Can I claim the solar tax credit if I financed the system with a loan?

Yes. The credit is based on total installed cost regardless of financing method. Solar leases and PPAs do not qualify since you do not own the system.

What happens if the solar tax credit exceeds my tax liability?

The solar credit is non-refundable. Unused credit carries forward indefinitely to future tax years until fully used. There is no time limit on the carryforward under IRA rules.

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Solar Panel Federal Tax Credit 2026: The 25D Credit Expired, and What Form 5695 Still Covers

Q: What is the solar panel federal tax credit percentage in 2026?

The residential clean energy credit remains at 30% in 2026 under the Inflation Reduction Act. This applies to the total installed cost including panels, inverters, labor, and battery storage. The 30% rate applied only to systems placed in service on or before December 31, 2025. Section 25D was repealed by the One Big Beautiful Bill (Public Law 119-21) and does not apply to systems placed in service in 2026 or later.

Q: What IRS form do I use to claim the solar tax credit?

File IRS Form 5695 (Part I) with your federal return. Enter qualified costs on Line 1, calculate 30% on Line 6b, then transfer to Schedule 3 (Form 1040), Line 5.

Q: Is there an income limit for the solar tax credit in 2026?

No income limit applies to the residential clean energy credit. Any taxpayer with federal tax liability can claim it. Unused amounts carry forward indefinitely.

⚠️ Credit Expiration Notice: The federal tax credit described in this article expired December 31, 2025 under the One Big Beautiful Bill (OBBBA, Public Law 119-21, signed July 4, 2025).

Systems placed in service on or before December 31, 2025 can still be claimed on your 2025 tax return. Installations completed in 2026 or later do not qualify. See what energy incentives are still available in 2026 →

Key facts for 2026:

Credit rate: 30% of total installed system cost, but only for systems placed in service on or before December 31, 2025
IRS form: Form 5695, Part I — Residential Clean Energy Credit
Income limit: None — any taxpayer with federal tax liability qualifies
Refundable?: No — but unused credit carries forward indefinitely
Eligible costs: Panels, inverters, wiring, installation labor, battery storage
Filing deadline: April 15, 2026 (for tax year 2025 installations)

What Is the Solar Federal Tax Credit in 2026?

The Residential Clean Energy Credit — commonly called the solar investment tax credit (ITC) — lets homeowners deduct 30% of their solar panel system costs directly from federal income taxes. Extended by the Inflation Reduction Act in 2022, the 30% rate was repealed early by the One Big Beautiful Bill and no longer applies to systems placed in service after December 31, 2025.

For a $25,000 solar installation, the credit equals $7,500 off your tax bill. No income cap applies.

What Costs Qualify for the 30% Credit?

Eligible Cost	Qualifies?	Notes
Solar panels / modules	Yes	New or used panels
Inverter	Yes	String, micro, or hybrid
Wiring and mounting hardware	Yes	Including roof attachment costs
Installation labor	Yes	Permits and inspection fees included
Battery storage (added simultaneously)	Yes	Must be charged by the solar system
Standalone battery (added later)	Yes (2023+)	IRA expanded eligibility
Utility interconnection fees	Yes	Grid-tie connection
Sales tax on eligible equipment	Yes	Included in cost basis
Utility rebates received	Deduct first	Subtract from cost before calculating 30%

How to Complete IRS Form 5695 for Solar (Step-by-Step)

Gather your solar installation documents
Collect the final invoice, proof of payment, installer certification, and any state/utility rebates received.

Download Form 5695 (2025 version)
Get the current version from IRS.gov. Use Part I (Lines 1–14) for the Residential Clean Energy Credit.

Enter qualified solar costs on Line 1
Total all eligible expenses. Subtract any utility rebates or state grants. Enter the net qualified cost on Line 1.

Calculate 30% on Line 6b
Multiply Line 1 by 0.30. This is your tentative credit amount.

Apply carryforward from prior year (Line 12)
If you had unused credit from prior years, enter it on Line 12. Total credits carry forward automatically.

Transfer to Schedule 3 (Form 1040), Line 5
The amount from Form 5695 Line 14 goes to Schedule 3, Part I, Line 5. This reduces your total tax liability.

Attach Form 5695 to your return
File electronically or attach the paper form. Keep your installer invoice for at least 7 years.

    Example: $28,000 system − $1,500 state rebate = $26,500 qualified cost × 30% = $7,950 federal tax credit. If your tax bill is $6,000, you get $6,000 off and carry forward $1,950 to next year.
  

Solar Tax Credit Schedule: 30% Through 2025, Then Repealed

Tax Year	Credit Rate	Status
2022–2032	30%	Current (IRA-extended)
2033	26%	Step-down scheduled
2034	22%	Step-down scheduled
2035+	0%	Expires unless extended

Note: Congress could modify these rates in future legislation. Installing before 2033 locks in the 30% rate for that tax year.

Financed Systems: Loan vs. Lease vs. PPA

Financing Type	Credit Eligible?	Why
Cash purchase	Yes	You own the system
Solar loan	Yes	You own the system
Home equity loan	Yes	You own the system
Solar lease	No	Installer owns the system
PPA (Power Purchase Agreement)	No	Installer owns the system

FAQ: Solar Federal Tax Credit 2026

What is the solar panel federal tax credit percentage in 2026?

There is no residential clean energy credit in 2026. Section 25D was repealed for property placed in service after December 31, 2025.

What IRS form do I use to claim the solar tax credit?

IRS Form 5695 (Part I). Transfer the credit to Schedule 3 (Form 1040), Line 5.

Is there an income limit for the solar tax credit in 2026?

No income limit. The credit is non-refundable — unused amounts carry forward indefinitely.

Can I claim the solar tax credit on a financed system?

Yes, for loans. No, for solar leases or PPAs (you don't own the system).

What happens if the credit exceeds my tax liability?

The unused portion carries forward to future tax years with no time limit.

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Before you spend money on this. Energy Rebate Calculator is an independent website. It is not affiliated with, endorsed by, or operated by the U.S. Department of Energy, the IRS, or any state agency, and nothing on this page is an offer, an application, or a promise of payment.

The federal HOMES and HEAR rebates are administered state by state and most states have not launched them. Tax credits, rebate amounts and eligibility rules change without notice, and rebates are generally not paid for work completed before a programme launches.

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