How To Claim The Solar Tax Credit (2024)

How To Claim The Solar Tax Credit

In addition to its environmental benefits, solar energy offers significant financial advantages for homeowners and business owners. The government has incentivized using eco-friendly energy sources through a tax credit for solar panels.

However, the claim process can be difficult to understand. In this complete guidebook, we’ll examine the most important parts of Form 5695 and explain how the solar tax credit works. 

Whether you are a first-time homeowner thinking about getting a solar panel or using green energy for a long time, you need to know about the solar tax credit to save money and help make the future better and more sustainable.

What is Form 5695?

Homeowners who reduce their energy use and environmental impact receive a special document known as Form 5695. It gives a tax cut to people who make energy-saving changes, such as installing solar panels.

It gives a tax break to investors who install solar panels in their houses as an energy-saving system. By including Form 5695 with your income tax form, homeowners can apply for a solar tax credit. This credit can reduce your tax liability or potentially receive a tax refund.

Form 5695’s primary aim is to link taxpayers and the government. Its function is to provide incentives and facilitate energy-saving measures undertaken by homeowners and the use of renewable energy sources.

What Is The Solar Energy Tax Credit?

The U.S. government offers Income Tax Credits (ITC), a tax break for people using solar power. The goal is to get more people to build solar power systems. The tax refund will be given to the person who is already spending money to buy and set up a solar energy system in their home or business. This means that the person will owe less federal income tax.

The tax credit is essential to people considering going solar because it allows everyone to use greener energy sources at a very economical rate compared to standard solar panel installation. Essentially, it ensures that you pay less for your solar electricity system.

It works the same way: while filing your taxes, you will be eligible to receive a credit for a certain percentage of the items purchased to install the solar power system in your house. In conclusion, solar tax credits in 2024 cover qualified installation costs—remarkably, up to 30% of them. 

But are you eligible to claim a solar tax credit in 2024? Well, let’s find out! 

First Things First: Are You Eligible For The Solar Tax Credit? 

Before you understand how to claim the solar tax credit, you should check your eligibility. The eligibility requirements for solar panel tax credits are not difficult to pass, but be sure to meet them all; otherwise, you will have problems when you file your claim.


You must own the property where the solar energy system is located to qualify for the solar tax credit. Most likely, you won’t be able to claim the tax refund if you decide to rent the home or lease a solar system because you did not initially buy it. 

Requirements For Primary Residence

The Solar Tax Credit is designed to focus primarily on residential buildings like individual homes, units in apartment buildings, and condos. You can also earn credit if you install solar cells in your vacation house or second home, but only if it is your primary residence.    

Use Of The Property

The installation of the solar energy system is reserved for residential use. That means the solar panels must have sufficient power for the main purposes of the house, such as lighting, heating, cooling, and more.

Placed In Service 

To claim the solar panel tax credit, the solar energy system must be “placed in service” during the tax year. This means the system should be fully installed and operational by the last day of the calendar year corresponding to the tax year for which you are claiming the credit.

Important note: To benefit from the solar tax credit, your tax liability must be equal to or higher than the value of the credit you are entitled to. This means that if the solar panel tax credit is more than your tax liability for the current year, you won’t receive a deduction for the difference.

Instructions For Filling Out Irs Form 5695 For 2024

It can be challenging to complete IRS Form 5695 initially, but it becomes much easier once you understand the purpose of each section and the required information. The following steps will guide you through filling out Form 5695 for the 2024 tax year:

Step 1 – Get Form 5695

Get the current IRS Form 5695 from the IRS website or the tax software that helps you with your taxes.

Click here to download the IRS Form 5695. 

Step 2 – Enter Your Personal Information

Enter your name, address, and Social Security number in the designated section of the form.

Step 3 – Identify Your Energy-Efficient Property 

In Section I of the form, you must specify the kind of energy-efficient home for which you are claiming the solar panel tax credit. Check the box next to “Qualified solar electric property costs” only since we are talking about solar energy systems.

Step 4 – Figure Out The Total Cost

Find out the cost of building your solar energy system on line 1. This includes the cost of purchasing the solar panels and any additional necessary equipment, such as inverters or mounting brackets.

Step 5 – Find the Amount of Credit Eligible

Enter the total cost, then add the relevant number to the credit amount valid as the second step. The solar panel tax credit is 30% for the 2024 tax year.  

Step 6 – Enter The Credit Amount

The amount of available credit has to be rewritten from line 5 to line 14. It shall be the sum of the solar tax credit you claim on your tax return. 

Step 7 – Figure Out the Limit

In Part II, you will work out the credit limit as you have other types of credits that do not qualify for business. The referenced limit can be determined by following the steps outlined in this section.

Step 8 – A final look at the form

Review it once again to ensure that all the fields are completed precisely and completely. Also, check your numbers twice to ensure proper accuracy.

Claim Your Solar Tax Credit With Form 5695

Now that you have filled out Form 5695 with the instructions, what must you do further to claim your solar tax credit for the 2024 financial year? Here’s the guide you need to follow to get the refund

  • Attach Form 5695 to Your Tax Return: When you file your federal income tax return, make sure to attach Form 5695 to Form 1040 or the relevant tax form. This will ensure that you submit your claim for the solar tax credit to the IRS and that your claim is processed correctly.
  • Verify the accuracy of the information: Before filing your tax return, review Form 5695 to ensure all details are accurate and current. Ensure to go through the calculations to avoid any discrepancy in the data and further delays in the claims.
  • Submit Your Tax Return: Make sure Form 5695 is complete and accurate, and then submit your tax return to the IRS on time. This deadline usually falls on April 15 of the following year unless an extension has been granted.
  • Wait for Processing: When you file your tax return, the IRS will consider the solar tax credit along with the entire return. Please be patient as this process may take some time.
  • Receive Your Tax Credit: When your solar panel tax credit certificate is approved, the credit will be applied to your tax liability for the 2024 tax year. In this case, the amount of taxes you owe or the refund you receive will depend on your specific circumstances.
  • Monitor Your Tax Refund: You can monitor your tax refund status using the IRS’s online tools or by calling the IRS if necessary. This will inform you of how the process is progressing and help you address any issues that may arise during processing.

Frequent Form 5695 Questions And Considerations 

Q: If I install a solar energy system on a house I rent out, will I still be eligible for the solar tax credit?

A: Not really. Usually, you can only receive the solar tax credit for solar energy systems connected to your primary residence.

Q: What expenses should I list on Form 5695 to show the total cost of my solar energy setup?

A: You can calculate the cost of buying solar panels, having them installed, and buying accessories such as inverters and hardware attachments.

Q: Can I only claim a certain amount of the solar tax credit on Form 5695?

A: Of course, you can claim as much solar tax credit as you want for your home.

Q: If I don’t use up all of my solar tax credit in the current tax year, can I still get it next year?

A: In the years after this one, you can use the extra money from your solar tax refund.

Q: What if I don’t want to claim the solar energy credit? Is it still necessary for me to send Form 5695 with my tax return?

A: You only need to include Form 5695 with your tax return if you want to claim the solar energy tax credit or any other home energy credit.


Solar energy is clear for both the environment and your wallet. By using solar power, you not only cut down on your use of fossil fuels, but you can also save a lot of money thanks to solar panel tax credits and other benefits.

We’re here at Understand Solar to help you confidently and clearly navigate the complicated world of solar energy. We want to give people and companies the information they need to make smart choices about going solar, like finding the best solar energy system for their needs or taking advantage of the available solar tax breaks.

Feel free to get in touch with us if you have any questions.

  • by Abhishek
  • |
  • June 2, 2024