Residential Clean Energy Credit Ends 2025: What Qualifies

(UNITED STATES) A major tax credit that has helped millions of households afford rooftop solar, battery storage, and other renewable energy upgrades will end this year for residential projects, following changes enacted in July 2025. The Residential Clean Energy Credit, which offers a 30% federal credit on qualified home energy systems, now expires on December 31, 2025 for residential installations.

Homeowners who want the credit must complete installation—not just purchase—by that date and claim it using IRS Form 5695. The Internal Revenue Service notes the credit is nonrefundable, but any unused amount can carry forward to reduce future tax bills.

What changed and why it matters

In July 2025, the One Big Beautiful Bill Act (OBBBA) shortened the credit’s residential timeline. The Residential Clean Energy Credit was originally set to run through 2033 with a phaseout, but OBBBA moved the residential end date up to the close of 2025.

• Demand surged as families weigh rising energy costs against the shrinking window, according to analysis by VisaVerge.com.
• The change places pressure on installers and homeowners who planned multi-stage projects—especially those pairing solar with batteries.
• Installers and households now face a tighter calendar for permitting, interconnection approvals, and on-site work.

What qualifies (eligible property and rules)

Under current rules, taxpayers may claim the Residential Clean Energy Credit for eligible clean energy systems installed from 2022 through December 31, 2025. The credit covers a wide range of renewable technologies installed on a main home in the United States 🇺🇸, whether the taxpayer owns or rents it.

Qualified property (new, not used, and installed at a U.S. home) includes:
– Solar electric panels
– Solar water heaters (certified)
– Small wind turbines (up to 100 kW)
– Geothermal heat pumps (Energy Star certified)
– Fuel cells (subject to special limits)
– Battery storage systems (eligible starting in 2023; must have at least 3 kWh capacity)

Installation costs count, including labor for onsite preparation, assembly, original installation, and piping or wiring needed to connect the system to the home. Traditional building parts that mainly serve a structural role don’t qualify (for example, standard shingles or roof trusses don’t count), but solar roofing tiles and solar shingles do because they generate electricity.

Important points on eligibility:
– The credit applies to new property only; used systems don’t qualify.
– Taxpayers must claim the credit for the year the property is placed in service—when installation is complete and the system is ready to operate—not the year they ordered or paid for it.
– The IRS’s guidance and form instructions remain the best source for current requirements and examples: see IRS: Residential Clean Energy Property Credit and download Form 5695 at IRS Form 5695.

Limits, caps, and special rules

• The credit rate is 30% of qualified costs.
• The credit is nonrefundable, but any unused portion can be carried forward to future tax years.
• There is no annual or lifetime dollar cap for most categories, but fuel cells have strict limits:
  • Maximum credit for fuel cell property: $500 per half-kilowatt of capacity.
  • If more than one person lives in the home, the combined credit is capped at $1,667 per half-kilowatt of capacity.
• Landlords or property owners who do not live in the home cannot claim the credit; it is tied to the taxpayer’s residence.
• Mixed-use homes: if business use is 20% or less, the full credit can be claimed. If business use exceeds 20%, the credit is prorated and based only on the nonbusiness portion of costs.
• Second homes: many upgrades can qualify for a second home used part-time and not rented to others, except fuel cell property, which is excluded for second homes.

Practical implications for households and installers

The revised end date creates time-sensitive scenarios:

• Example: A family that paid a deposit for solar + battery in fall may lose eligibility if completion slips into 2026 due to supply or permitting delays.
• Installers are advising customers to prioritize elements that slow projects (roof work, panel upgrades, utility paperwork) to ensure a placed-in-service date on or before December 31, 2025.
• Contract language matters: homeowners should seek clear commitments on installed-by dates if the credit affects affordability.
• For renters: the credit can apply if a tenant pays for and installs qualified property in a main home, though this is uncommon. Landlords who don’t live in the property can’t claim the credit.
• Regarding roofs: structural roofing that only protects the home does not qualify, but solar roofing tiles and solar shingles that generate electricity do qualify.

Battery storage specifics:
– Became eligible starting in 2023.
– Must be at least 3 kWh to qualify.
– Can be added to an existing installation and has driven interest for outage resilience and time-shifting energy.

Installer and supply-chain pressures:
– Many installers anticipate tight supply and installation slots through year-end.
– Delays from permitting, inspections, or interconnection can push completion into 2026 and make projects ineligible.
– Households on tight budgets can still benefit from the carryforward feature if their credit exceeds tax liability in the installation year.

How to claim the credit

To claim the Residential Clean Energy Credit:

1. Confirm the system is placed in service by December 31, 2025.
2. Keep records:
   • Invoices showing labor and equipment costs
   • Proof of placed-in-service dates (final inspection or permission-to-operate letters)
   • Product certifications for solar water heaters and geothermal heat pumps, when required
3. File for the year the system was installed (e.g., claim on your 2025 tax return if placed in service by 12/31/2025) using Form 5695, Residential Energy Credits, Part I.
4. Consult the IRS for detailed guidance, limits for fuel cell property, and eligible costs:
   • IRS: Residential Clean Energy Property Credit
   • IRS Form 5695

Warning: Purchases or deposits alone do not qualify. The property must be installed and ready to run in the claimed tax year. Used equipment, interest, and loan fees cannot be included in the qualified cost basis.

Key takeaways

• The Residential Clean Energy Credit is a 30% federal credit that now expires for residential projects on December 31, 2025.
• Households must complete installation by that date and claim the credit on Form 5695 for the year the system is placed in service.
• Battery systems (≥ 3 kWh), solar panels, solar shingles, certified solar water heaters, small wind turbines, geothermal heat pumps, and eligible fuel cell property (with limits) are covered when new and installed at a qualifying residence.
• The credit is nonrefundable but may be carried forward; fuel cell property has special caps; second-home and mixed-use rules apply.
• Acting promptly, documenting everything, and ensuring placed-in-service confirmation are essential steps to preserve eligibility given the compressed timeline.

If you plan to install solar panels, solar shingles, a certified solar water heater, a small wind turbine, a certified geothermal heat pump, a qualifying battery storage system (at least 3 kWh), or eligible fuel cell property, the window for the Residential Clean Energy Credit closes on December 31, 2025. Act soon, keep paperwork in order, and file Form 5695 correctly to make the most of this final residential year.