Disclaimer: We are a solar company, not tax accountants or financial advisors. The information below is our interpretation of 26 U.S. Code § 25D and the recent updates from the One Big Beautiful Bill Act. We strongly recommend consulting your tax professional for advice specific to your financial situation.
The “30% Credit” Explained
Investment Tax Credit. The Federal Tax Credit. The 30% Solar Tax Credit. You have likely heard it called a dozen different names.
Regardless of the nickname, they all refer to the same piece of federal law: Title 26 of the United States Code, Section 25D: The Residential Clean Energy Credit. The full title can be found here.
This credit allows residential homeowners to claim a dollar-for-dollar credit against their federal income tax equal to 30% of their qualified solar expenditures. However, with the passage of the One Big Beautiful Bill Act (OBBA) in July 2025, the timeline for this credit has changed drastically.
When is the Tax Credit Deadline?
The new legislation has introduced a hard deadline. Under the updated Section 25D(h), the law now states:
“The credit allowed under this section shall not apply with respect to any expenditures made after December 31, 2025.”
In plain English: To claim the 30% credit, you must have “made the expenditure” before the ball drops on New Year’s Eve, 2025.
What Does “Expenditure Made” Mean?
This is the most common point of confusion. Many homeowners (and even some accountants accustomed to commercial solar rules) believe you must have “Permission to Operate” (PTO) from the utility company to claim the credit. This is incorrect for residential solar.
According to Section 25D(e)(8)(A) of the tax code, the definition is strictly physical:
“(A) In general: Except as provided in subparagraph (B), an expenditure with respect to an item shall be treated as made when the original installation of the item is completed.”
- Note: Subparagraph (B) refers specifically to New Construction (homes being built from scratch). If you are installing solar on a house that is currently being built (not yet lived in), the rules change entirely.
The IRS has reinforced this standard historically (see IRS Notice 2013-70). The OBBA did not change this rule. While the One Big Beautiful Bill Act changed the expiration date of the credit to December 31, 2025, it did not alter the legal definition of an ‘expenditure.’ The standard set by IRS Notice 2013-70 and 26 U.S.C. § 25D(e)(8)(A) remains the law of the land: if the installation is complete, the expenditure is made. Below are two questions from the IRS Notice, which reinforce installation is the determining factor:
- Q-5: May a taxpayer claim the credits in the year of purchase if installation of the qualifying property occurs in a later year?
- No. A taxpayer may not claim the credits until the year the property is installed.
- Q-24: In 2010, Taxpayer A purchases and moves into a newly constructed home that contains qualifying § 25D property. Taxpayer A claims the § 25D credit in 2010. In 2013, Taxpayer A sells the home to Taxpayer B. Is Taxpayer B eligible for a credit on the same § 25D property?
- No. Section 25D(e)(8) generally treats an expenditure as made when the original installation of the qualifying property is completed.
Takeaway: The IRS standard demands “Completion,” not “Operation.” The tax code specifically uses the word completed—it does not say connected, energized, or approved. Therefore, if our crews finish bolting the panels and wiring the system on December 31, 2025, you are eligible for the credit in the 2025 tax year—even if the utility company doesn’t grant Permission to Operate until 2026.
Does Pre-Paying Work?
No. Simply paying in 2025 for a project that is installed in 2026 will not qualify. Below is from the IRS FAQ page.
- For purposes of the residential clean energy credit under section 25D, can a credit be claimed for property installed after December 31, 2025, or constructed after that date, if a taxpayer pays for the property on or before December 31, 2025?
- “Section 25D(e)(8)(A) provides that an expenditure… is treated as made when the original installation of the item is completed. If installation is completed after December 31, 2025, the expenditure will be treated as made after December 31, 2025, which will prevent the taxpayer from claiming the section 25D credit.”
The link to the full FAQ page can be found here.
How to Claim the Credit
To claim the credit, you (or your tax professional) will file IRS Form 5695 (Residential Clean Energy Credit) with your 2025 tax return. Be aware that the IRS will update this form in early 2026 to reflect the final tax year regulations. You can view the Instructions for Form 5695 here.
For further reading, please see our article, Filing for the Federal Solar Tax Credit.
How We Protect Energy Select Customers
Because the 2025 deadline is strict, documentation is key. For all Energy Select customers installed in late 2025:
- Certification Letter: We will provide a formal document on company letterhead certifying the exact date your installation was physically completed.
- Photo Proof: We recommend keeping timestamped photos of the completed installation (which we take during the job) for your records. Just to cover your bases, you could also take your own photos as well.
- Production Verification: If possible, we will activate the system briefly for testing (prior to official PTO) to log minimal production in your monitoring app. This creates a digital footprint proving the system was installed within the 2025 calendar year.
Still Have Questions? We’re Here to Help.
Navigating federal tax codes can be complicated, but going solar shouldn’t be. If you are unsure about your project’s timeline or want to confirm your eligibility before the 2025 deadline, reach out to the Energy Select team today. We can walk you through the schedule, clarify the “installation complete” process, and help ensure you don’t miss out on the 30% credit before it expires.