This article was last updated in March 2025 to reflect the latest changes to the Residential Clean Energy Property Credit.
What is the Residential Clean Energy Property Credit?
The Residential Clean Energy Property Credit is a valuable tax credit designed to help homeowners offset the cost of installing renewable energy systems in their homes. This includes items like solar panels, solar water heaters, small wind turbines, geothermal heat pumps, and fuel cell properties.
For 2025, this credit remains at 30% of the total cost of qualifying clean energy installations. That means if you install eligible clean energy equipment, you can claim 30% of the cost as a direct credit on your tax return, reducing what you owe dollar-for-dollar.
Changes to the Credit:
The 30% tax credit remains in effect until 2032. After that, the credit will gradually phase out:
- 2033: Credit reduces to 26%
- 2034: Credit reduces to 22%
- 2035: The credit expires unless extended by Congress
This means 2025 is still a great year to take advantage of the full 30% credit before it starts decreasing. For a detailed breakdown of eligibility and credit percentages, refer to the IRS Residential Clean Energy Credit Guide.
When Does the Credit Apply?
The Residential Clean Energy Credit applies to qualifying property installed and placed in service between January 1, 2022, and December 31, 2034.
How to Claim The Credit:
To claim this credit, you’ll need to:
- Fill out IRS Form 5695 (Residential Energy Credits) when filing your tax return.
- Include documentation of your clean energy system installation costs.
- Ensure the equipment meets energy efficiency standards (check Energy Star for guidance).
Benefits of the Residential Clean Energy Property Credit:
There are many benefits to switching to clean energy and taking advantage of the Residential Clean Energy Property Credit. Here are just a few:
- Lower Energy Bills – Reduce reliance on traditional power sources and save money long-term.
- Tax Savings – A direct 30% tax credit helps offset installation costs.
- No RMDs on Energy Credits – If you’re nearing retirement, these credits can provide savings without impacting your Required Minimum Distributions (RMDs).
- Increased Home Value – Homes with renewable energy systems often appraise higher.
- Environmental Benefits – Reduce carbon emissions and contribute to sustainability.
Other Home Energy Tax Credits You May Qualify For
In addition to the Residential Clean Energy Property Credit, homeowners can also benefit from the Energy Efficient Home Improvement Credit, which covers energy-efficient upgrades like:
- Windows & doors
- Heat pumps & central air conditioning
- Home energy audits
Read more about Overlooked Small Business Tax Deductions to see if your home office expenses can be leverages in your tax strategy.
Final Thoughts
In conclusion, the Residential Clean Energy Property Credit is a great way to save money and help the environment. With the 30% Residential Clean Energy Credit still in effect through 2032, 2025 remains a great time to invest in solar, wind, geothermal, and battery storage solutions.
At Beckley and Associates, a trusted CPA and accounting firm in Plano, TX, we’re here to help. If you have any questions about how to claim the credit, or if you need assistance with your taxes, please don’t hesitate to contact us. We’re always here to help you make the most of your finances and save money.