If you’re planning to go solar, one of the most significant financial incentives you should be aware of is the 30% residential clean energy credit, commonly referred to as the solar tax credit. This tax credit can significantly reduce the cost of installing solar panels, offering homeowners a 30% credit on the total cost of the system. For commercial solar, the tax credit is known as the ITC (Investment Tax Credit) and is claimed differently.
Please note, this article is for informational purposes only. We are not tax professionals, and no part of this should be considered legal or tax advice. Be sure to consult with a tax professional to make sure you can claim the credit for yourself.
Eligibility for the Residential Solar Tax Credit
To qualify for the 30% solar tax credit, your system must meet certain criteria:
- Homeowners must own their solar system (i.e., it can’t be leased).
- The system must be installed on a primary or secondary residence in the U.S. (rental properties generally don’t qualify for this credit).
- The credit applies to both solar photovoltaic (PV) panels and solar water heating systems, provided they meet IRS energy-efficiency standards.

What Form is Used to Claim the Solar Tax Credit?
Claiming the solar tax credit is a straightforward process if you follow these steps:
- Complete IRS Form 5695: To claim the solar tax credit, you’ll need to fill out IRS Form 5695, “Residential Energy Credits.” This form allows you to calculate the credit based on the cost of the solar system.
- Enter the Credit on Your 1040 Tax Form: After completing Form 5695, enter the calculated credit on your IRS Form 1040 when filing your federal taxes.
- Document Your Expenses: Be sure to keep all receipts and invoices related to the installation, as the IRS may require proof of the system’s costs.
It’s important to complete these steps accurately and in line with IRS requirements. Check with your CPA to make sure you are eligible for the credit, and that the forms are properly filled out.
Tips About the Solar Tax Credit
- Consult a Tax Professional: While the process is simple, working with a tax expert can ensure accuracy and help maximize your savings.
- The 30% credit is scheduled to phase down after 2032. Acting now ensures that you can take full advantage of the tax credit before it decreases.
- Offset More Than Solar Panels: The credit applies to additional equipment like inverters, mounting hardware, and even labor costs related to the installation.
- Visit the IRS website on form 5695 for the most up-t0-date information.
Summing it up
The 30% solar tax credit is a fantastic way to save money on your Virginia solar installation while reducing your environmental impact. By following the steps outlined here, homeowners can maximize their savings and take advantage of this federal incentive before it begins to phase out. Now is the time to go solar and start saving!