New Roof With Solar Panels Tax Credit: What You Need to Know

Installing a new roof with solar panels can be a smart investment, lowering energy bills and increasing home value. To make it more appealing, the federal government offers tax credits to offset some costs. However, not all roofing expenses qualify, so understanding the details is essential to maximizing savings.

Before assuming your entire project is eligible, it’s important to know which expenses count, how to claim the credit, and what documentation you’ll need.

Eligibility Requirements

To qualify, the solar energy system must be installed on a residential property you own in the United States. Rental properties do not qualify unless you also use the home as a personal residence for part of the year. The system must be new—used or refurbished panels are not eligible.

The IRS requires that the solar panels meet energy efficiency standards set by the U.S. Department of Energy. The manufacturer must certify that the system meets these standards. The credit applies to both primary and secondary residences, but vacation homes rented out for most of the year may not qualify.

The credit is only available for systems installed and placed in service during the tax year in which you claim it. The IRS defines “placed in service” as the date the system is operational and generating electricity, not when the contract is signed or when work begins.

Qualified Roofing Expenses

Not all roofing costs qualify for the federal tax credit. While the credit covers the solar energy system, roofing expenses are only eligible if directly related to the installation and functionality of the panels.

Materials

Only certain roofing materials qualify, and they must be necessary for the solar system’s installation. The IRS does not allow the credit for general roof replacements or upgrades unless the materials serve a structural purpose for the solar system.

Solar shingles or tiles that generate electricity qualify. However, traditional asphalt shingles, metal roofing, and other non-solar materials do not. Reflective roofing materials that improve energy efficiency are also not covered under the solar tax credit, though they may qualify for other energy efficiency incentives.

If your roof requires reinforcement to support the panels, the cost of additional structural materials may be eligible, but only if they are essential for the solar system’s operation. Homeowners should review IRS guidance and consult a tax professional before assuming any roofing materials will be covered.

Labor

Labor costs for installing solar panels qualify, but general roofing labor does not. If you replace your entire roof, the portion of labor costs related to standard roofing work—such as removing old shingles or installing underlayment—will not qualify.

However, labor costs directly related to the solar panel installation, such as mounting brackets or integrating solar shingles, are eligible. For example, if a contractor charges $10,000 for a full roof replacement and $3,000 of that amount is for solar panel installation, only the $3,000 portion qualifies.

To ensure compliance, request an itemized invoice from your contractor that separates solar-related labor from general roofing work. Without proper documentation, the IRS may disallow the deduction.

Installation

Installation costs directly tied to the solar energy system qualify for the tax credit. This includes mounting hardware, wiring, inverters, and other components necessary to connect the system to your home’s electrical grid.

If modifications to the roof are required to accommodate the panels, such as adding support structures or sealing penetrations to prevent leaks, those costs may qualify. However, unrelated upgrades—such as improving attic insulation or replacing gutters—do not.

To maximize your tax credit, ensure your contractor provides a detailed breakdown of installation expenses, clearly distinguishing between solar-related work and general home improvements.

Claiming the Credit

The solar tax credit reduces your overall tax liability. This credit is non-refundable, meaning it can bring your tax bill to zero but will not result in a refund beyond what you owe. If the credit exceeds your total tax liability for the year, the unused portion can be carried forward to future years.

To claim the credit, file IRS Form 5695, which is used for residential energy credits. This form requires you to calculate the total cost of your solar installation and determine the credit amount based on the applicable percentage for the tax year. For systems installed in 2024, the credit remains at 30% of eligible expenses, as outlined in the Inflation Reduction Act of 2022. This percentage is set to remain in effect until at least 2032.

The credit applies to the year the system was placed in service. If your project was completed in December but you file in April, the credit still applies to the previous tax year. Consulting a tax professional can help ensure you maximize the benefit while complying with IRS regulations. Errors on Form 5695 could lead to an audit or delays in processing your return.

Required Documentation

Maintaining thorough records is necessary when claiming the solar tax credit. The IRS may request supporting documentation to verify eligibility.

A detailed invoice from your contractor is essential. It should itemize costs associated with the solar installation, distinguishing between expenses for solar panels, inverters, mounting equipment, and electrical work. Without an itemized invoice, the IRS may disallow portions of your claim if costs appear bundled with unrelated home improvements.

Proof of payment is also important. Bank statements, canceled checks, or credit card receipts should match the amounts listed on your invoice. If you financed the project, keep loan agreements and financing terms. While financing costs themselves are not eligible for the credit, they provide context in case of an audit.

Manufacturers’ certifications for the solar components should also be kept on file. The IRS requires that eligible equipment meet performance standards set by the U.S. Department of Energy. Most manufacturers provide a certification statement confirming compliance, which should be downloaded or requested at the time of purchase. If an audit occurs, failure to provide this certification could result in the IRS disallowing the credit.

Common Misconceptions

Many homeowners assume that replacing their entire roof qualifies for the solar tax credit, but this is not the case. The IRS does not allow general roof replacements unless specific roofing materials or structural modifications are directly related to the solar panel installation. If you replace your roof solely to prepare for solar panels, the cost of traditional shingles or underlayment will not be eligible.

Another misconception is that the tax credit provides an immediate refund. Since this is a non-refundable credit, it only offsets tax liability rather than generating a direct payout. If a homeowner does not owe enough in taxes to use the full credit in one year, the remaining balance carries forward, but it does not result in a check from the IRS.

Additionally, leased solar panels do not qualify for the credit. Only homeowners who purchase their system outright or through financing can claim the benefit. Those who lease their panels or enter into a power purchase agreement (PPA) do not own the system and therefore cannot claim the credit. The leasing company retains ownership and may claim the incentive instead.