Federal Tax Credit

Qualifying Solar Electric Property & Costs

Qualified solar electric property encompasses costs for equipment that uses solar energy to generate electricity, such as inverters, batteries, and solar panels.

Typically, traditional roofing materials and structural components are not eligible for the credit. However, solar roofing tiles and shingles that serve as both traditional roofing and solar electric collectors, or that combine solar electric generation with structural support, can qualify.

Battery Storage

Standalone energy storage systems (i.e. batteries without solar) are also eligible for the credits. The Caveat is that they must have a capacity of at least 3 kilowatt-hours. In todays market most battery Systems exceed 3kWh’s.

Loans, Leases, and PPAs

You can finance your system through a bank loan, home equity line of credit, or a solar loan provider. In these cases, you remain eligible for the 25D tax credit.

However, if you choose to sign a lease or Power Purchase Agreement (PPA) instead of purchasing the system outright, you won’t qualify for the 25D tax credit because you do not own the system. In this scenario, your installer would be eligible for the Section 48 business tax credit and would pass on the value, or a portion of it, to you through the lease or PPA pricing.

Eligible Homes

The system must be installed in a residence that you use, though it doesn't have to be your primary home. Eligible residences include houses, houseboats, mobile homes, cooperative apartments, condominiums, and manufactured homes that meet Federal Manufactured Home Construction and Safety Standards.

Joint Occupancy

If you jointly own the residence with someone other than your spouse, the credit must be divided between you and the co-owner.

Business Use

You can still claim credits if part of your residence is used for business purposes. The credit amount depends on how much of the home is used for business:

1. If more than 80% is for non-business use, you receive the full credit.

2. If less than 80% is for non-business use, the credit is reduced based on the allocation ratio.

Years to Claim the Credit

For systems installed on existing homes, the credit is available in the tax year when the system is installed. For systems on new homes, the credit is available in the tax year when the home is put into use. It's not enough to have signed a contract, made a down payment, or even begun construction; the system must be placed in service to claim the credit in that calendar year.

Unused Credits

These credits can only reduce your taxes and are not refundable. However, any unused credits can be carried forward to future years.

Claiming the Credit

To claim the residential credit, you will fill out and use Form 5695 to claim the residential tax credit when you file your taxes. For more information please visit the IRS' Form 5695 Instructions Resource.

If you are looking for more information please feel free to use any of these resources for more information on going Solar:

• IRS Form 5695

• IRS FAQs