2025 Federal Solar Tax Credit: What You Need to Know

If you’re thinking about going solar in 2025, here’s some good news: the Federal Solar Tax Credit is still going strong and it’s one of the smartest financial tools available to homeowners today. With over 15 years in the electrical trade, we’ve seen firsthand how this tax credit has helped thousands of homeowners cut their energy bills and boost their property value. But to benefit from it, you’ve got to understand how it works and how to make it work for you. It important to note that your contractor is knowledgeable in the current inceptive in your state in order to guide you thought the process.

What Is the 2025 Solar Tax Credit?

The solar tax credit 2025 officially called the Residential Clean Energy Credit  essenially lets you deduct 30% of the total cost of a solar energy system from your federal taxes. This includes not just the panels but also the labor, permitting, wiring, and battery storage. If your total system cost is $22,000, you’re looking at a $6,600 credit right off your tax bill. (Amazing right?)

This credit was extended through 2032 as part of the Inflation Reduction Act, so 2025 is still a great time to take advantage.

Who Qualifies for the Solar Panel Tax Credit?

To qualify for the federal solar tax credit, you need to meet these basic requirements:

• You own the solar system (no leasing).
• It’s installed at your primary or secondary U.S. residence.
• The system is new and used for the first time.
• Installation is complete during the tax year you’re claiming it.

If you meet these, the credit is yours. And trust us — as someone who’s installed solar-ready electrical systems for over a decade making sure your setup meets code and compliance is just as important as meeting IRS guidelines.

What Expenses Are Covered?

Homeowners often think this is just for panels, but the solar energy tax credit applies to:

• Photovoltaic (PV) panels
• Inverters and racking
• Battery storage (like Tesla Powerwall)
• Labor, permitting, and inspection
• Electrical upgrades or wiring (when necessary for the system)

Tip from the field: If your main panel is outdated, now’s the time to upgrade. You can roll that into your eligible costs if it’s part of the solar install.

How to Claim the Solar Tax Credit

Here’s how you can claim the solar panel tax credit on your 2025 return:

1. Keep all invoices from your installer.
2. Fill out IRS Form 5695 (Residential Energy Credits).
3. Enter the final credit amount on Form 1040.

You can download Form 5695 here.

If you’re unsure how to handle this on your taxes, speak to a licensed tax professional — or ask your solar installer to walk you through it. Most reputable ones provide a tax prep guide.

Bonus: State-Level Solar Incentives in 2025

The federal solar credit is just the top of an iceberg. Many states offer their own solar incentives 2025, including:

• California: The Self-Generation Incentive Program (SGIP) offers rebates for battery storage. As well as TechClean
• New York: NY-Sun rebates can knock thousands off your upfront costs.
• Texas: Austin Energy and CPS Energy both offer utility rebates.
• Massachusetts: SMART Program pays homeowners per kWh generated.

Want to see what your state offers? Check the DSIRE database — it’s a reliable and up-to-date source for rebates and renewable programs by state. Also make sure to double check with your contractor because most likely they can help you out filling it out for you.

Example: How Much Can You Save?

Here’s a real-world example from a recent job in San Jose:

• System cost: $24,000
• Federal credit (30%): -$7,200
• CA SGIP battery rebate: -$1,500
• Total savings: $8,700

When you combine the ITC solar credit with state and utility rebates, your ROI becomes incredibly attractive — often under 7 years.

Is the Solar Tax Credit Refundable?

This one trips up a lot of homeowners. The answer is no, it’s not refundable. That means if you owe $5,000 in taxes and your credit is $6,000, the extra $1,000 won’t come back to you as a check — but it will roll over to the next year.

So if you don’t owe much in taxes this year, don’t worry you can still make use of the full credit over time.

Final Word from the Field

As an electrician who’s wired hundreds of homes for solar over the years, I’ll tell you this: the 2025 federal solar tax credit isn’t just a marketing gimmick. It’s one of the few government programs that genuinely puts money back in your pocket and adds long-term value to your home.

But the window doesn’t stay open forever. The 30% rate is locked in through 2032, but that doesn’t mean utility companies or local governments won’t shift policies or pricing in the meantime.

Ready to Go Solar?

Need help planning your system or upgrading your electrical panel? Contact our licensed electricians to get expert guidance and make sure your solar setup is code-compliant and rebate-eligible.

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