Residential Clean Energy Credit 25D
What qualifies?
The 25D tax credit can be used to reduce a percentage of the cost of a qualified clean energy project.
Qualified clean energy projects include:
- Solar electric panels, also known as solar photovoltaics (PV systems), and associated electrical upgrades
- Solar water heaters
- Wind turbines
- Geothermal heat pumps
- Fuel cells
- Battery storage technology, including electrical upgrades
Some technical specifications and standards may apply — view those here.
The project must meet the following criteria:
- The clean energy equipment must be new, not used.
- The clean energy project must be located at a residence in the United States. The credit is not restricted to a primary residence and can be claimed on any home.
- The clean energy project must be purchased outright, but owners can use financing. Leased or Power Purchase Agreement (PPA) clean energy projects are not eligible.
Incentive value
The credit is up to 30% of the cost of the project through 2032, 26% in 2033, and 22% in 2034.
Qualified expenses factored into project cost include:
- The clean energy project equipment
- Sales tax on eligible expenses
- Labor costs for onsite preparation, assembly or installation of qualified equipment, and piping or wiring to connect it to the home
If your home is partly used for business, the credit follows a different rate.
This can be used with other federal incentives like the Home Efficiency Rebate and Home Electrification and Appliance Rebate, which will lower costs even more.
Who is eligible?
- An individual or household who installed a qualified clean energy project at their residence in the United States.
- The individual does not have to be the homeowner to claim the tax credit; renters are eligible if they are the clean energy project owner and entirely or partially contributed to the cost.
- Purchasers of an off-site community solar project if the electricity generated is credited against and does not exceed the individual's home’s electricity consumption.
When is the credit available?
The 25D credit is available for purchases on or after January 1, 2023, through 2035.
How to claim the credit
You may claim the credit when you file your tax return by submitting Form 5695. You must claim the credit for the tax year when the project is installed, not purchased. The value of the credit will be reduced from the amount of taxes you owe. The credit is not refundable, so the credit amount you receive can’t exceed the amount you owe in taxes.
Visit the federal website here for more details on what qualifies and how to use the credit.
Disclaimer: None of the information presented on this website should be considered official legal or financial advice. Please contact a licensed tax professional for additional information.