Federal Solar Tax Credits

This is a summary of what the IRS currently says (as of mid‑2025) about the Federal Solar Tax Credit (sometimes called the solar/home energy tax credit) and key issues you should know. This is general info — always check with a tax professional for your situation.

On October 3, 2008, President George W. Bush signed into law the Emergency Stabilization Act followed by President Barack Obama signing into law the American Recovery and Reinvestment Act of 2009 (ARRA) on February 17, 2009.

What the Tax Credit Is / How It Works

If you invest in qualified clean energy property (solar panels, solar water heaters, battery storage, etc.) for your home, you may be eligible for a tax credit — the Federal Solar Tax Credit.

The credit is equal to 30% of the cost of qualified property installed between 2022 and 2032.

After 2032, the credit phases down:

• 26% for property placed in service in 2033
• 22% for property placed in service in 2034
  

The credit is nonrefundable — you can reduce your tax liability, but it won’t produce a refund beyond what you owe. Unused portions may be carried forward to future years.



There is no lifetime cap or maximum dollar limit on the credit (except for fuel cell property, which has its own limits)

What Qualifies for a Tax Credit (and What Doesn’t)

 – Qualifying Property and Costs

Solar electric systems (photovoltaic) for homes

Solar water heaters (if certified)

Battery storage (starting in 2023) — must have a minimum capacity requirement (e.g. 3 kWh)

Labor costs for installation, wiring, interconnection, onsite preparation, etc.

Rebates or subsidies may reduce the “qualified cost” basis (i.e. you might have to subtract certain incentives from the cost you use to compute the credit).

– Qualifying Property and Costs

Solar electric systems (photovoltaic) for homes

Solar water heaters (if certified)

Battery storage (starting in 2023) — must have a minimum capacity requirement (e.g. 3 kWh)

Labor costs for installation, wiring, interconnection, onsite preparation, etc.

Rebates or subsidies may reduce the “qualified cost” basis (i.e. you might have to subtract certain incentives from the cost you use to compute the credit).

– Items That Do Not Qualify

Used or previously owned clean energy property is not eligible.

Traditional building or structural components (like roof trusses, standard shingles) that primarily serve a roofing or structural function—unless they are solar-integrated roofing (e.g. solar shingles) that generate electricity.

Costs related to non‑qualified structural or aesthetic improvements.

Timing, Installation & Claiming

The credit must be claimed in the tax year when the qualified property is placed in service (i.e. installed and operational), not simply when you pay for it.

You use IRS Form 5695, Residential Energy Credits, to claim the credit.

You must keep your receipts, installation documents, certification documents, etc., in case of audit.

If you install improvements in more than one home in a given year, you combine the eligible costs and report them on one Form 5695.

If part of the home is used for business, only the portion allocated to residential use qualifies.

Deadlines, Phase‑Outs & Recent Changes

As of the current law, installations completed by the end of 2032 can qualify at the 30% rate.

In 2033, the rate goes down to 26%, and in 2034 drops to 22%

After 2034, unless Congress acts, the credit is scheduled to expire.

Some sources outside IRS suggest that because of recent legislative changes, the “One Big Beautiful Bill Act” might accelerate or alter the phaseout (for example, ending for property placed in service after December 31, 2025). However, official IRS pages still reference the 2032–2034 phase‑down schedule.

Always double-check for updates, because tax law can change and the IRS may issue new guidance.

Under these laws, VELUX Solar Powered Fresh Air Skylights, and other eligible VELUX Skylights with Go Solar, as well as VELUX residential rigid Sun Tunnel® with the solar night light, and VELUX Solar Powered Shades qualify under “Solar Electric Property” expenditures when purchased and installed from January 1, 2009, through December 31, 2032.

If you are interested in checking into the details on “Federal Solar Tax Credits” with new Skylight Panel for you home then please fill out the form below so that we can contact you to schedule an onsite inspection and estimate for free on your home.

Velux has an online estimator at this link Velux Skylight Website Estimator for the latest tax credit.