Under Form 5695, Part I – Residential Clean Energy Credit, taxpayers may claim a credit for qualified energy-saving improvements made to a home used as a residence during the tax year. The credit is available for the following types of property:
Qualified Property Types
- Solar Electric Property: Costs for property that uses solar energy to generate electricity for use in the home. This includes solar panels, solar roofing tiles, and solar roofing shingles that serve both structural and energy generation functions.
- Solar Water Heating Property: Costs for systems that heat water using solar energy, provided at least half the energy used is derived from the sun. The system must be certified by the Solar Rating Certification Corporation or a comparable state-endorsed entity.
- Small Wind Energy Property: Costs for wind turbines that generate electricity for use in connection with the home.
- Geothermal Heat Pump Property: Costs for geothermal heat pumps installed in connection with the home.
- Battery Storage Technology: Costs for battery storage systems with a capacity of at least 3 kilowatt-hours, installed in connection with the home.
- Fuel Cell Property: Costs for qualified fuel cell systems installed on or in connection with the main home. The system must have a nameplate capacity of at least 0.5 kilowatts and an electricity-only generation efficiency greater than 30%.
Key Rules and Limitations
- The credit is equal to 30% of the qualified costs for property placed in service in 2022 through 2025.
- Labor costs allocable to onsite preparation, assembly, installation, and interconnection (e.g., wiring or piping) are included in the qualified costs.
- For fuel cell property, the credit is capped at $500 per half-kilowatt of capacity. The maximum qualifying cost for all occupants combined is $1,667 per half-kilowatt.
- If multiple people occupy the home jointly (not married filing jointly), each must file their own Form 5695. The credit is allocated based on the proportion of costs each person paid, up to the maximum allowable amount.
- Costs allocable to swimming pools, hot tubs, or other energy storage mediums with non-storage functions do not qualify.
Source:
Form 5695 (2025) - Residential Clean Energy Credit Instructions
Disclaimer: Always verify details with the current IRS Form 5695 and its instructions, as well as your state’s Department of Revenue guidelines. For complex situations, consult a tax professional or attorney.