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If you’re considering investing in a solar power system for your home in 2025, you can’t afford NOT to take advantage of every government or private incentive available to you.
Residential solar panel systems can be an outstanding investment — both financially and for the safety and energy security of your home and family.
With natural disasters like floods, wildfires, and extreme weather events growing more frequent and severe, America’s aging utility grid is under increasing stress.
Thanks in part to artificial intelligence and electric vehicles, electricity demand has never been higher…
Neither has the frequency of blackouts and extended power outages.
Read on to find out how the Federal Solar Tax Credit can save you 30% on purchase and installation costs on photovoltaic (PV) systems that generate electricity from sunlight and battery backup for your home.*
What Is the Federal Solar Investment Tax Credit?
The Federal Solar Investment Tax Credit is a government program that can save US taxpayers 30% of the total purchase and installation costs of new, eligible clean energy property for their primary or secondary homes.
Officially called the Residential Clean Energy Credit, it is also frequently known by other names, including:
- Investment tax credit (ITC)
- Federal Solar Tax Credit
- Residential Renewable Energy Tax Credit
- 30% Solar Tax Credit
The solar tax credit has been around in some shape or form for years, although there have been interruptions and many changes to eligibility.
The current incarnation applies to many types of clean energy systems besides solar, including small wind energy systems and home backup batteries with a storage capacity of over 3 kilowatt-hours (kWh).
The Residential Clean Energy Credit is part of the Inflation Reduction Act, passed in 2022, and is valid from tax year 2023 through 2032.
Homeowners may be eligible for a tax credit on qualified systems installed before 2023, but at a reduced rate — typically 26%.
How Does the 30% Solar Tax Credit Work?
The Residential Clean Energy Tax Credit is available to federal income taxpayers who purchase and install new qualified systems at their primary or secondary homes in the United States.
You must own and live in the dwelling for at least part of the year.
The following individuals are ineligible:
- Landlords who don’t live on the premises
- Renters (except for community solar programs)
- People who don’t pay federal income tax
The credit is non-refundable.
That means that if the total amount of the 30% credit exceeds your federal income tax liability, you won’t get a check from the IRS for the difference.
However, you can carry the credit amount over to subsequent tax years until you’ve recovered the 30% in full.
Even if you don’t owe taxes in the system’s installation year, you can recover the credit against future federal income tax liabilities.
There’s no dollar cap on the Residential Clean Energy Tax Credit, nor is there a limit to how many times you can apply the credit for new qualified purchase and installation costs.
Just keep in mind that you’ll never receive a tax rebate or refund unless you’re subject to withholding taxes and have paid more than you owe.
What Costs Qualify for Solar Credit?
The Residential Clean Energy Credit covers 30% of the total purchase and installation costs of qualified systems.
Other solar credits, such as state or local incentives, have different rules.
According to the IRS, the following clean energy property costs qualify for the credit:
- Solar electric properties, including photovoltaic modules (solar panels) and the balance of system.
- Solar water heaters
- Wind turbines (small wind energy systems)
- Geothermal heat pumps
- Fuel cells
- Battery storage technology (minimum 3kWh capacity)
All equipment must be new, and you must own it — used, rented, or leased systems are ineligible.
Additionally,
Qualified expenses may include labor costs for onsite preparation, assembly, or original installation of the property and for piping or wiring to connect it to the home.
Essentially, you’re entitled to a 30% tax credit against all purchase and installation costs of qualified systems.
How Do I Claim My Solar Tax Credit?
Federal residential energy credits, like the Residential Clean Energy Credit and Home Energy Efficiency Improvement Credit, are claimed by filing IRS Form 5695 with your personal income tax return.
Unlike many IRS deductions and tax credits, the Residential Clean Energy Credit is relatively straightforward to claim.
Whether you do your own taxes or use an accountant or other tax preparer, it’s easy to claim the credit on an eligible system — certainly compared to state and local property tax returns.
You must itemize qualified costs on the form, but there are no special verification requirements for residential energy credit claims.
Despite the IRS not taking extra steps to verify eligibility, proceed with caution.
Like any other tax deduction or credit you claim, you’ll need to produce evidence that it’s qualified if you face an audit or investigation.
Falsifying federal income tax returns can result in severe consequences, including penalties, civil and criminal liability, and even imprisonment.
Even if you simply make a mistake regarding your eligibility or purchase an unqualified system, you may face penalties and have the tax credit denied.
Don’t let that put you off…
Confirm system eligibility before making a clean energy property — and ALWAYS keep your receipts.
Does the Federal Solar Tax Credit Work With Other Incentives and Rebates?
In most cases, claiming the Residential Clean Energy Credit doesn’t disqualify you from participating in other incentive programs, including the Home Energy Efficiency Improvement Credit.
However, adjustments may be required for certain rebate programs.
According to the IRS:
When calculating your credit, you may need to subtract subsidies, rebates or other financial incentives from your qualified property expenses because they’re considered a purchase-price adjustment.
Public utility subsidies for buying or installing clean energy property are subtracted from qualified expenses.
This is true whether the subsidy comes directly to you or to a contractor on your behalf.
However, utility payments for clean energy you sell back to the grid, such as net metering credits, don’t affect your qualified expenses.
Rebates are subtracted from qualified expenses if all of these apply:
- The rebate is based on the cost of the property.
- It comes from someone connected to the sale such as the manufacturer, distributor, seller, or installer.
- It isn’t given as payment for services you provide.
State energy efficiency incentives are generally not subtracted from qualified costs unless they qualify as a rebate or purchase-price adjustment under federal income tax law.
Many states label energy efficiency incentives as rebates even though they don’t qualify under that definition.
Those incentives could be included in your gross income for federal income tax purposes.
Find more about how subsidies affect home energy credits.
In most cases, if you receive a power company or other rebate that reduces the purchase or installation costs of your clean energy property, you must claim the net costs on Form 5695 after the rebate is applied.
If in doubt, consult a tax professional to avoid potentially costly mistakes.
Having said that, you should still be eligible for the following incentives before or after you make a Residential Clean Energy Credit claim.
Energy Efficiency Home Improvement Credit
You can also claim the Energy Efficiency Home Improvement Credit on IRS Form 5695.
However, the eligibility requirements and types of costs you can claim are completely different.
For example, both renters and homeowners are eligible to take credit for qualified improvements.
And unlike the Residential Clean Energy Credit, there is a dollar cap on how much you can claim each year.
Learn how to apply for the Energy Efficiency Home Improvement Credit here.
Electric Vehicle (EV) Charger Tax Credit
The Alternative Fuel Refueling Property Tax Credit is another 30% IRS tax credit, mostly used to reduce the costs of EV charging stations.
According to the IRS, the credit is available to businesses and “consumers who purchase and install qualified alternative fuel vehicle refueling property for their principal residence, including electric vehicle charging equipment, between December 31, 2022, and January 1, 2033.
Learn how to claim the EV charger credit here.
State Solar Tax Incentives
About half of state governments in the US offered tax credits in 2024.
Nearly all states have some form of solar incentive — such as rebates, property tax exemptions, or grants.
State programs are subject to frequent change, so it’s best to consult a reputable installer or your state’s energy department or public utility commission (PUC) to ensure you’re not missing out.
Here’s a recent summary of state solar incentives available in 2024.
Local and Municipal Government Incentives
Many municipal and local governments offer incentives to residents to install solar power systems at their homes.
For example, The City of Austin, TX, offers numerous incentives to consumers who install solar panel systems at home, including:
- Austin Energy Residential Solar Rebate: You can earn a $2,500 rebate by completing a solar education course and installing a qualifying solar system on your home.
- Austin Energy credits residential solar production at the current Value of Solar Rate of 9.91 cents per kWh.
- Property tax credits
Like state solar credits, eligibility requirements, and availability vary widely and change rapidly.
Check out your local government’s website or consult a reputable solar installer for details on what home solar incentive programs are available to you.
Utility and Power Company Incentives
Utility providers and power companies in many regions offer various consumer solar incentives, including preferential time-of-use rates, net metering, and rebates on solar panels and home backup batteries.
Check your electricity provider’s website for up-to-date information.
(Source: Vermont.gov)
Net Metering
Grid-connected residential photovoltaic systems are eligible for some form of net metering program in almost every state.
Net metering is a billing arrangement between PV system owners and utility companies where electricity generated by solar panels in excess of household consumption is “sold” to the grid.
Net metering programs vary widely by location and electricity provider, but it’s rare for there not to be some kind of incentive available in 2025.
Here are some things to keep in mind about net metering, no matter where you live.
- Only on-grid bi-directional solar power systems are eligible for net metering.
- Grid-tied home solar panel systems are designed to supplement — not replace — electricity from your utility.
- All grid-tied photovoltaic systems with battery storage MUST automatically shut down during a blackout and remain offline for the duration of the power outage.
- Because grid-tied systems must consume electricity from the power company, any money you earn will be applied against your bill, often at a lower rate per kWh than what you pay for electricity. It’s almost unheard of for residential net metering customers to get a check for the power their system produces.
On-grid solar is cheaper upfront than solar + battery storage hybrid systems.
However, your return on solar investment is likely to be lower over the mid-to-long term.
Final Thoughts
Thanks to solar tax credits and other incentives, improved technology, and falling costs, there’s never been a better time to make the solar switch.
If you pay federal income tax and want to install a solar power system at a primary or secondary home that you own, nothing can really get in the way of you claiming the Residential Clean Energy Credit of 30% against the purchase and installation costs of a qualified system.
EcoFlow DELTA Pro Ultra is a whole home solar generator with expandable battery storage that offers multiple charging methods — including grid power.
It qualifies for the credit AND keeps your home running during blackouts.
No matter what your residential or recreational solar power and backup battery needs, EcoFlow has a solution for you.
Check out our selection today.
*Disclaimer: Before reading this guidance, please remember that tax matters can be highly individualized and complex. EcoFlow does not provide any assurances or guarantees concerning potential tax credits associated with our products. Any information in this guidance is solely for educational purposes and shall not be construed as legal advice. We recommend you rely on the expertise of tax professionals for accurate and personalized tax advice.