The constant weather changes and frequent occurrence of natural disasters have reiterated one thing – the need to adapt to sustainable practices. No wonder homeowners these days are looking for solutions that are efficient and also eco-friendly. Using solar energy for modern homes is one such initiative that has worked wonders. In order to encourage more homeowners to join the club, the IRS has introduced the Resi Solar Tax credit. This will not only help you save money on the ever-rising energy bills but will also reduce the tax amount you are liable to pay.
This article gives you a detailed account of how you can benefit from the Resi Solar Tax Credits in 2025.
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What is the Resi Solar Tax Credit?
Short for Residential Solar Tax Credit, this is a federal tax credit program introduced to encourage homeowners to adopt solar energy. This means if you install solar panels and batteries in your home, you can deduct a percentage of the costs incurred from the taxes you are supposed to pay. In 2025, you qualify for a claim of 30% of the total solar installation costs.
Who is Eligible to Claim the Resi Solar Tax Credit?
The Resi Solar Tax Credit can put the money back into your pocket that you spend to power your residential premises with solar energy. However, not everyone is eligible for this credit. Here is a list of who and what qualifies for the Resi solar tax credit:
- Projects that started in 2017 or later. Any projects that started before the introduction of the energy credit program are not eligible.
- You own the solar power system. Leased systems are not eligible to gain the benefit of the Resi solar tax credit.
- The residence in which the system is installed should be located in the United States of America.
- The system should have been installed and should have started functioning the same year in which you claim the tax credit.
- Second-hand equipment is not eligible for the tax credit. You can claim Resi Solar credit for brand-new systems only.
Know the Components Covered by Resi Solar Tax Credit
If you are planning to get a solar power system installed in your home, you might be planning to take advantage of the Resi Solar Tax credit. However, before you claim this, know that it does not cover all the costs. Here’s what it covers:
- Cost of the solar panel, mounting components, inverters, and any other important parts
- Cost of batteries, even if they are installed separately
- Labor costs paid for prepping the site, installing the system, and wiring
- Costs related to attaining permissions and inspections
- Most states of the USA also allow you to claim credit on the sales tax incurred while purchasing the equipment.
How to Claim Resi Solar Tax Credit if You Don’t Owe Enough Taxes
If you think that you are not eligible for the Resi Solar Tax credit just because you don’t owe enough taxes, think again. The best thing about this credit is that it is flexible and can be spread out over a few years. This means if your tax liability is lower than the tax credit you are eligible for, the remaining credit will be carried forward to the next year. Hence, you can reap the benefits of installing solar power in your house till your credits are fully used.
Similarly, if you do not owe any federal taxes in a given year, your remaining credit will be carried forward for future use. It will be stored in your account and used to reduce your tax when your liability increases in the future. But remember that this is a non-refundable tax credit. Thus, it will not get you any tax refund but will reduce your tax liability.
Claiming Resi Solar Tax Credit: What Should You Do
You can easily claim the Resi Solar Tax Credit to maximize your savings. Here’s how to do this:
Save Receipts and Documents
When claiming the tax credit, you will have to present proof of the total costs incurred for installing the system. Hence, you must preserve all the bills and invoices for equipment, permission, labor, battery, etc.
Fill IRS 5695 Form
In order to calculate the Resi solar tax credit you are eligible for, fill out form 5695 issued by the IRS. By following the instructions properly, you can get an accurate report of the eligible amount of credit.
Apply Credit to Tax Returns
Once you have calculated the tax credit amount, transfer this to 1040 tax returns. The credit that you are eligible for will be directly subtracted from your tax liability amount that you owe.
File Your Taxes
While filing your taxes, make sure to submit all the relevant forms to claim the Resi Solar tax credit.
Wrapping Up
The Resi Solar Tax credit has made it easier for homeowners to transition to solar power. However, since the policies can change with time, make sure that you consistently follow the IRS for any changes. Also, if you have undertaken a solar project for your home, act fast to make the most of the existing incentives.
Apart from this, if you want to know more about The Solar Tax Credit You Might Have Missed then visit our Business category.
