How Does the IRS Verify Solar Credit: Full Solar Tax Credit Process Explained

Content writer Tim Tolka HeadshotWritten by Tim Tolka

Solar Panels | March 29, 2024

Man looking at a government building and his home with solar panels wondering how does the IRS verify solar credit and is there a guide to the solar tax credit (itc) explained along with form 5695 instructions for solar investment and renewable energy tax credit.

Have you ever asked yourself, how does IRS verify solar credit?

Many people who are interested in obtaining the solar tax credit available for home solar installation wonder how the Internal Revenue Service verifies that the panels and system were built.

The IRS got involved in solar credits back in 2005 with the Energy Policy Act of 2005, one of the first major federal solar incentives for residential properties.

The next year, the Solar Investment Tax Credit was enacted and since then, it has become one of the biggest incentives for the adoption of solar panels and clean energy technologies.

This solar credit has been so popular that Congress has extended the deadline for claiming it a bunch of times. If you’re one of those who asks how does IRS verify solar credit, you can claim the solar tax credit on IRS Form 5695 under the residential energy credit, and it applies to both homes being built and existing residences.

Does the US Government Support Clean Energy?

In addition to the solar tax credit, the US government supports residential clean energy and clean energy in general through several initiatives.

In July 2023, President Joe Biden announced the allocation of $20 billion in funding for clean energy investments.1

His initiative was made up of two separate programs that provide grants to states, nonprofits, and tribes for green energy investments. The Biden administration said this initiative is designed to focus on traditionally disadvantaged communities, which if the past is any guide, made little impact in these communities.

The Department of Energy also has the Loan Programs Office.3 This provides loans and loan guarantees to produce large-scale clean energy projects.

Up until now, the office has given over $30 billion in funding.

How Does IRS Verify Solar Credit: What Is the Solar Tax Credit From the Federal Government?

The federal government’s solar tax credit is worth 30 percent of an investment in solar energy technology.

This credit, like other tax credits, provides a direct reduction in tax dollars that would otherwise be given to the US government.

A graphic that shows the process of IRS solar credit verification which includes the IRS verifying solar credit claims by reviewing the documentation on form 5695, the invoice from the solar installer, and permit or inspection report.

Homeowners who put in solar technology or build it into a new home can put some of the credits on their personal income taxes. If the house is new then, the homeowner can put down the credit for the year they moved into the house.

If a homeowner asks themselves how does IRS verify solar credit leases the system or buys his electricity from a solar system through an agreement, then the solar tax credit can only be claimed by the owner of the system according to the Solar Energy Industries Association.2

How Does IRS Verify Solar Credit: How Do Solar Tax Credits Work?

The federal solar tax credit is accessible for residents when they install solar technology on a house in the United States.

Homeowners and landlords may then claim the solar tax credit as long as they own the system. However, tenant-stockholders and condominium members may also claim the tax credit as long as they contributed to covering the cost of the solar installation on the premises.

How much do solar panels cost? You will normally pay around $2.95 per watt,4 so that all told, a new set of solar panels will put you back around $20,000.

So, how do solar tax credits work? The solar credit takes care of any qualified expenses that are part of the costs of new solar panels and their installation.

A graphic that shows how do solar tax credits work for years 2022 to 2032, 2033, and 2034.

This can consist of new electric panels, new wiring, labor costs, assembly, and installation. Any previously owned solar energy technology is not eligible for the credit.

There are no annual or lifetime limits on a dollar amount for those asking how does IRS verify solar credit. Although the credit is scheduled to phase out starting in 2033, someone can install new qualifying solar technology into their home every year and receive the credit each year.

You might wonder, is solar tax credit refundable? Sorry, the solar tax credit is nonrefundable, which means the credit received cannot be more than the amount owed in tax.

If there is excess credit that can’t be applied to a tax year, it can be carried over to future years.

What Qualifies for Tax Credit Under the Federal Solar Incentives Program?

To claim a tax credit under the federal incentive program, solar power must be installed on a residence located in the US.

A residence that qualifies for a tax credit under the federal solar program can include a house, vacation home, mobile home, apartment, condominium, houseboat, or manufactured home as long as it meets federal construction and safety standards.

If you claim the credit, you must live in this residence for most of the year. The government offers all taxpayers some exceptions for issues like health, military service, business, education, and family vacations.

The expenses covered by the tax credit are strictly related to payment for the original installation of solar energy equipment. If the credit is being claimed for a new build or total reconstruction, costs can be claimed once you’ve moved into the residence.

Beware: If you’re using your house as an office and conducting business there and if that business somehow uses the newly installed solar technology, it could affect how qualified costs are considered in the ever-vigilant eyes of the IRS.

If you’re part of an association or cooperative and you collectively finance the installation of solar technology, you will likely be classified as having paid an equal part of the overall qualified costs.

Other subsidies, rebates, or additional financial incentives must be discarded from the recorded costs since they decrease the purchase price. Federal rebates for solar may only be subtracted if they were obtained right from the purchase of solar technology, are based on the purchase cost, and were not given in exchange for a service.

Public utility subsidies have to be subtracted from costs if they are paid right to the homeowner or to a contractor for someone else’s home.

If state energy promotions don’t alter the purchase price, they won’t be taken out from qualified costs. For example, there are some states that provide incentives related to gross income for federal income tax purposes.

Qualified costs consist of building materials directly related to solar technology. Building materials that directly have another function, like shingles and roof trusses, will not be claimed for the solar tax credit because they are not involved in the production or transmission of clean energy.

Solar Credit for Rental Property and Commercial Solar Tax Credit

People who have a rental property can’t claim the solar credit for rental property for any solar technology installations on said property.

respect to a part-time rental, qualified expenses are reduced by the proportion to which the property is rented out.

Aerial view of a lakeside neighborhood, with one residence showcasing solar panels on its rooftop.

(Image: On Shot15)

Similarly, people who own a vacation home can claim qualified expenses for a solar installation based on the amount of time they spend in that vacation home.

There are some options for commercial solar tax credits, however. Commercial taxpayers can claim some qualified costs, or they can claim a Production Tax Credit (PTC) for generating clean energy.

The PTC is available on a per-kWh basis for the first decade of a solar systems operation, according to the Department of Energy.5

How To Claim Solar Tax Credit: IRS Form 5695

If you are one of those who ask themselves how does IRS verify solar credit or how to claim solar tax credit and you went ahead and installed solar panels on a home that you use as your residence, you can use IRS Form 5695 to claim the clean energy tax credit (Solar Tax Credit Form).

If you made any other clean energy investments into one of your residences, you can also claim the credit for these investments. That can include wind energy, geothermal heat pumps, biomass fuel technology, and fuel cell technology.

As with solar power investments, you will have access to claim any costs related to the installation. The credit helps with about 30% of your clean energy costs, except for qualified fuel cell investments, which are limited to $500 for each 0.5 kWh of capacity.

There are but two categories of costs related to solar energy, and they are solar electricity and solar water heating. Qualifying costs for solar electricity must be related to the production of electricity that is used in your US-based home.

Costs related to structural components that are not involved with solar electricity do not qualify.

Newer solar roofing tiles and shingles can function as both conventional roofing and producers of electricity. These do qualify for the tax credit, while roof decking or rafters do not qualify.

Qualified costs for solar water heating must be directly related to the use of solar energy to heat water for a US-based home. At least 50 percent of the energy used by a water heater must come from the sun for an investment to qualify.

To be entitled to the credit, you must purchase technology that has been certified by the nonprofit Solar Rating Certification Corporation or a similar entity that has been approved by the state government to oversee the property in question.

Any money supplied by subsidized energy financing cannot be included when calculating qualified costs. This funding is typically provided by a federal, state, or community program designed to support solar energy installation.

If you lived in a residence with one or more people who were not your spouse, every occupant who invested in a solar installation can complete their own Form 5695. The qualifying cost for each occupant is the lesser of the amount they paid, or the cost for the entire investment times the amount they paid, divided by the total cost.

If you and a next-door neighbor split the costs of a solar installation to benefit your residences, each of you can claim the clean energy credit, with your credit based on the share of the costs that you paid.

If you and your spouse lived apart in separate primary residences that you shared ownership of, you can claim investments in each property if filing jointly. If you’re filing separately, you should each finish a separate Form 5695.

What Is the Energy Efficient Home Improvement Credit?

In the United States, one can get tax credits for costs relevant to energy-smooth home improvements and energy audits. The great thing about these is that just like the solar energy tax credit, this energy-efficient home improvement credit is equal to about 30 percent of qualifying expenses.

In order to get this, one must have quality energy improvements that comply with established standards for energy efficiency. In addition, the home improvement materials have to be brand new.

Overhead perspective of structures, with several rooftops equipped with solar panels.

(Image: Kelly 17)

There are standards for expenses that coincide with exterior doors ($250 per door and $500 total), exterior windows ($600), and home energy audits ($150).

If an individual is considering making energy-efficient home improvements, a great starting place would be a home energy audit. Fortunately, an auditor can conduct an inspection and make a list of the biggest and most cost-effective improvements that will make your home more energy efficient.

For one to get a tax credit of up to $150 for one’s audit, the auditor must be certified and the individual needs to keep a copy of the report that they provide.

Building envelope components like exterior doors, exterior windows, and insulation materials can qualify for this credit if they meet energy efficiency standards. Exterior doors and windows need to comply with the federal Energy Star requirements.

Insulation has to meet standards published in the International Energy Conservation Code.

One may also receive credit for getting air conditioners, water heaters, furnaces, and hot water boilers that get the highest tier of standards established by the Consortium for Energy Efficiency (CEE).

Electrical components will be necessary to maintain energy-efficient systems. They may qualify if they have a capacity of at least 200 amps and meet the National Electric Code.

Qualified expenses for this credit include installation costs and the credit can be up to $600 per item.

The Inflation Reduction Act, signed into law in August 2022, changed the energy-efficient home improvement tax credits, extending them and giving them a bigger financial impact.

Before the Inflation Reduction Act,11 the energy-efficient home improvement credit has called the Nonbusiness Energy Property Credit and it had a lifetime cap of $500 through December 31, 2022. The Inflation Reduction Act raised the cap in two ways.

First, the credit would have an annual cap, not a lifetime cap. Second, the cap was raised to $1,200 for annual qualifying costs through 2032.

The act also renamed the credit to the Energy Efficient Home Improvement Credit.

With the shift from a lifetime limit to an annual limit, homeowners are incentivized to spread out qualifying energy efficiency costs over the decade that the credit is available. You might ask, how does the solar tax credit work if I don’t owe taxes?

If you have already been taking full advantage of this credit and plan to do so through 2032, you could receive $12,000 in credit toward your taxes, which is not too shabby! It’s a lot more than the $500 maximum under the prior credit.

As with the solar tax credit, the home energy efficient tax credit can be claimed by filling out IRS Form 5695.

Solar Tax Credit Form / Form 5695 Instructions: Claiming the Energy-Efficient Home Improvement Credit

As with most IRS tax forms, Form 5695 instructions can seem intimidating,10 arduous, frustrating, and picayune, and it absolutely is arduous, frustrating, and picayune, no two ways about it.

Snapshot of the first page of IRS Form 5695 titled "Residential Energy Credits."

(Image: Department of the Treasury Internal Revenue Service16)

Below is an abbreviated list of instructions for filling out Form 5695 hopefully, without sticking a fork in your eye due to frustration.

Part I Residential Clean Energy Credit

Lines 1 to 5: Go ahead and enter the qualified costs related to your investments in solar electricity, solar water heating, residential wind energy, geothermal heat, and biomass fuel technologies.

Don’t forget to include any costs related to the onsite assembly and installation of your new clean energy technology, including any necessary piping and wiring.

Lines 6a and 6b: Enter the total of all qualifying costs and multiply them by 0.3.

Lines 7a and 7b: Confirm any investments in fuel cell technology for a primary residence located in the US. If you did not have any qualifying costs in this area, check the “No” box and skip to Line 12.

If you did make investments in this residential clean energy technology, check the “Yes” box and enter the property address.

If you and your spouse are filing jointly and have multiple homes with qualified costs, enter one address on Line 7b then add an additional sheet that lists the address of other main residences. Add the total costs for all residences together and list them on Line 8.

Line 8: Enter your qualifying costs for fuel cell technology, including any labor costs related to on-site assembly and installation.

Line 9: Multiply Line 8 by 0.3.

Line 10: Enter the kilowatt capacity of the fuel cell and multiply it by $1,000.

Line 11: Enter the lesser of Line 8 or Line 9.

Line 12: Enter any solar tax credit carryover from the previous year, which can be found on Line 16 of the previous year’s form.

Line 13: Enter the total of Lines 6b, 11, and 12.

Line 14: Complete the Residential Clean Energy Worksheet to determine any limitation based on tax liability.

Line 15: Enter your residential clean energy credit, which is the smaller of Lines 13 or 14. This is the amount to list on Line 5 of Schedule 3 for IRS tax form 1040.

Line 16: If Line 14 is less than Line 13, then you cannot use the entire credit because of your tax liability limit. If this is the case, subtract Line 15 from Line 13 for the amount you can carry over to the following year.

Part II Energy Efficient Home Improvement Credit (Pre-2023)

The Inflation Reduction Act significantly expanded the energy-efficient home improvement credit and editions of Form 5695 for 2023 and beyond will reflect these changes.

Per the IRS website,6 use pre-2023 editions of Form 5695 for improvements made earlier than 2023.

Snapshot of the second page of IRS Form 5695 titled "Part two: Energy Efficient Home Improvement Credit"

(Image: Department of the Treasury Internal Revenue Service16)

The instructions for this part only pertain to those editions of Form 5695.

Lines 17a to 17c: Confirm any energy-efficient home improvements you made to a primary residence located in the US. These must be improvements to an existing home or part of the renovation of an existing home.

Any energy-efficient measures incorporated as part of a new build cannot be claimed for this tax credit, even if the actual installation of these measures happened after you started living in the home. If you only made investments in clean energy and not energy-efficient technology, check the “No” box and skip the rest of Part II.

If you did make investments in energy-efficient technology, check the “Yes” box and enter the property’s address.

Line 18: Included in pre-2023 editions of IRS form 5693, this line item is related to the lifetime credit limit for energy-efficient investments made in the past. If this line is on your form, you must fill out the Lifetime Limitation Worksheet.

If the result of the worksheet is credits totaling $500 or more, you can’t take this tax credit.

Lines 19a to 19h: These lines are related to individual qualified costs that are not related to on-site labor. A manufacturer’s certification can be helpful for confirming that your costs do indeed qualify.

While you do not need to attach any certification documents, you should keep them for your records.

Line 19a: Enter the qualifying costs for any insulation material or an insulation system, which meets the standards established by the International Energy Conservation Code (IECC). Do not claim any housing component that has not primarily designed for insulation.

Structural supports, drywall, and siding are examples of materials that can provide insulation but are primarily there for structural support, and therefore cannot be claimed for credit.

Line 19b: Enter the qualifying costs for any exterior doors, which meet Energy Star standards version 6.0.

Line 19c: Enter the qualifying costs for a metal roof that is specifically designed to reduce heat gain, which meets or exceeds Energy Star standards.

Line 19d: Enter the qualifying costs for exterior windows and skylights, which meet or exceed Energy Star standards version 6.0.

Line 19f: If you previously claimed qualifying costs for windows or skylights, use the Window Expense Worksheet to determine the amount to enter for this line.

Lines 20 and 21: Enter the total of Lines 19a, 19b, 19c, and 19h, then multiply this by 0.1.

Lines 22a to Line 22c: These lines are related to qualifying costs for purchases of energy-efficient technology, such as heat pumps, air conditioning, or heating units. The expenses listed in these lines should include labor costs for on-site assembly or installation.

Line 22a: To be considered qualifying costs:

  • An electric heat pump water heater must undergo the standard test procedure outlined by the Department of Energy and produce a Uniform Energy Factor of at least 2.2.
  • A central air conditioner must meet the highest efficiency standard established by the ICEE.
  • A gas-, propane-, or oil-powered water heater must undergo the standard test procedure outlined by the Department of Energy and produce a Uniform Energy Factor of at least 0.82 or have an efficiency of at least 90%.
  • A gas-, propane-, or oil-powered furnace or hot water boiler must have an annual fuel utilization rate of at least 95.
  • An air-circulating fan used in a furnace must have an annual electricity use of 2% or less of the total energy use for the unit.

Line 23 and Line 24: Add all of the qualifying costs for energy-efficient home improvements.

Line 25: If claiming joint occupancy, cross out the preprinted $500 and enter the smaller of either Line 24 or $500 multiplied by Line 24, then divided by the amount from Line 24 for all owners.

Line 25 to Line 28: Add and subtract to determine a potential tax credit.

Line 29: Complete the Energy Efficient Home Improvement Credit Limit Worksheet

Line 30: Enter the smaller of Line 28 or Line 29 to determine the Energy Efficient Home Improvement Credit.

How Does IRS Verify Solar Credit: How Many Times Can You Claim Solar Tax Credit?

So, how many times can you claim solar tax credit?

While there is no limit to how many times you can claim the solar tax credit, the amount of the credit is set to decrease every year after 2032 and completely disappear in 2035. It should be pointed out that this credit has been very popular since it was established in 2005 and Congress has pushed back its expiration several times.

Also, the solar tax credit is nonrefundable, which means the IRS will not issue a refund if the credit exceeds your tax liability. If this is the case, you can “roll over” any unused credit into the following year, through 2034.

Solar Panels Rebate

Rebates from a utility company or incentives from manufacturers that reduce the purchase price will typically reduce the solar tax credit. Solar panels rebate from the state and state tax credits do not affect the federal solar tax credit.

If you receive money from the sale of renewable energy certificates, it is taxable income that gets added to your gross income, but it does not lower the tax credit.

Types of Solar Panels

Solar cells produce electricity through a semiconducting substance that changes light into electricity, with the standard semiconductor material being silicon.

Solar panels differ in look, efficiency, cost, and the way they’re produced. There are three primary types of solar panels:

  1. Monocrystalline: These solar panels are produced from a single silicon crystal via an energy-intensive process. Because manufacturers need to absorb the expense of making these crystals, monocrystalline cells are usually the most expensive choice.
    This production process, referred to as the Czochralski process, also creates excess silicon, which can be used to make polycrystalline solar panels.
  2. Polycrystalline: These solar cells are made of silicon pieces using a fairly rudimentary process. Consequently, they are typically cheaper than monocrystalline solar panels.
  3. Thin-film: The prices for these solar cells vary a bunch. The cheapest kind of thin-film solar panel to make is CdTe,13 while CIGS panels are more pricey.

Monocrystalline and polycrystalline panels contain solar cells made of silicon wafers that are set up in rows and columns coming together in a rectangle. The silicon is covered with a glass panel and framed.

Aerial view of a residential neighborhood surrounded by trees near a small vineyard with one home distinctly displaying solar panels on its roof.

(Image: Bastian Riccardi18)

The most accessible thin-film panel is made from a layer of cadmium telluride added in the center of layers that trap sunlight. Amorphous silicon (a-Si) panels are made up of non-crystalline silicon on top of glass, metal, or plastic.

Copper-Indium-Gallium-Selenide panels consist of layers of all four elements crushed between two conductive layers, with electrodes on either side of the material.

Thin-film panels are considered to be the most ideal type of panel because of their sleek, all-black design. You put these panels up on your rooftop.

The Monocrystalline panel is another panel with an elegant black look. This kind of panel also has a generous substantial amount of white space, making them more noticeable and conspicuous than thin-film panels.

Polycrystalline panels are more likely to be thought of as the ugliest ones. They have a unique blue marbling that differs from one panel to the next, making them highly conspicuous.

Monocrystalline panels usually give the greatest efficiency and power-generating capacity. Their panels may reach efficiencies greater than 20%, while polycrystalline panels usually get efficiencies of between 15% and 17%.

The great capability of monocrystalline solar panels also enables them to generate more electricity than others. Monocrystalline panels usually consist of over 300 watts of capacity, and some of them hold a capacity of more than 400 watts.

Polycrystalline solar panels have capacities of around 250 watts.

Monocrystalline panels also have a tendency to outperform polycrystalline panels in high temperatures. Both monocrystalline and polycrystalline panels come in sizes of 60, 72, and 96 cells.

However, monocrystalline panels create more electricity with the same number of cells.

Thin-film panels tend to be less efficient than both monocrystalline and polycrystalline solar panels. Thin-film panel efficiencies vary based on what they’re made from, but they tend to have an efficiency of about 11%.

Unlike monocrystalline and polycrystalline panels, thin-film solar panels don’t come in standard sizes.

Because capacity depends on size, it varies from one thin-film panel to another. That being said, the capacity per square foot of a thin-film panel tends to be lower than that of monocrystalline or polycrystalline solar panels.

Monocrystalline solar panels are the most efficient type of panel and the most expensive, with the cost averaging $1 and $1.50 per watt. Polycrystalline panels tend to cost between $.70 and $1 per watt.

The cost of a thin-film panel is based on the source material. CIGS panels cost $.60 to $.70 per watt, CdTe panels cost $.50 to $.60 per watt, and a-Si panels cost $.43 to $.50 per watt.

According to Energy Sage, the cost of installing thin-film solar panels can be less than the installation cost for monocrystalline or polycrystalline panels because of the additional work that you gotta do.7

Thin-film panels are lighter-weight and easier to wrangle than the other ones. As a result, it’s way easier to get the panels up onto your rooftop and set them into position, and that means you’ll spend less on labor.

What Kind of Solar Panels Should I Get?

The kind of solar panel that is best for a particular home depends on the situation. People with plenty of space for solar panels can opt for many lower-cost polycrystalline panels.

Those with limited space may have to install higher-cost monocrystalline solar panels to generate adequate levels of power.

Thin-film panels are best for a roof that can’t support the weight of other panel types. Although, their lower efficiencies mean a lot of panels must be installed to generate significant levels of electricity.

Thin-film panels are also ideal for portable solar systems, like those found on RVs or large boats.

Along with performance, price, and energy output installation requirements, there are a number of other things to consider when figuring out which panel type is right for your residence.

  1. Hail frequency: Despite the fact that most solar power systems are protected by robust tempered glass, severe hail storms have been known to damage solar panels. The typical solar panel can tolerate hail up to 1 inch in diameter falling at about 50 mph.
    Monocrystalline and polycrystalline panels are best for areas that regularly receive large hail because they are more robust than thin-film panels.
  2. Severe storm frequency: Along the East and Gulf coasts, hurricanes are a regular thing, every year. If you live in these areas, your solar panels must be able to weather these storms.
    There is no official classification system for the ability to withstand hurricanes, but most panels can tolerate winds of up to 140 mph. Panels in tropical storm and hurricane regions should be tightly secured with fasteners, bolting, or a rail system.
  3. Average temperatures: Solar panel efficiency is impacted by the surrounding temperature, with the ideal temperature being around 77 degrees Fahrenheit. If solar panels are allowed to reach temperatures above 149 degrees Fahrenheit, their capability goes down a lot.
  4. Fire rating: As with any building materials, potential fires are a concern with solar panel installation, and obviously, solar panels should not make a residence more dangerous. Fire ratings for solar panels are based on standards from the Underwriters Laboratory and International Electrotechnical Commission.
    Ratings range from Class A, for moderate fire hazard areas, to Class C for low-risk fire areas.

What Are Solar Roofing Shingles?

Even though solar technology offers so many benefits, including the solar tax credit, some people are reluctant to install solar panels simply for aesthetic reasons. Basically, they just do not like the look of solar panels on a roof.

These folks may want to have a look at solar shingles. As the name suggests, solar shingles are roofing shingles that can provide solar power without significantly altering the appearance of a roof.12

The technology is the same as solar panels and the shingles are easily installed.

Unfortunately, there are significant drawbacks. To start with, the cost can be prohibitive, particularly when it comes to solar shingles from brands like Tesla.

The ability to offset that upfront cost with solar electricity is also limited by a lack of efficiency, ranging between 14 and 18%. Even if you’re able to pay for them and willing to put up with decreased efficiency, solar shingles can be hard to find.

Most solar shingles are made to replace asphalt roofing. The cheapest way to install solar shingles is to make it part of a total roof replacement.

Although this can be a major upfront investment, it will likely pay off in the long run and you can take the solar tax credit after the installation is done and paid for.

What Are PERC Solar Panels?

Passivated Emitter and Rear Cell (or Passivated Emitter and Rear Contact)14 solar panels are an emerging technology that could become more widespread in the coming years. PERC technology offers superior energy production by adding a passivation layer to the back of a conventional solar cell.

This additional layer offers three primary benefits:

  1. Reflecting light back to the semiconductor: The semiconductor in a standard solar cell cannot absorb all the light it receives. The passivity layer bounces this light back, giving the silicon layer a second attempt at absorption.
  2. Decreased electron recombination: Electron recombination prevents the free flow of electrons through a solar cell. The passivity layer reduced the tendency for electrons to recombine.
  3. Decreased heat absorption: High-wavelength light that passes through a semiconductor layer gets absorbed by the panel’s metal back, which generates heat. The passivity layer is designed to reflect high-wavelength light and minimize productivity-draining heat.

Solar panels produced from PERC cells often perform better than conventional panels in challenging conditions, particularly in low light and high temperatures. PERC solar panels make it possible to create energy-dense installations, which generate the same quantity of electricity with fewer solar panels.

Using fewer panels can mean a cost reduction and more flexibility. If roof space is very limited, PERC solar panels can make a solar installation more practical.

A graphic that shows the different components of PERC solar panels such as frame and busbars, passivated emitter, PERC cells, passive rear cell, and aluminum.

Decreasing the number of panels needed has the additional advantage of overall costs. An installation requires components that are not part of the panels themselves, such as racking and wiring.

Fewer panels mean fewer installation parts.

While PERC solar panels are an exciting technology due to the advantages they offer over conventional solar panels, many manufacturers haven’t switched over to PERC technology. On the bright side, switching to the production of PERC cells doesn’t call for a lot of alterations to existing processes, according to Energy Sage.8

There are only two extra steps needed: the application of the passivity layer and laser or chemical etching of the passivity layer. These steps don’t add substantial costs and taking them yields a superior solar cell.

While a classic hurdle to new solar cell technology is added cost, more manufacturers may embrace PERC technology as they realize a low-cost, easy transition to make.

If you’re looking into switching to renewable energy through solar energy and think that the installation costs are too high, emerging low-cost solar panel manufacturing techniques and government-offered tax breaks will help lower the prices. We hope that this step-by-step guide on how to fill out Form 5695 has shed light on how does IRS verify solar credit applications and has helped you decide to make the switch.

Frequently Asked Questions About How Does IRS Verify Solar Credit

How Can You Redeem Residential Energy Credit?

The government also has incentives related to residential energy efficiency improvement, including a tax credit. This tax credit can also be redeemed on the same IRS form as the solar credit.

Does a Solar Panel Rebate Affect the Tax Credit?

In addition to the federal solar tax credit, there are also a number of other incentives available to people who install solar power into their residences. According to Energy Sage,9 some of these incentives can reduce the tax credit while some do not.

Learn More About How Does the IRS Verify Solar Credit


References

1Daly, M. (2023, July 14). Biden opens up $20 billion ‘green bank’ for clean energy projects. Fortune. Retrieved July 26, 2023, from <https://fortune.com/2023/07/14/biden-administration-opens-up-20-billion-green-bank-for-clean-energy-projects/.>

2Solar Investment Tax Credit (ITC) | SEIA. (n.d.). Solar Energy Industries Association. Retrieved July 26, 2023, from <https://www.seia.org/initiatives/solar-investment-tax-credit-itc>

3US Department of Energy. (2023). Loan Programs Office. Energy.gov. Retrieved August 12, 2023, from <https://www.energy.gov/lpo/loan-programs-office>

4Mey, A. (2021, July 16). Average U.S. construction costs for solar generation continued to fall in 2019. U.S. Energy Information Administration. Retrieved August 12, 2023, from <https://www.eia.gov/todayinenergy/detail.php?id=48736>

5Solar Energy Technologies Office. (2023, June). Federal Solar Tax Credits for Businesses. Energy Efficiency & Renewable Energy. <https://www.energy.gov/eere/solar/federal-solar-tax-credits-businesses>

6IRS. (2023, August 9). Energy Efficient Home Improvement Credit. IRS. Retrieved August 12, 2023, from <https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit>

7Marsh, J. (2023, January 2). What are the different types of solar panels? Energy Sage. Retrieved August 12, 2023, from <https://news.energysage.com/types-of-solar-panels/>

8Marsh, J. (2018, November 14). PERC solar cells: an overview. Energy Sage. Retrieved August 12, 2023, from <https://news.energysage.com/perc-solar-cells-overview/>

9Marsh, J. (2023, January 3). Federal solar tax credit in 2023: complete guide. Energy Sage. Retrieved August 12, 2023, from <https://news.energysage.com/solar-tax-credit-explained/>

10IRS. (2023, February 17). About Form 5695, Residential Energy Credits. IRS. Retrieved August 12, 2023, from <https://www.irs.gov/forms-pubs/about-form-5695>

11The White House. (2023). Inflation Reduction Act Guidebook. The White House. Retrieved August 12, 2023, from <https://www.whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook/>

12National Renewable Energy Laboratory. (2023). Solar Roofing Shingles. National Renewable Energy Laboratory. <https://www.nrel.gov/docs/fy00osti/23700.pdf>

13National Renewable Energy Laboratory. (2023). Thin-Film Material Science and Processing. National Renewable Energy Laboratory. Retrieved August 12, 2023, from <https://www.nrel.gov/materials-science/thin-film.html>

14Hsu, C.-H., Yang, C.-H., Wang, Y.-H., Huang, C.-W., Lien, S.-Y., Kung, C.-Y., & Lou, J.-C. (2016, July 8). Low Cost Local Contact Opening by Using Polystyrene Spheres Spin-Coating Method for PERC Solar Cells. National Library of Medicine. Retrieved August 12, 2023, from <https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5456904/>

15On Shot. Pexels. Retrieved from <https://www.pexels.com/photo/top-view-of-houses-with-swimming-pools-6641571/>

16Department of the Treasury Internal Revenue Service. IRS. Retrieved from <https://www.irs.gov/pub/irs-pdf/f5695.pdf>

17Kelly. Pexels. Retrieved from <https://www.pexels.com/photo/bird-s-eye-view-of-buildings-rooftops-12530460/>

18Bastian Riccardi. Pexels. Retrieved from <https://www.pexels.com/photo/top-view-of-a-residential-area-8092374/>