Federal Solar Tax Credit

Posted November 27, 2018

How do I claim the solar tax credit?

To claim the 30% solar tax credit you simply complete a Form 5695 and add the results of this to your main tax return.

How to complete Form 5695

Form 5695 - Qualified Solar Electric Costs

Form 5695 calculates tax credits for a variety of qualified residential energy improvements. You only need to worry about line 1 being the line for solar electricity. Insert the total cost of your solar panels system, including installation into line 1.

Assuming you are not also receiving a tax credit for fuel cells installed on your property, and you aren't carrying forward any credits from last year, put the value from line 6 on line 13.

Now you need to calculate if you will have enough tax liability to get the full 30% credit in one year.

Complete the worksheet on page 4 of the instructions for Form 5695 to calculate the limit on tax credits you can claim. If you are claiming tax credits for adoption expenses, interest on a mortgage, buying a home for the first time, or buying a plug-in hybrid or electric vehicle, you will need that information here. (For this example, total federal tax liability is $7,000.)

Residential Energy Efficient Property Credit Limit Worksheet - Line 14

Form 5695 - Residential Energy Efficient Credit

Enter the result on line 14 of Form 5695. Review line 13 and line 14, and put the smaller of the two values on line 15.

If your tax liability is smaller than your tax credits, subtract line 15 from line 13, and enter it on line 16. That's the amount you can claim on next year's taxes.

Form 5695 - Calculate Tax Credit

Add credit to Form 1040

The value on line 15 is the amount that will be credited on your taxes this year. Enter that value into Form 1040, line 53 (or Form 1040, line 50).

Form 1040 - Residential Energy Credits

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