2025 IRS Residential Clean Energy Credit for Homeowners
If you’re considering adding clean energy equipment to your home this year, then the Residential Clean Energy Credit (Section 25D) is one of the most valuable incentives available. This federal tax credit helps offset the cost of installing qualifying “clean energy” systems like solar panels, geothermal heat pumps, and battery storage.
However, it is important to realize that the chance is always there that the Trump administration could potentially be planning to make changes to or even eliminate clean energy incentives at some point in the future. So, 2025 may be the best (or even last) time to take advantage of it.
What the Residential Clean Energy Credit Covers
As it stands today, the Residential Clean Energy Credit allows you to claim 30% of qualifying expenses for eligible clean energy systems. This includes not only the equipment itself but also the installation, wiring, and labor costs that go into setting it up. Qualifying systems include:
- Solar panels and solar water heaters
- Wind turbines and geothermal heat pumps
- Battery storage systems with at least 3 kWh capacity
- Fuel cells (with certain limits on how much you can claim)
It’s important to note that used or secondhand equipment will not qualify—the credit only applies to brand-new installations.
Who Can Claim the Residential Clean Energy Credit?
Homeowners can apply this credit to their primary residence and, in many cases, a secondary home as long as it isn’t rented out. If you use part of the system for business purposes, you’ll need to adjust the credit to reflect the portion used for your home. For example, if 25% of the system supports business activity, only the remaining 75% would be eligible. Landlords generally cannot claim the credit.
How Long Does the Residential Clean Energy Credit Last?
The full 30% credit is available for qualifying projects that are placed in service through December 31, 2025. After that, things get more uncertain. Unless Congress extends it, the Residential Clean Energy Credit is scheduled to gradually phase down. It will remain at 30% through 2032 before dropping to 26% in 2033 and 22% in 2034. By 2035, the credit is set to expire completely.
That’s why so many homeowners are moving quickly in 2025 to lock in their savings. Waiting may mean missing out altogether, especially since some lawmakers have recently signaled interest in scaling back renewable energy incentives.
Why It Matters This Year
Because there’s no annual or lifetime cap on the credit (outside of the small limits for fuel cells), it can amount to you receiving thousands of dollars back on your taxes. If your credit ends up being larger than your tax bill in 2025, you don’t lose the extra—you can carry it forward to future years. For homeowners planning major clean energy upgrades, that makes 2025 a very strategic year to move forward.
The Residential Clean Energy Credit is one of the most powerful tools homeowners have to make clean energy more affordable. But with its future uncertain after 2025, now is the time to act. Whether you’re looking at solar panels, a geothermal system, or adding battery storage, completing your project this year ensures that you can take full advantage of the 30% credit. To claim the credit, you’ll need to keep careful records of purchase and installation costs and file IRS Form 5695 with your tax return.