2025 Residential Clean Energy Credit
For 2025, the Residential Clean Energy Credit is 30% (Credit rate) and $500 (Fuel cell credit limit, per half kilowatt).
Effective 2025-01-01Source: 2025 Instructions for Form 5695 (IRS)Verified 2026-08-29
Compared with 2024
Every figure on this page is unchanged from 2024.
| Item | 2024 | 2025 | Change |
|---|---|---|---|
| Credit rate | 30% | 30% | +0% (+0.0%) |
| Fuel cell credit limit, per half kilowatt | $500 | $500 | +$0 (+0.0%) |
Who it applies to
The credit is for someone who paid for qualified clean energy property at a home in the United States where they lived during 2025, including a house, houseboat, mobile home, cooperative apartment, condominium, or a conforming manufactured home. For solar electric, solar water heating, small wind, geothermal heat pump and battery storage property the home does not have to be your main home, so a second residence can qualify; only qualified fuel cell property has to be at your main home. Unlike the energy efficient home improvement credit on the same form, this credit is available for a home under construction as well as an existing one. Costs are treated as paid when the original installation is completed, or, for a home being constructed, when your original use of it begins. If an item is used partly for business, only the part of the cost allocable to nonbusiness use counts unless nonbusiness use meets the threshold in the instructions, and you must reduce the cost basis of your home by the credit allowed.
What changed this year, and why
The credit rate is unchanged for 2025: the 2025 Instructions for Form 5695 state that the credit rate for property placed in service through 2025 is 30%, applied to the cost of qualified solar electric, solar water heating, small wind energy, geothermal heat pump, battery storage and fuel cell property. What changed is the ending. You cannot claim residential clean energy credits for expenditures made after December 31, 2025, which makes this the last year the 30% rate has anything to apply to. The instructions also add a checkbox for condominium and cooperative owners claiming a fractional share. Form 5695 is still where an unused amount carried forward from 2024 is taken, and where the unused portion of this year's credit is carried to 2026.
Common questions
- What is the residential clean energy credit rate for 2025?
- 30%. The instructions for Form 5695 state that the credit rate for property placed in service through 2025 is 30%, and it applies to your costs for qualified solar electric property, solar water heating property, small wind energy property, geothermal heat pump property, battery storage technology and fuel cell property. Among these categories only qualified fuel cell property carries a stated cap of its own, which is set by the capacity of the property.
- What property qualifies for the residential clean energy credit?
- Qualified solar electric property that uses solar energy to generate electricity for your home; solar water heating property, where at least half the energy used for heating comes from the sun and the property is certified for performance; small wind energy property using a wind turbine; geothermal heat pump property meeting the Energy Star requirements in effect at purchase; battery storage technology meeting the minimum capacity in the instructions; and qualified fuel cell property at your main home.
- Do solar roof tiles and shingles qualify for the 30% credit?
- Yes. Some solar roofing tiles and shingles serve the function of both traditional roofing and solar electric collectors, and the instructions say no cost relating to a solar panel or other property installed as a roof fails to qualify solely because it is a structural component of the structure it sits on. The contrast is with components that serve only a roofing or structural function, such as a roof's decking or rafters, which do not qualify.
- Are installation and labor costs included in the credit?
- Yes. You include labor costs properly allocable to the onsite preparation, assembly, or original installation of the residential clean energy property, and for the piping or wiring needed to interconnect that property to the home. Costs count when the original installation is completed rather than when you paid the invoice, and for property tied to the construction of a home, when your original use of the constructed home begins.
- What if the residential clean energy credit is more than my tax?
- The credit is limited by your tax liability, figured on the credit limit worksheet for Form 5695. If you cannot use all of it because of that limit, you carry the unused portion forward to 2026. The instructions tell you to file the form even if you cannot use any of the credit in 2025, since that is how the carryforward is established. A carryforward from 2024 is claimed on the same form.
- Does a utility rebate reduce my residential clean energy credit?
- Yes. If you received a subsidy from a public utility for buying or installing an energy conservation product and that subsidy was not included in your gross income, you must reduce your cost for the product by the subsidy before figuring the credit. The rule also applies when a third party such as a contractor receives the subsidy on your behalf. Separately, you must reduce the cost basis of your home by the credit allowed.
- Can I claim the credit for a second home or a rental?
- A second home you live in can qualify for most of the categories, because for solar electric, solar water heating, small wind, geothermal heat pump and battery storage property the instructions say the home does not have to be your main home. Qualified fuel cell property is the exception and must be at your main home. Where an item is used partly for business, only the nonbusiness portion of the cost can be used.
- When does the residential clean energy credit end?
- You cannot claim residential clean energy credits for expenditures made after December 31, 2025. Because costs are generally treated as paid when the original installation is completed, a project finished after that date is outside the credit even if you paid a deposit earlier. An unused portion of a credit properly claimed for 2025 can still be carried forward to 2026 on Form 5695.
What happens when the credit is bigger than your tax
When the residential clean energy credit you calculated exceeds the tax liability limit on your return, the excess does not vanish. You may carry the unused portion forward to the next tax year (2026). The form instructs you to file it even if you cannot use any of your credit in 2025, because the carryforward preserves your right to the 30% rate on the amount that did not fit. Note that the credit itself is nonrefundable - it can only reduce tax you owe, not generate a refund - but the carryforward rule gives you an additional year to absorb the balance against future tax liability.
If you can't use all of the credit because of the tax liability limit (that is, line 14 is less than line 13), you can carry the unused portion of the credit to 2026.
2025 Instructions for Form 5695 (IRS)
Business use of the property can cut the credit
The residential clean energy credit is meant for property used in a personal residence, not for business property. If you use an item - such as solar panels, a wind turbine, or a fuel cell - mostly for business, the credit is reduced. Specifically, if less than 80% of the use of the item is for nonbusiness purposes, only the portion of the costs allocable to the nonbusiness use can be counted when figuring the credit. In other words, the item must be used at least 80% for nonbusiness (personal) purposes for you to claim the full 30% credit on the entire cost. If personal use falls below that 80% threshold, you must prorate the cost and claim the credit only on the percentage that corresponds to nonbusiness use. This 80% test applies to both the residential clean energy credit and the energy efficient home improvement credit, so mixed-use property requires careful allocation before you calculate either credit.
If less than 80% of the use of an item is for nonbusiness purposes, only that portion of the costs that is allocable to the nonbusiness use can be used to determine either credit.
2025 Instructions for Form 5695 (IRS)
A cost counts when installation is finished, not when you paid
For the residential clean energy credit, the date you pay a contractor or buy equipment is not what matters. The IRS treats costs as being paid when the original installation of the item is completed. If the costs are connected with the reconstruction of your home, they are treated as paid when your original use of the reconstructed home begins. Similarly, for the residential clean energy credit only, costs connected with the construction of a new home are treated as paid when your original use of the constructed home begins. This timing rule matters because the credit is available only for expenditures made before the program terminates; what counts is the year the installation is finished and the home is put to its original use, not the year you signed a contract, made a deposit, or received an invoice. If installation spans two tax years, the credit belongs to the year in which original use begins.
For purposes of both credits, costs are treated as being paid when the original installation of the item is completed, or, in the case of costs connected with the reconstruction of your home, when your original use of the reconstructed home begins.
2025 Instructions for Form 5695 (IRS)
Utility rebates come off the cost first
If a public utility pays part of the cost of your qualifying clean energy property and you don't include that subsidy in your gross income, you must subtract the subsidy from your cost before figuring the 30% credit. The credit is based on the net amount you actually bear, not the sticker price. This reduction rule also applies when a third party, such as your contractor, receives the utility subsidy on your behalf. The logic is that the credit is designed to offset out-of-pocket expenses; a tax-free subsidy already lowers your economic cost, so allowing the full pre-subsidy cost would give a double benefit. You should keep records of any utility rebate or subsidy received and reduce the expenditure reported on Form 5695 accordingly before multiplying by the 30% credit rate.
If you received a subsidy from a public utility for the purchase or installation of an energy conservation product and that subsidy wasn't included in your gross income, you must reduce your cost for the product by the amount of that subsidy before you figure your credit.
2025 Instructions for Form 5695 (IRS)
Fuel cells must be at your main home; solar need not be
Not every clean energy property has to go on your main home, but fuel cell property does. Qualified fuel cell property costs are defined as costs for property installed on or in connection with your main home located in the United States. By contrast, other qualifying property - such as solar electric panels, solar water heaters, small wind turbines, geothermal heat pumps, and battery storage technology - only needs to be installed in connection with your home located in the United States; it need not be your main home, so a second home or vacation property can qualify for those technologies. The fuel cell property itself must be an integrated system with a nameplate capacity of at least one-half kilowatt that converts fuel into electricity using an electrochemical process. Because fuel cells have the stricter main-home rule, installing one at a rental or second residence would not qualify, while solar panels at the same property could.
Qualified fuel cell property costs are costs for qualified fuel cell property installed on or in connection with your main home located in the United States.
2025 Instructions for Form 5695 (IRS)
The last expenditures that can qualify
The residential clean energy credit has a defined end date. You cannot claim the credit for any expenditures made after December 31, 2025. This means that to qualify, the installation of the property must be completed - or, in the case of construction or reconstruction, original use must begin - on or before that date. The termination applies to all categories of qualifying property under Part I of Form 5695, including solar electric, solar water heating, small wind, geothermal heat pumps, battery storage, and fuel cell property. Congress set the credit at 30% for property placed in service through the end of 2025; after that date, no new residential clean energy credit is available unless Congress extends the program. Taxpayers with projects in progress should pay close attention to the installation-completion and original-use rules, because those determine whether the expenditure counts in 2025 or falls into a later year with no credit available.
You can’t claim residential clean energy credits for expenditures made after December 31, 2025.
2025 Instructions for Form 5695 (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
2025 Instructions for Form 5695 (IRS)
- Credit rate
The credit rate for property placed in service in 2022 through 2025 is 30%.
- Fuel cell credit limit, per half kilowatt
The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property.