Skip to content
ClaimWatt Find my rebates
25D Phasedown · IRS Form 5695 (Part I)

Residential Clean Energy Credit (2026)

The federal Section 25D Residential Clean Energy Credit returns 30% of the total cost of qualifying solar, geothermal, battery, fuel cell, or small wind systems — with no dollar cap. Unlike 25C, 25D credits unused in the install year carry forward to future tax years until used. Standalone batteries (no solar required) became eligible in tax year 2023. The 30% rate holds through 2032, then steps down to 26% in 2033 and 22% in 2034.

What this credit covers

Uncapped 30% credit on solar PV, solar water heating, geothermal heat pumps, fuel cells, small wind, and battery storage (3 kWh+).

Eligibility quick check

Do I have to own the home?

You must own the home — but unlike 25C, vacation homes qualify (just not rentals you do not live in).

Are there income limits?

No income limits.

Do I need to own the system, or does a lease qualify?

You must own the system. Leases and PPAs do not qualify — the leasing company claims the commercial 48 ITC instead.

Is roof replacement eligible?

Generally no, but structural roof work directly required for solar mounting may be included. Standard re-roofing is not credit-eligible.

How to claim 25D on your tax return

  1. Confirm system ownership

    You must own the equipment outright (cash or solar loan). Leases, PPAs, and community solar shares do not qualify.

  2. Document total project cost

    Keep contractor invoices that include equipment, labor, permitting, and interconnection. All are includable in the credit basis.

  3. File IRS Form 5695 Part I

    Enter qualified costs by category. The credit is 30% of total qualifying cost with no cap.

  4. Carry forward any unused credit

    If your 25D credit exceeds your tax liability, the excess rolls to next year automatically — Form 5695 line 16.

  5. Update basis if you sell

    The 25D credit reduces the home cost basis dollar-for-dollar at sale. Your CPA will need the credit amount.

Stacking with state and utility programs

Stacks with all state, county, city, and utility rebates. State rebates reduce the federal basis but stacking still wins almost universally. SRECs do not reduce basis. Cannot be claimed on the same equipment as commercial Section 48 ITC.

Phasedown schedule

30% through 2032 → 26% in 2033 → 22% in 2034 → 0% from 2035 unless extended.

Frequently asked questions

Does 25D stack with state solar rebates? +
Yes. State rebates reduce the federal cost basis but the math still favors stacking. Example: $20,000 solar minus $3,000 state rebate equals $17,000 basis, and 30% of $17,000 equals $5,100 federal credit.
Does 25D stack with SRECs? +
Yes. SREC payments are taxable income but do not reduce the 25D basis — they are revenue, not cost offsets.
Can I claim 25D on a battery I add later? +
Yes. Standalone batteries 3 kWh or larger qualify since tax year 2023, even if installed years after the original solar system.
Can I claim 25D for solar on a rental property? +
No. The home must be your residence (primary or secondary). Pure rentals fall under commercial Section 48 ITC, not 25D.
Does 25D require US-made components? +
No. The 25D residential credit has no domestic content requirement. (The commercial 48 ITC does.)
How is the credit applied at filing? +
Form 5695 Part I calculates the credit, which flows to Schedule 3 line 5a, then to your Form 1040 reducing tax owed.
What is the 25D phasedown? +
30% through 2032, 26% in 2033, 22% in 2034, then 0% from 2035 unless Congress extends. The applicable rate is set by the install (placed-in-service) date.
Can renters claim 25D? +
No, but if you own a home you rent out occasionally and live in part of the year, you can claim 25D pro-rata.
Is a solar loan the same as cash for 25D? +
Yes. The IRS treats financed installations the same as cash for credit eligibility — the credit goes to the homeowner regardless of how they paid.
Does net metering affect 25D? +
No. Net metering is utility billing, not a federal incentive. It does not reduce the credit basis.

Related