Step-by-Step Guide to Claiming the Solar Tax Credit: Instructions for

Tax deadline is approaching again! But this year is different because you’ve installed solar panels on your home (or other qualifying property), and now it's time to claim your solar tax credit. We're here to guide you through the process!

To claim the solar tax credit, you'll need your solar installation receipts, along with IRS Form 1040, Form 5695, and the instructions for both forms.

We've included an example below on how to fill out these tax forms, along with answers to some frequently asked questions about claiming the 30% tax credit.

Steps and Checklist for Claiming the Tax Credit

Solar Installation Receipts: Proof of all installation-related expenses.
IRS Form 1040 IRS and Form 1040 Schedule 3: Form 1040 is your individual income tax return. And Form 1040 Schedule 3 is for calculating additional credits and payments.
IRS Form 5695 and instructions for Form 5695: Residential Energy Credit form.

Example:

We’re walking through the process with “John Smith” who’s from California. He installed a 7.6 kW solar panel system for $15,500,and a 10 KWH battery for $10,000 and is now ready to tackle his tax forms. Here’s how he handled it:

Step 1：Solar and Battery Installation Receipt

Step 2: Form 1040

Complete Form 1040 as usual. When you get to line 20, pause and switch to Schedule 3 to enter any other payments and additional credits, including the solar tax credit. To determine the value of your tax credit, refer to Form 5695.

Step 3: Form 5695-Part 1: Residential Clean Energy Credit

Line 1: Fill out 15500, which is the solar cost
Line 2-4: Skip, in the case , John did not have any qualifying events
Line 5a : it is checked, because John installed the battery of 20 KWH which is qualified,
Line 5b: Fill out$10,000, which is the battery cost
Line 6a : Add up 1 thought 5b, the total number is $25,500, fill out 6a $25,500
Line 6b: Multiple 6a by 30%, it is $7,650, fill out 6b :$7,650

Line 7a: check “No” , because in the example, John did not have any Qualified fuel cell property
Line 7b-11, Skip, in the case , John did not have any qualifying events
Line 12, Enter “0”, in this case, John doesn't have any Credit carryforward from 2022, if your actual case has, it need to be filled out, please consult your CPA
Line 13: Add line 6b, 11 and 12, enter the number “7,650”

Line 14:

The solar tax credit is not “fully refundable,” which means you can only claim a credit up to the amount of taxes you owe. This differs from fully refundable tax credits like the Child Tax Credit and the Health Coverage Tax Credit, where you can receive a refund even if your tax liability is reduced to zero.

In this simple case, John’s tax amount is $7,200.

And the Residential Clean Energy Credit Limit Worksheet is like:

Line 15：Enter the smaller amount , enter“7,200”
Line 16: Deducting “ 7650-7200=450, enter 450, which can be claimed next year.

Step 4: Form 1040 Schedule 3

Finally, he transfers the $7200 from line 15 of Form 5695 to line 5 of Schedule 3.

Please contact us for more solar insights!