Solar Power Rocks logo

Solar Power Rocks - Clear info on home solar power rebates, tax credits, and other benefits

Find out how much you can save with solar!

Get quotes from trusted local installers



Privacy Assurance - We will not sell or otherwise transmit your personal information to others without your permission.

How to Claim the Federal 30% Solar Tax Credit using Form 5695

UPDATED FOR 2019! (2018 filing year)

It’s that time of year again—tax time! But this year is different, because this was the year you installed solar panels on your home (or qualifying property), and now you’re ready to get that big fat tax credit to take 30% right off the top of that expense. And we’re here to help guide you through the process!

And hey—if you’re reading this and haven’t yet installed solar, you only have a couple more years to get this sweet tax credit. 30% off the cost of a system is nothing to scoff at people, but the tax credit won’t be that big after the end of 2019… so what are you waiting for? Sign up to get personalized solar quotes from our expert partner installers.

We’ve included an example below of how to fill out the tax forms, and we’ve also included a section at the bottom of this post that answers some frequently asked questions about the process of claiming the credit.

We’ve prepared two posts to answer all your solar tax credit questions. Click on a button below to go to the relevant post:

KEEP IN MIND: We are solar guys, not tax guys. We do not give tax advice, and anything you read on this page is merely one example of how someone might act. Please consult a tax professional before filing.

Now then, let’s get down to it.

What you need to claim the tax credit

  • The receipts for your solar installation
  • IRS Form 1040 for 2018
  • IRS Form 5695 for 2018
  • Instructions for both those forms
  • A pencil
  • Some snacks to keep your energy up… something not too greasy, though… wouldn’t want to smudge the forms… pretzels are always a nice choice
  • Some water, maybe, if your mouth gets dry from the pretzels
  • A calculator

Fill out your Form 1040 as you normally would. Stop when you get down to line 53, and move to Form 5695. Write or type your name in the space provided.

How to fill out Form 5695

We chose “Example Exampleson,” who hails from my home state of Minnesota, dontcha know. He spent $25,000 to install a 5-kW solar panel system on his home, and entered that number in line 1 below:

IRS form 5695 lines 1-4

So what’s a qualified solar electric property cost? Here’s what the instructions for Form 5695 say:

Include any labor costs properly allocable to the onsite preparation, assembly, or original installation of the residential energy efficient property and for piping or wiring to interconnect such property to the home.

Qualified solar electric property costs are costs for property that uses solar energy to generate electricity for use in your home located in the United States. No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed. The home does not have to be your main home.

All that is a fancy way of saying “Pretty much any cost related to installation and materials counts. Claim it.” Next, unless you also installed solar water heating equipment or a geothermal heat pump, move on to line 5. Follow the instructions to complete lines 5, 6, and 7:

IRS form 5695 lines 5-7

Skip to line 12 unless you installed fuel cell property (huh?), and enter in any credit you’re carrying over from a qualified energy property installation (like a previous solar installation) from the previous year. Then fill in line 13 with the total amount of credit from lines 6, 11, and 12. In Mr. Exampleson’s case, he has no prior-year credit to add, so he just puts the same $7,500 from line 6:

IRS form 5695 lines 12-13

Form 5695 Line 14 Worksheet – Reducing the credit

Line 14 is where it gets tricky. The thing about the solar tax credit is it isn’t “fully refundable,” meaning you can only take a credit for what you would have owed in taxes. This is different than other, fully refundable tax credits like the Child Tax Credit and the Health Coverage Tax Credit.

That’s why you use the worksheet below. You enter the total tax you owe before credits in line 1 of the worksheet, and the amounts of any fully refundable credits on lines 2 through 8.

Add up the total credits on line 9 and subtract to get your total tax liability. That number goes on line 10 of the worksheet and line 14 of Form 5695.

Luckily, you can carry over the unused credit to the next tax year, so if you can’t claim the whole credit on your 2018 taxes, you get to reduce your 2019 tax bill, too. A tax liability calculation worksheet is provided in the instructions for Form 5695. Here’s what it looks like for our friend, who has a total tax liability (listed on line 1 and line 11 below) of $4,600 this year:

IRS form 5695 instructions for line 14

Because Mr. Exampleson only owes $4,600 in taxes this year, that’s all the credit he can take now. He enters that number on lines 14 and 15 of Form 5695, and then enters $2,900, the difference between his total credit ($7,500) and the credit he can take this year ($4,600), into line 16.

Finally, he enters the amount from line 15 on Form 5695 into the box on line 53 of Form 1040.

That’s it! Mr Exampleson owes $0 taxes this year, and will get a further credit of $2,900 on his 2017 tax return. Now, check out the tax credit FAQ below. If you have any other questions, please enter them in the comments!

Frequent Form 5695 Questions and Considerations

  • Q: I got a rebate from my utility company for my solar panels. Do I calculate the 30% tax credit before or after the reduction from the rebate?
  • A: We get this question all the time, and here’s the best answer: You calculate the 30% federal tax credit based on the cost to you AFTER any rebates. For example, if your system cost $20,000 and you get a $5,000 rebate from the utility, your federal tax credit would be 30% of $15,000, or $4.500. Here’s the tricky part: if your state ALSO gives you a tax credit, you don’t need to worry about that amount to calculate your federal credit. Both state and federal tax credits are calculated based on the amount you paid, minus rebates or grants.


  • Q: Should I claim the tax credit if I partially paid (e.g., a deposit) in 2017 for an installation that won’t be completed until 2018?
  • A: No, the instructions for Form 5695 say “Costs are treated as being paid when the original installation of the item is completed,” so you can claim all the costs for your installation no matter when they were paid, but you have to wait to claim them in the year the installation takes place. Keep receipts!


  • Q: If I installed a solar panel system a few years ago and now I want to add new panels, can I claim the credit?
  • A: Yes! You can claim the credit for any new costs associated with the addition. You can’t go back and claim the credit for the previously-installed equipment. Hopefully you already claimed the credit for those costs back then.


  • Q: If I install solar and claim the tax credit, will I have to repay the credit to the government if I sell the house within a certain number of years?
  • A: No! If you install a solar panel system on a home you own, you can claim the whole credit and sell at any point after. Keep in mind this is only true for homeowners. The law is significantly more complex for commercial solar installations.


  • Q: Can I get a tax credit if I install solar panels on rental property I own?
  • A: If the property is a rental only, you cannot claim the tax credit. HOWEVER, if you own the property and maintain it as a residence for a certain portion of the year (i.e., you rent it out while you’re away), you can claim the credit for the portion of the year you spend there. For example, if you install $20,000 worth of solar panels on a home in Florida that you live in from November 1st to May 1st, and you rent that home during the summer, you are entitled to take 50% of the possible tax credit, or $3,000 (30% of $20,000 is $6,000, and 50% of that is $3,000).


  • Q: I just had a quote from a solar company. They informed me I needed a new roof to hold the solar array. Can I get 30% back off the roof and the solar, as it was an additional cost?
  • A: Let’s be clear again that we’re not tax experts, but it looks like the answer is yes. Early in this article, we quoted the instructions for Form 5695. Here that is again:

    No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed.

    What it looks like that sentence is saying is: a roof that is built to be able to hold a solar array counts as a structural component, and therefore counts as a cost of the project. Thanks, IRS!

Head on over to our “Frequently Asked Questions” post about the ITC:

Last modified: May 16, 2019

How much can you save with a solar roof?

Profit from your roof space: find local deals on solar, eliminate your power bill, and join the solar revolution.

See my savings!

148
Leave a Reply

avatar
104 Comment threads
44 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
93 Comment authors
BridgetiSolar Installation Government RebateBCainNickJosh Recent comment authors
  Subscribe  
newest oldest most voted
Notify of
Bridgeti
Guest
Bridgeti

I purchased solar in late 2018, but the installation did not take place until early 2019. Contract signed 2018 and work began (permits, engineering etc.). The amount paid in 2018 was 25% of the total due. From what I read in the 2018 IRS guidance, I should be able to take the total credit in 2018, since > 5% was paid and commencement of work occurred (Safe Harbor?). Can anyone verify this? My tax advisor is not sure of the interpretation.

Solar Installation Government Rebate
Guest
Solar Installation Government Rebate

Indeed that it varies from company to company; some solar companies have more crews and install much higher volumes than others.

BCain
Guest
BCain

We installed solar last year, and will qualify for $10800 credit. Our taxes this year were only $4500, so we will get $3000 of it this year. It says that the rest will rollover to next year. If our taxwa next year aren’t enough to cover the remainig amount, will it roll over one more time?

Anonymous
Guest
Anonymous

Why don’t solar sales companies inform that customers only get 25% of the 30%. And i see that part of the tax form wad left out of the screen shot examples. So 30% of $20,000 is $6000 and the 25% of $6000 is $1,500

Nick
Guest
Nick

Before I entered my ITC info, I was getting back about $2800. The total that I get from the ITC the 30% is $11,400. Yet after I enter the solar info, it goes up to $8400, and I dont get the full $11,400. I dont owe taxes so how am I not get the full $11,400 back that I’m supposed to that’s 30% of the total cost of solar?

Josh
Guest
Josh

Clarification for all of you that are asking the same question regarding the solar tax credit. I installeId solar panels in my house on 2018 and I was concerned when I learnt that the credit was not “fully refundable”. Well I just finished my taxes for 2018 and one thing I would like to clarify is that the credit goes against your tax liability for the year. That doesn’t mean that if you calculate your taxes and the final amount says you owe $1,000 to the Feds (say your solar credit is $3,000), you’ll only be able to get $1,000… Read more »

Joey
Guest
Joey

I own a home that my disabled daughter lives in (she receives SSA). I pay the electricity for the home and it’s in my name. Can I get the rebate for solar? She is a dependent on our taxes.

Wong Lee
Guest
Wong Lee

I installed solar on house in 2017. 30% of the my solar was about 8200. In my 2017 tax return, I owed $3313 in tax, so I received $3313 solar rebate. I have about $4888 left for my solar rebate. Based on my estimate for the 2018 tax return, I will owe $5103 in tax. However, I will be getting only about $2800 in solar rebate. My question is: Why won’t I be getting the full remaining of my rebate, $4888?

Carolyn
Guest
Carolyn

We are about to install solar panels on our house and were told that the Federal Credit would be $12,648 and that it would be given to us when we filed our taxes. Will we really get that amount back along with our regular refund(which we usually get).

Our dream is to turn your thoughts of solar power for your home into reality

The first step is calculating how much you can save with solar

Cool, let’s calculate my savings Nah, maybe we’ll do that later

shares

Solar Power Rocks is a Wave Solar company

Wave Solar Logo