To claim the solar tax credit, follow these steps:
Step-by-Step Process
- Check Eligibility
- Ensure the solar equipment is installed at a U.S. residence, which can include houses, mobile homes, or cooperative apartments.
- Only new solar equipment qualifies; used or previously owned equipment does not.
- Purchase, not lease, the solar system or buy into a community solar project.
- Buy and Install the Solar System
- Purchase and complete the installation of solar equipment, such as solar panels or solar water heaters.
- Record all installation costs, including materials (e.g., panels, inverters) and labor.
- Gather Documentation
- Save all purchase receipts and installation records as they may be required if your tax return is audited.
- Ensure you have a record of any subsidies or rebates you received to accurately calculate the credit.
- Calculate the Credit
- For solar installations in 2025, the credit is 30% of the total installation costs.
- Subtract any rebates or subsidies from your total costs before calculating the credit.
- File Form 5695
- Complete IRS Form 5695, “Residential Energy Credits,” to calculate your solar tax credit.
- Ensure you use the most recent version of Form 5695 available from the IRS.
- Add Credit to Your Tax Return
- Once you’ve calculated the credit using Form 5695, enter the amount on Schedule 3 of your Form 1040.
- Submit both forms with your tax return to claim the credit.
Important Considerations
- Unused Credit Carryover: If your credit exceeds your tax liability, you can carry the excess to the next year.
- Tax Year Timing: Claim the credit in the tax year when the solar system is installed and put in service.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-is-the-process-to-claim-the-solar-tax-credit/
