25D — Tax Credit · No Cap · Through 2032
What it is
The Residential Clean Energy Credit ("25D") is a federal tax credit equal to 30% of the cost of qualified clean-energy property installed at your home. There is no annual cap and no income limit. The credit runs at 30% through 2032, then steps down to 26% (2033) and 22% (2034).
What qualifies
- Solar PV systems — panels, inverters, racking, labor, balance-of-system
- Battery storage — standalone or paired with solar, minimum 3 kWh capacity
- Solar water heating — at least half the home's hot water from solar
- Geothermal heat pumps — ENERGY STAR-certified, ground-source
- Small wind turbines — for residential generation
- Fuel-cell systems — capped at $500 per 0.5 kW of capacity
Why this is the most generous federal energy credit
| Feature | Detail |
|---|---|
| Annual cap | None — credit scales with project cost |
| Income test | None |
| Property type | Primary residence OR second home (rentals excluded) |
| Carryforward | Yes — unused credit carries to future tax years |
| Sunset | Steps down 2033, 2034; expires 2035 |
Example: $30,000 solar system
30% × $30,000 = $9,000 federal tax credit. If your tax liability is only $6,000, you claim $6,000 this year and carry $3,000 to next year. No income test, no cap.
Stacking
25D stacks with state solar incentives and net-metering programs in most states. It does NOT stack with the IRA's commercial Investment Tax Credit (ITC) — that's a separate path for solar developers. Some state programs (notably NY-Sun) reduce the eligible 25D basis if state incentives are claimed first; check your state's rules.
How to claim
File IRS Form 5695 (same form as 25C). Document panel/inverter/battery model numbers, installation dates, and itemized cost (separating equipment from labor isn't required for 25D, unlike 25C).