IRS Form — Residential Energy Credits
Form 5695 — Residential Energy Credits
Form 5695 is used to claim the Residential Clean Energy Credit (formerly the Residential Energy Efficient Property Credit) and the Energy Efficient Home Improvement Credit. The Inflation Reduction Act (IRA 2022) significantly expanded these credits. For tax professionals, Form 5695 is a high-value advisory opportunity — many clients are unaware of the credits available for solar panels, heat pumps, EV chargers, and energy-efficient windows and doors.
Key Rules and Authority
| Rule | Detail |
|---|---|
| Clean Energy Credit Rate | 30% through 2032 |
| Clean Energy Credit | Solar panels, solar water heaters, geothermal, wind, battery storage |
| EEHIC Annual Cap | $3,200 total ($1,200 property + $2,000 heat pump) |
| EEHIC Heat Pump Cap | $2,000 per year |
| EEHIC Windows Cap | $600 per year |
| Carryforward | Clean Energy Credit carries forward; EEHIC does not |
Two Credits on Form 5695 — Key Differences
| Feature | Residential Clean Energy Credit (§25D) | Energy Efficient Home Improvement Credit (§25C) |
|---|---|---|
| Rate | 30% of cost | 30% of cost |
| Annual cap | No cap (carryforward available) | $3,200/year ($1,200 property + $2,000 heat pump) |
| Carryforward | Yes — unlimited | No — use it or lose it |
| Qualifying property | Solar panels, geothermal, wind, battery storage | Heat pumps, insulation, windows, doors, energy audits |
| New construction | Yes | No — existing homes only |
| Rental property | No — primary/secondary residence only | No — primary residence only |
Frequently Asked Questions
My client installed solar panels on their home for $30,000. What is their credit?
The Residential Clean Energy Credit is 30% of the cost of the solar panel system, including installation. On a $30,000 system, the credit is $9,000. The credit is non-refundable — it can reduce the client's tax liability to zero but cannot generate a refund. If the credit exceeds the tax liability, the excess carries forward to future years (there is no limit on the carryforward period). The credit applies to the full cost including installation, wiring, and mounting hardware. It does not apply to the cost of any battery storage system that is not charged by solar (a standalone battery storage system qualifies for the credit starting in 2023).
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