IRS Solar Tax Credit Payouts Soar as Scams Target Homeowners
Clean energy tax credits are paying off for many, but experts warn of increasing scams. Here's what you should know.


The federal solar tax credit, officially the “Residential Clean Energy Credit,” has become a popular incentive for homeowners to invest in renewable energy. The credit is here due to the Inflation Reduction Act (IRA). It allows eligible homeowners to deduct up to 30% of the cost of installing a solar energy system on their federal returns.
Notably, this tax break has led to a boom in solar installations across the United States.
Data show that last year was a record-breaking one for solar installations, with 51% more gigawatts of solar energy capacity installed than the prior year. (That’s according to a market report by the Solar Energy Industries Association (SEIA) and data analytics company Wood Mackenzie.)
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
To top it off, the IRS and the U.S. Treasury Department recently revealed that residential clean energy payouts to taxpayers have reached billions of dollars.
So, if you’ve been on the fence over whether to “go solar,” this tax credit might entice you to take the leap. But before you do, it’s also important to know that increased demand and interest in solar panel installations have led to a rise in scam solar contracts.
Here’s more of what you need to know.
IRS solar tax credit payouts top $6 billion
The IRS has paid billions in solar tax credits since the program's inception.
Recent data show that more than 1.2 million taxpayers took advantage of the residential clean energy tax credit, claiming a total of around $6.3 billion. That translates to an average of just over $5,000 in people’s pockets for each eligible claim.
- Rooftop solar panels were popular, with about 752,300 homeowners claiming credits specifically for those installations.
- Additionally, about 48,840 taxpayers reportedly claimed credits for battery storage systems.
How the solar tax credit works
The tax credit allows homeowners to claim 30% of the cost of installing a solar energy system on their federal income tax return. The credit reduces your tax bill, and if you end up with more credit than you owe in taxes, you can generally carry that over to future years.
Proponents of the incentive say it makes renewable energy more accessible by helping to reduce upfront solar installation costs.
Who can claim it? If you make clean energy improvements to your main home — including solar panels or solar water heaters — you’re likely eligible for the tax credit. Make sure the system is on a property you live in most of the time, and consult a trusted tax professional if you’re unsure of your eligibility.
How much is the tax credit? The solar tax credit covers up to 30% of the total cost of your solar installation, including the setup. There’s no maximum dollar amount for how much you can claim (the credit is based on a percentage of eligible costs).
Note: The tax credit will remain at 30% through 2032. After that, it decreases to 26% in 2033 and 22% in 2034.
This tax break generally applies to qualified expenses like:
- Solar electric panels and fuel cells
- Certified solar water heaters
- Labor costs for installation, prep, assembly
- Permitting fees and inspection costs
- Certain capacity battery storage technology
Use IRS Form 5695 when filing your federal tax return.
Beware of solar panel scams
While solar tax credit can be beneficial, the Consumer Financial Protection Bureau (CFPB) is warning about deceptive practices. Some companies are using misleading sales tactics and fraudulent contracts to exploit homeowners.
Scams can range from sending fake loan contracts to lenders to claiming inflated or non-existent tax credits or claiming you'll receive a rebate check from the government in the mail.
Specifically, the CFPB cautions to beware of:
- Promises of unrealistic savings
- High-pressure sales
- Hidden fees or escalating solar contract payments
- Companies claiming to be affiliated with government programs
To protect yourself, research solar installation companies and verify any claims that a given company is affiliated with a government program.
It’s also good to:
- Get multiple quotes from reputable installers
- Read contracts carefully before signing
- Be cautious of door-to-door sales pitches
Homeowner tax breaks: Bottom line
Given the popularity of solar installations and clean energy tax credits, it’s important to stay informed about the benefits and potential risks before signing any solar installation contract.
Also, don’t forget about other ways to lower your tax bill. The IRS offers several tax credits and deductions for homeowners and homebuyers and the IRA contains other clean energy incentives like the federal EV tax credit.
Related
- Tax Breaks for Clean Energy Home Improvement
- How the EV Tax Credit Works
- Tax Credits and Deductions for Homeowners and Homebuyers
- Should You Go Solar?
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist.
-
How to Add Your Favorite News Sources to Google Top Stories
Google now lets you choose which outlets you want to see more often in Top Stories. Here's how to set your preferred sources in just a few clicks.
-
Home Equity in Retirement: Should You Sell, Borrow or Rent?
Learn how to preserve your property's value, tap equity for income and make smart choices about downsizing, renting, or leaving a legacy.
-
Home Equity in Retirement: Should You Sell, Borrow or Rent?
Learn how to preserve your property's value, tap equity for income and make smart choices about downsizing, renting, or leaving a legacy.
-
Think You Know How 2025 Tax Brackets Work? Take The Quiz
Quiz Test your knowledge of IRS rules that impact how much money you keep in your wallet.
-
The October 15 Tax Deadline Is Coming: A Tax Attorney Highlights What You Need to Know
If you filed an extension in April, time is running out to get your taxes wrapped up for last year. Here's what you need to know for filing your 2024 taxes and preparing for tax year 2025.
-
Three Strategies to Take Advantage of OBBB Changes, From a Financial Planning Pro
Four of the One Big Beautiful Bill's changes could impact your retirement, so it's smart to review your financial plans to see if these strategies would help you get the most out of the new provisions.
-
Retirees Face a Growing Capital Gains Tax Trap: What's Next?
Home Sales A changing housing market and unchanged IRS exclusion amounts can add up to a headache for many homeowners. Will Congress offer a fix?
-
New York Inflation Refund Checks Are Coming Soon: What to Know Now
Tax Relief Inflation relief checks are on the way for over 8 million New York taxpayers. Here's a full breakdown of who gets a payment and when you may expect yours.
-
Are You Getting a Gray Divorce? These Six Financial Strategies Come From a Financial Planner
Managing an equitable division of assets, selling a home, negotiating alimony and splitting retirement accounts are among the money matters that weigh as heavily as emotional issues.
-
The Tax Trap Snares Many Business Owners: A Financial Pro's Guide to 11 Strategies You May Be Missing
Poor tax planning means many business owners are leaving money on the table for the IRS. This detailed guide from a financial adviser highlights strategies you may not be aware of.