Major League Tax Strategies: So You Got Solar? Here’s How to Make the IRS Pay for It (Legally)

When your solar panels shine and the IRS picks up 30% of the tab—now that’s what we call clean energy with dirty savings!

Thinking about going green—or already dropped serious cash on solar panels?

Good news: the IRS might help you out.

Bad news: only if you play by their rules.

This isn’t free money for anyone with a roof and ambition. But for those who know how to work the system (legally, of course), this can be a big win.

Let’s take a swing at one of the most misunderstood credits in the tax code: the Residential Clean Energy Credit, aka IRC Section 25D. And yes, it actually works... if you know how to use it.

A Quick Story: The Solar Enthusiast with a Surprise

Maya is one of our real estate investors in Florida who installed a $30,000 solar setup on her home in 2024. Her installer said, “You’ll get a 30% tax credit—no problem.” Maya did what a lot of people do—she believed them.

Then she came to us. Turns out, part of her invoice included roofing upgrades that weren’t even related to the solar system. Her CPA hadn’t asked for the right documents. And Maya had no clue when to actually take the credit.

That $9,000 credit she thought was in the bag? Not so fast.

Let’s make sure that’s not you.

The Basics: What Is This Credit, Really?

The Residential Clean Energy Credit is a 30% federal tax credit for installing certain energy-efficient systems on your home—not your rental, not your Airbnb, not your friend’s barn you’re “thinking of converting.”

What Counts:

• Solar panels (the big-ticket item for most people)

• Solar water heaters (but only the ones that actually work—read: 50%+ solar-powered)

• Geothermal heat pumps (if you like your HVAC expensive and futuristic)

• Wind turbines (if you’re off-grid and proud)

• Battery storage systems (starting in 2023)

• Fuel cells (they exist, we swear)

  
  

As long as it’s installed at a home you use personally, you're on the board. Even a second home can qualify. Rental-only? You’re out.

What Doesn’t Count:

• Portable solar gadgets

• Basic roof replacements

• Anything the builder paid for

• Solar panels still sitting in boxes

  
  

Don’t Blow It: Questions You Should Be Asking

Before you slap those panels on your roof—or if you already have—you need to answer some key questions:

1. What exactly did you install? (Don’t just say “solar.” Be specific.)

2. When was it installed and turned on? (The IRS cares about when it's “in service,” not when you cut the check.)

3. Whose name is on the contract? (You must have paid for it yourself to claim the credit.)

4. What type of home was it installed on? (Your main home? Vacation property? Rental? Be honest.)

5. Did the project include other stuff—like a new roof? (Some of it may count, but not all.)

Pro tip: If you don’t have an itemized invoice, your CPA’s gonna have questions.

And if they don’t, you need a new CPA.

What About That Roof Work?

Ah yes—this is where people get a little “creative.” Let’s clear it up:

• Roofing that is part of the solar energy system—like solar shingles—can qualify.

• Roofing done just to support the weight of the panels? That’s a maybe.

• New shingles or underlayment that have nothing to do with energy production? Nice try, but no.

  
  

If your installer told you “everything qualifies,” please read the fine print—or have someone like us do it.

The Form Everyone Ignores Until April: IRS Form 5695

This is the form where the magic (or the audit) happens. It’s called Residential Energy Credits, and it’s where you report the amount you spent and calculate your credit.

Common mistakes include:

• Claiming the credit in the wrong year (it's about when the system is turned on, not just paid for)

• Forgetting to reduce your home’s basis by the credit amount

• Slapping the full roof bill into the credit calculation

• Trying to use the credit for a rental property

• Skipping Form 5695 entirely and just “assuming” your software will handle it

  
  

You’d be shocked how many smart people mess this up.

Strategy Time: Use It or Lose It (Eventually)

Here’s where it gets fun: this credit is nonrefundable, which means it only reduces taxes you actually owe. If your credit is bigger than your tax bill? You carry the extra forward to next year. And the next. And the next.

So, if you’re in a high-income year, this credit can go to work for you right away. If not? You’ll have to wait.

This is where real planning pays off—timing the install for a high-income year, coordinating with other tax moves, and maximizing your return.

The Bottom Line

If you’re putting serious money into solar, batteries, or other clean energy upgrades, don't rely on your installer’s brochure or your neighbor’s Facebook post for tax advice.

Get clarity. Get documentation. Get someone who understands how this credit actually works.

And when in doubt? Ask us. Because the only thing worse than overpaying the IRS is thinking you got a $9,000 tax break… and finding out in April that you didn’t.

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