Solar Energy Tax Credit (ITC): A Guide for Businesses & Homeowners
If you’re considering a clean energy upgrade at your home or business, you’ve likely heard of solar energy tax credits. Also known as the Residential Clean Energy Credit (25D) and the Clean Electricity Investment Credit (48/48E), these IRS credits could help you chart a path to a more economical project.
Solar Tax Credit Definitions
Domestic Content Adder
A bonus credit for business solar that uses certain American-sourced products.
Energy Communities Adder
A bonus credit for commercial/nonprofit solar located in a specially designated “energy community” region, such as a brownfield, statistical area, or ex-coal mine.
Prevailing Wage and Registered Apprenticeship (PWA) Adder
A solar bonus credit for businesses that commit to paying prevailing wages and employing registered apprentices.
2025 Credits At-a-Glance: Amounts, Who Qualifies
25Dis a non-refundable, annual, carry-forward credit for homeowners
48/48Eis an investment tax credit for businesses and the tax-exempt
- Base amount equal to 6% of the qualified solar energy investment placed in service after Dec 31, 2024
- Increases by up to 30% with the prevailing wage & apprenticeship (PWA) adder
- Increases by up to 10% with the domestic content or energy community adders
- Decreases to 22% for properties placed in service in 2034
- Use IRS Form 3468 here
- Read more here
What Changed in 2025?
Changes for Taxpayers Who Claim 48/48E
January 16th: Treasury Department Publishes Notice 2025-08
Notice 2025-08 updated the elective safe harbor tables for the domestic content adder, changing the bonus amounts after a 90-day transition period.
April 16th: 2025-08 in Full Effect
With the 90-day transition over, developers could now only choose between Notice 2025-08 rules or direct-cost accounting when calculating the domestic content adder.
Changes for Taxpayers Who Claim 25D
July 4th: The One Big Beautiful Bill (OBBB) Act Sunsets 25D
The OBBB repealed the 25D tax credit for energy-efficient home upgrades. Homeowners who still want to claim solar projects under 25D must do so by December 31, 2025.
Domestic Content Bonus: How It Works Now
Notice 2025-08 made important changes to the business solar energy tax tables. Now, rooftop and ground-mounted systems fall into two independent categories with different percentages. See the new tables here.
How to Claim Solar Tax Credits
Claiming 25D as a Homeowner
- Confirm your eligibility. Many factors impact eligibility. For instance, batteries, solar panels, and solar water heaters are all eligible, but using your home as a place of business reduces your credit amount. Also, you must claim the credit for the year of the system’s installation/first startup, not the year of its purchase.
- Install solar. Buy your solar energy system, install it, and bring it into service.
- Collect your documents. You don’t have to file documentation with your claim. But the IRS recommends gathering purchase receipts and installation records—they’ll be necessary if your return gets audited or you sell the property.
- File Form 5695. Add this form when filing taxes for the year you brought your solar into service. Find instructions and Form 5695 here.
Carry forward (optional). These credits may exceed your tax liabilities. If so, you can carry them forward to claim them in subsequent years.
Claiming 48/48E as a Business
- Choose the ITC or PTC. In addition to the Investment Tax Credit, IRS rules created the Clean Electricity Production Credit (PTC). PTC-eligible system owners may receive a base rate of 0.3 cents per kWh they generate, adjusted for inflation. (Read more)
- Confirm your PWA status. If you know your business satisfies PWA, great. If you’re unsure, consider whether you might qualify for an exception. Your project may be excused from PWA requirements if it outputs under 1MW max or it broke ground before January 29, 2023. (Read more)
- Consider adders. Bonus adders can significantly increase your credit eligibility.
- File Form 3468 (and 3800). Add Form 3468 when you’re filing taxes and claiming the 48/48E investment credit. You’ll also need to report your 48/48E credit on IRS Form 3800 (General Business Credit). Get your forms here: Form 3468, Form 3800.
Can I monetize my business solar energy tax credit?
Two possible options for credit monetization include elective pay and transferability:
- Elective Pay: Applicable entities (governmental, tax-exempt, tribal, and others) may receive credits in the form of refund payments.
- Transferability: Non-applicable entities can transfer a portion or all of their credit to a third-party buyer for cash.
Clarifying PWA: Rules for the 30% (Maximum) Adder
PWA adder rules establish two main requirements:
- Prevailing Wages: Your PWA adder eligibility depends on your ensuring you pay wages no less than the prevailing rates for similar work in your area. (Read more)
- Apprenticeships: Your project’s construction, alteration, or repair must make use of a sufficient amount of qualified apprentice labor. (Read more)
If you fulfill these requirements, your 6% adder base rate multiplies by 5 to a maximum of 30%. Alternatively, you may claim the PWA adder by qualifying for an exception. (Read more)
Updates on Incentives and Storage Eligibility
Next Steps for Developers
Watch this tax credit explainer.
Reach out to your SolarEdge sales rep for certification letters.
FAQs
What expenses count toward the credit?
Qualified residential expenses include the costs of new clean energy properties, like solar electric panels, solar water heaters, and battery storage technology (since 2023).
Qualified business solar facility owners can claim annual credits based on the amount of clean energy they generate.
Do leases/PPAs qualify for homeowners?
Home solar energy systems you use under a lease or Power Purchase Agreement (PPA) are not claimable on your tax return. However, the company that owns the solar energy system can capture credits and (hopefully) offer you lower rates.
Can nonprofits get full value (elective pay)?
Tax-exempt organizations are one of a handful of applicable entities that qualify for elective pay.
Can businesses sell (transfer) the credit?
Individual taxpayers, partnerships, and S corporations may choose to sell investment tax credits partially or in full in exchange for cash at their own discretion. This does not apply to applicable entities.
Is there state credit on top of federal?
There are numerous state-level solar energy tax credit programs. For programs in your area, visit the Database of State Incentives for Renewables & Efficiency.
What documentation do I need?
Although not all filings require documentation, it’s advisable to keep a detailed paper trail. Examples include installation records, purchase receipts, and certification letters from solar equipment providers. Consult with a legal expert about what you’ll need to document your claim, stay audit-ready, or prepare for a property sale.
Does re-roofing count?
ITC credits are only for new renewable energy properties.
What if I don’t have enough tax liability?
If your home solar energy tax credit exceeds your liability (the credit is bigger than what you owe), you can carry it forward (use the credit on later filings).
If your business lacks sufficient tax liability, you may still be able to monetize the credits through a transfer. Check Form 3800’s Transfer of Eligible Credits Under Section 6418 for more.
SolarEdge does not provide tax and/or legal advice. The forward-looking statements herein are accurate as of the date herein and are subject to change. You should consult with your own legal and/or tax advisor(s) regarding the eligibility of your project for the ITC or PTC, including the 10% Domestic Content bonus, to determine how the applicable rules apply to your project. For more information, please contact your local SolarEdge sales representative.
