The federal solar tax credit could put thousands back in your pocket, up to 30% of your entire solar installation cost. Here’s exactly how to claim it when you file your 2025 taxes.
The Challenge: Understanding Your Eligibility
Many homeowners assume solar tax credits are complicated or worry they’ll miss out on savings. The truth? Claiming the Residential Clean Energy Credit is straightforward, and if you installed solar panels in 2025, you’re likely eligible for significant savings.
What Is the Solar Tax Credit Worth?
The federal solar tax credit equals 30% of your total solar installation costs, including:
- Solar panels and equipment
- Installation labor
- Permitting and inspection fees
- Sales taxes on eligible expenses
- Battery storage (if 3kWh capacity or greater)
Real numbers: On an average solar installation, homeowners save around $7,500. Install a $25,000 system? Your tax credit is $7,500. A $40,000 system gets you $12,000 back.
Who Qualifies? (It’s Simpler Than You Think)
You qualify if you meet these basic requirements:
- You own the system (not leased)
- Installed at your primary or secondary U.S. residence
- System was activated between 2022-2032
- You have federal income tax liability
There’s no income limit to qualify, anyone who pays federal income taxes can claim this credit.
Important: The credit applies when your system receives Permission to Operate (PTO) from your utility, not when you signed the contract. Installed in December 2024 but got PTO in January 2025? Claim it on your 2025 tax return.
How to Claim Your Solar Tax Credit (3 Easy Steps)
Step 1: Gather Your Documentation
You’ll need your total installation costs and manufacturer certifications confirming your equipment qualifies.
Step 2: Complete IRS Form 5695
Fill out Form 5695 when filing your taxes:
- Line 1: Enter your total solar system costs
- Calculate: Multiply by 30% to get your credit amount
- Transfer: Add the final credit to Form 1040
Step 3: Apply the Credit
The credit directly reduces what you owe in federal taxes. Owe $10,000 and have a $7,000 credit? You now owe just $3,000.
Using TurboTax or H&R Block? Tax software automatically searches for eligible credits and files Form 5695 for you. Just answer questions about your solar installation.
What If Your Credit Exceeds What You Owe?
The solar tax credit is non-refundable, but you can carry forward any unused portion to future tax years. Credit worth $8,000 but only owe $5,000? Apply $5,000 this year and roll over $3,000 to next year’s taxes.
Timing Matters: The Step-Down Schedule
The 30% credit remains available through 2032, then decreases to 26% in 2033 and 22% in 2034 before expiring in 2035. Every year you wait costs you money.
2025 installation: 30% credit
2033 installation: 26% credit
2035 installation: No credit
Can You Combine This with Other Incentives?
Yes! You can claim the federal tax credit alongside state tax credits and utility rebates, though utility rebates may reduce your system’s cost basis for calculating the federal credit. Most state incentives don’t affect your federal credit amount.
Common Questions Answered
Does financing affect my credit?
Yes, you can claim the full credit if you finance your system with a loan. Financing costs aren’t included, but the equipment and installation costs are.
What about battery storage?
Batteries qualify if they have at least 3kWh capacity, even installed separately from solar panels.
Can I claim this for a vacation home?
Yes, the credit applies to primary and secondary residences.
Missed claiming it last year?
File an amended return to claim credits from previous years.
Your Next Step: Get Your Solar Savings Started
The solar tax credit makes going solar 30% more affordable, but only if you act before the incentive decreases. There is no solar tax credit after December 31, 2034.
Ready to see your potential savings? Get 3 free quotes from local solar installers and discover exactly how much you could save with solar plus the federal tax credit. Most homeowners receive quotes within 24 hours and save thousands compared to single-installer pricing.
Compare offers, understand your options, and claim your 30% tax credit when you file next year. The sooner you install, the sooner you start saving.
In another related article, The Real Cost of Going Solar: What Homeowners Should Know
