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The 30% Federal Clean Energy Tax Credit (Section 25D): Homeowner Guide

How to claim the 30% Residential Clean Energy Credit on IRS Form 5695 for solar panels, home battery storage, and heat pumps.

By the WattWise Editorial Team 8 min read

The Inflation Reduction Act of 2022 enacted the largest clean energy investment in American history, revitalizing Internal Revenue Code Section 25D — the Residential Clean Energy Credit.

Understanding how to file IRS Form 5695 accurately ensures homeowners claim thousands of dollars in legitimate federal credits.

Eligible Clean Energy Equipment

The 30% credit applies across five core residential technologies through December 31, 2032:

  1. Solar Photovoltaic (PV) Panels: Racks, panels, microinverters, wiring, and labor.
  2. Solar Water Heating Equipment: Certified by the Solar Rating and Certification Corporation (SRCC).
  3. Battery Energy Storage Systems: Must have a minimum capacity of 3 kilowatt-hours (kWh).
  4. Geothermal Heat Pump Systems: Meeting Energy Star requirements.
  5. Small Residential Wind Turbines.

How to Calculate and Claim the Credit

  • The credit is calculated on the net cash price paid after state utility rebates, but before state tax credits.
  • If a solar installation costs $25,000, the 30% credit equals $7,500.
  • Complete IRS Form 5695 (Part I) and attach it to your Form 1040 when filing taxes.
  • Because it is a nonrefundable credit, it can reduce your tax liability to zero, and any remaining balance rolls forward into future tax years.

Sources

Frequently asked questions

Is the 30% solar credit a tax deduction or a tax credit?
It is a dollar-for-dollar nonrefundable tax credit that directly reduces your federal income tax liability, which is significantly more valuable than a deduction.
What happens if the 30% tax credit is larger than what I owe in taxes?
Under Section 25D, unused credit amounts roll over to subsequent tax years indefinitely until the credit is fully exhausted.

About the author

Written by the WattWise Editorial Team, which researches and maintains every guide on this site. Read more about our editorial standards or contact us with corrections.

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