring, piping, and connection to the home.

Solar shingles and solar tiles that both serve as roofing and generate electricity do count. A conventional roof replacement to support ordinary panels does not, even if the panels can’t be installed without it. Ask your installer for an itemized invoice so the structural work stays separate from the energy-generating equipment.

What Doesn’t Count

Interest on a solar loan and loan origination fees are excluded from the calculation.³ If you took a $30,000 loan and paid $2,500 in interest and fees over its life, only the $30,000 of equipment and labor counts toward the 30 percent.

Permit fees, interconnection application fees, and other administrative charges are also outside the qualified expense base. Some installers roll these into a lump-sum project price, which can inflate your credit calculation if you aren’t watching.

How Rebates Affect the Credit

Utility company rebates for buying or installing clean energy equipment are subtracted from your qualified expenses before you apply the 30 percent.³ If a $28,000 system came with a $2,000 utility rebate, the credit runs off $26,000.

State rebates generally do not reduce your federal credit unless they qualify as a purchase-price adjustment under IRS rules, which most do not. A state tax credit can indirectly raise your federal taxable income because you’d have less state tax to deduct. Net metering credits for electricity you sell back to the grid do not reduce qualified expenses.³

Filing With Form 5695

Gather your paperwork first. You’ll need the installer’s itemized final invoice showing total project cost, a breakdown of hardware and labor, and the date the system was placed in service (the day it became fully operational). That completion date determines the tax year. A copy of the final inspection report from your local building department confirms it.

Also keep the manufacturer’s written certification that the equipment qualifies. The IRS lets you rely on this certification but tells you not to attach it to your return.⁴

The filing itself goes on IRS Form 5695, Residential Energy Credits. Part I handles the residential clean energy credit. Solar electric property costs go on line 1, solar water heating on line 2, and battery storage on line 6.⁴ The form sums those amounts and applies the 30 percent rate.

A worksheet in the instructions compares your tentative credit against your tax liability. This is a nonrefundable credit, so it can zero out what you owe but won’t produce a refund on its own. The final figure transfers to Schedule 3 of Form 1040.⁴ Attach Form 5695 to your return whether you file electronically or by mail.

Carrying Unused Credit Forward

Because the credit is nonrefundable, it only offsets tax you actually owe. If your credit is $8,400 but your total tax liability is $5,000, the credit erases the $5,000 and the remaining $3,400 carries forward to the next year.² You keep claiming the carryforward on later returns until the balance runs out.

Termination of the credit for new installations does not wipe out carryforward amounts from a qualifying 2025 system. If your 2025 credit exceeds your 2025 tax, the unused portion still flows into your 2026 return and beyond. Report it on Form 5695 each year until the balance reaches zero.

The credit can also offset the Alternative Minimum Tax. If you’re subject to AMT, the residential clean energy credit can reduce that liability too.⁵

If You Sell the Home Before Using the Full Credit

The unused credit stays with you. It does not transfer to the buyer, and the buyer cannot claim any portion of a credit that originated from a system you purchased. You continue claiming the carryforward on your own returns against your own tax liability. If a sale is likely soon after installation, factor that in: the credit is tied to the taxpayer who made the expenditure, not to the property.

Records to Keep

Hold onto the installer invoice, the manufacturer certification, the inspection report, Form 5695, and the Form 1040 for each year the credit is in play. The general IRS statute of limitations is three years from the date you file.⁶ If you’re carrying the credit forward across multiple years, keep the records for three years after filing the last return on which any portion is claimed. For a large credit spread over several years, that could mean holding paperwork well into the 2030s.

1
Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under Public Law 119-21
2
Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit
3
Internal Revenue Service. Residential Clean Energy Credit
4
Internal Revenue Service. Instructions for Form 5695 (2025)
5
Internal Revenue Service. Frequently Asked Questions About Energy Efficient Home Improvements and Residential Clean Energy Property Credits – Residential Clean Energy Property Credit – General Questions
6
Internal Revenue Service. How Long Should I Keep Records