The Residential Clean Energy Credit is a federal tax credit — meaning it directly reduces the amount of federal income tax you owe, dollar-for-dollar.

• Covers 30% of the cost of installing renewable energy systems like solar, wind, geothermal, and fuel cells.
  
  

• For solar, it applies to both solar panels and solar batteries (energy storage).
  
  

• There’s no cap on the amount you can claim — whether your system costs $10,000 or $100,000, you still get 30%.

Key detail: This is a credit, not a deduction. A deduction lowers your taxable income; a credit lowers your tax bill.

While the credit covers multiple clean energy types, solar tends to have the highest return on investment for homeowners.

Why?

• Solar panels can cut electricity bills by 50–100%.
  
  

• Many states allow net metering, where you sell excess power back to the grid.
  
  

• Adding a battery can protect against blackouts.

With electricity prices rising in most U.S. states, the upfront cost of solar gets paid back faster — especially when 30% of that cost comes off your tax bill.

This means:

• Install in 2025 → $20,000 system = $6,000 credit
  
  

• Install in 2033 → same system = $5,200 credit
  
  

• Wait until 2035 → $0 credit

Delaying just a couple of years can cost you thousands — and installation demand may spike as the deadline approaches.

 Eligible:

• Solar photovoltaic (PV) panels
  
  

• Inverters
  
  

• Racking and mounting equipment
  
  

• Balance-of-system wiring, conduits, and hardware
  
  

• Energy storage devices (batteries ≥ 3 kWh capacity)
  
  

• Labor for site prep, assembly, and installation
  
  

• Permitting fees directly tied to installation
  
  

• Sales tax on eligible equipment

 Not Eligible:

• Roof replacement (unless structural changes are solely to support solar)
  
  

• Solar pool heaters or decorative fountains
  
  

• Portable solar devices for RVs or boats (unless they meet IRS criteria for home use)

Scenario:

• Solar system cost: $22,000
  
  

• Battery storage cost: $8,000
  
  

• Total: $30,000

30% credit = $9,000

If your total federal tax bill is $7,000, the credit will:

• Reduce your owed tax to $0

• Carry over the remaining $2,000 to the following tax year

• Hire a certified installer — check NABCEP certification and state licensing.
  
  

• Sign your contract early — supply chain issues can cause delays.
  
  

• Install and activate your system before December 31 of your target year.
  
  

• Save all receipts — include invoices for panels, batteries, labor, and permits.
  
  

• File IRS Form 5695 with your federal tax return.
  
  

• Apply the credit to reduce your tax bill.

Tip: Some installers offer paperwork assistance to make sure you don’t miss a step.

• The installation must be complete in the same tax year you claim the credit.
  
  

• For 2025 installs, claim on your 2025 tax return (due April 15, 2026).
  
  

• The credit can be carried forward if it’s larger than your tax bill.

• Combine installation with battery storage for greater savings.
  
  

• Time your install early in the year to beat contractor backlogs.
  
  

• Use state rebates and utility incentives alongside the federal credit.
  
  

• Consider financing options that let you pay after you receive your tax refund.
  
  

• If your home needs upgrades for solar, ensure they’re integrated into the eligible cost.
  
  

The federal credit is great, but stacking incentives is where real savings happen.

Examples:

• California – Self-Generation Incentive Program (SGIP) for batteries
  
  

• New York – NY-Sun rebate program
  
  

• Massachusetts – SMART program for monthly performance payments

Find your state’s programs: DSIRE Incentive Database

• Waiting until the last quarter of the year → high demand and possible delays.
  
  

• Forgetting to include sales tax in the credit calculation.
  
  

• Using unlicensed contractors.
  
  

• Assuming the credit is a cash rebate — it’s a tax reduction.

The Residential Clean Energy Credit is at its strongest now — and for homeowners considering solar, the smartest move is to act before it begins phasing out in 2033.

By installing now, you’ll:

• Lock in the full 30% savings
  
  

• Reduce your utility bills
  
  

• Increase your property value
  
  

• Support a cleaner energy future

Thinking of going solar and want help quantifying your savings? Get our free eBook on "How to Slash Your Energy Bills with a Solar Generator (Even If You Rent)". Here!