Form 5695 instructions: How to claim the solar tax credit

If you installed solar panels in 2025, congratulations—you're among the last homeowners who can claim the federal solar tax credit before it disappears.

Historically, the Investment Tax Credit (ITC) has delivered a dollar-for-dollar reduction on your tax bill equal to 30% of your total system cost. But in July 2025, Congress eliminated the residential tax credit for systems installed after December 31, 2026. If you're still considering solar, be aware that most installers are at capacity through year-end, making it unlikely that you'll qualify for the ITC on a purchased system.

If you've already gone solar or expect your system to be installed before the end of the year, the following guide will walk you through exactly how to claim your credit.

Disclaimer: This article is intended to provide an informational overview of the federal solar tax credit for interested homeowners. It is not intended to serve as official financial guidance. Readers interested in installing solar products should use their best judgment and seek advice from a licensed professional before purchasing or investing.

Form 5695 is the official IRS tax form you must use to claim the federal solar tax credit when you file your taxes. You can download a copy of Form 5695 (PDF) on the IRS website. The form is updated every year, so make sure you use the most recent version available.

You can also claim the tax credit for qualified battery storage technology using Form 5695. As long as your costs for installing battery storage were incurred after Dec. 31, 2022, they are eligible to qualify for the ITC. If you purchased your battery a few years ago, but didn't realize you could claim the tax credit, you can retroactively apply for it.

In addition to Form 5695, you'll also want:

• Instructions for Form 5695

• Schedule 3

• IRS Form 1040

• Instructions for Form 1040

You are eligible for the federal ITC if you own your solar energy system. If you sign a lease or power purchase agreement (PPA), the third-party owner gets the solar tax credit associated with the system. While you won't receive the tax credit directly, competitive lease and PPA providers should pass those savings along through lower monthly rates—especially since these are the only residential projects that still qualify for federal tax credits after 2025.

You're also eligible even if the solar energy system is not on your primary residence—as long as you own the property, live in it for part of the year, and don't rent it out as a landlord, you can claim the solar tax credit.

If your federal tax bill is less than your total tax credit value, you’ll receive tax credits equivalent to your bill. Then, you can rollover any unused credit into future years.

Claiming the ITC is easy. To get started, you'll first need your standard IRS 1040 Form, IRS Form 5695, "Residential Energy Credits," and the instructions for Form 5695. The purpose of Form 5695 is to validate your qualification for renewable energy credits.

1. Enter your energy efficiency property costs

Form 5695 calculates tax credits for various qualified residential energy improvements, including geothermal heat pumps, solar panels, solar water heating, small wind turbines, and fuel cells. We'll use $25,000 as the gross cost of a solar panel system for an example.

First, you will need to know the qualified solar electric property costs. This is the total gross cost of your solar energy system after any cash rebates. Add that to line 1. Next, insert the total cost of any additional energy improvements on lines 2 through 5 and add them up on line 6a. In this example, we'll assume you don't have any additional energy efficiency property costs.

On line 6b, multiply line 6a by 30%. This is the total value of your tax credit (but not necessarily the amount you'll receive, depending on your tax bill).

Assuming you're not also receiving a tax credit for battery storage or fuel cells installed on your property and aren't carrying forward any credits from last year, put the value from line 6b on line 13 of Form 5695.

2. Determine your tax liability

Next you need to calculate if you have enough tax liability to get the full 30% credit in one year. You must have completed sections 1 through 18 on your standard 1040 Form to get started. For this example, we'll assume your tax liability equals $5,000.

Now, you'll need the instructions for Form 5695. On page 4, you'll see a worksheet to calculate the limit on tax credits you can claim. Add the number on line 18 of your 1040 Form to line 1 of this worksheet. If you're claiming tax credits for things like adoption expenses, interest on a mortgage, or buying a plug-in hybrid or electric vehicle, you'll need that information in line 2. You'll then subtract the number on line 2 from line 1 to determine your residential energy-efficient property credit limit. (For this example, it's still equal to $5,000).

3. Calculate your tax credit

Finally, enter the result of line 3 of the worksheet on line 14 of Form 5695. Review line 13 and line 14, and put the smaller of the two values on line 15.

If your tax liability is smaller than your tax credits, subtract line 15 from line 13, and enter it on line 16. That's the amount you can claim on next year's taxes.

4. Enter your energy credit: Instructions for adding values to Schedule 3 and Form 1040 for 2024

The value on line 15 is your amount of renewable energy credit this year. You must add that number to Schedule 3 and, ultimately, to your regular tax form, IRS Form 1040.

5. Enter value into Schedule 3

First, you need that number on line 15 from Form 5695, which, in our example, is $5,000. Add this number to line 5 on Schedule 3 (and make sure to attach Form 5695).

After adding in any other nonrefundable tax credits (which our example is $0), you'll add up your total sum of refundable tax credits on line 8.

6. Add value to Form 1040

Finally, you'll need to take the number from Schedule 3, line 8, and add it to Form 1040, line 20 and you will have completed all the necessary steps to filing out your tax forms.

While federal policy has shifted, state and local solar incentives continue to evolve. Many states offer their own tax credits, rebates, and performance-based incentives that can significantly reduce system costs. Net metering programs—which credit you for excess electricity your panels send back to the grid—remain available in some states and often deliver substantial long-term value.

For homeowners exploring solar moving forward, financing options have also expanded. Zero-down solar loans provide ownership benefits without upfront costs, while lease and PPA arrangements offer access to solar with minimal responsibility for maintenance or system performance.

The solar industry continues to innovate with more efficient panels, integrated battery storage, and smart home energy management systems that maximize your system's value. Whether you're filing your 2025 taxes or planning your energy future, the shift to clean energy at home offers significant savings opportunities.