How Does IRS Verify Solar Credit? A Complete Guide
Using the IRS solar tax credit verification process, only eligible taxpayers can take advantage of the Residential Clean Energy Credit. Understanding how the IRS verifies solar panel claims can help you avoid errors, delays, and audits if you want to install solar panels and claim the credit.
This guide will explain how the IRS verifies solar tax credit claims. Additionally, we’ll discuss the documents you’ll need and common audit triggers.
What is the IRS Solar Tax Credit?
Solar panel installation costs can be claimed on federal taxes as part of the Residential Clean Energy Credit (formerly the Investment Tax Credit). Credit percentages are as follows:
- 30% for solar energy systems installed between 2022 and 2032
- 26% of systems will be installed in 2033
- 22% of systems will be installed in 2034
The solar system must be installed on a primary or secondary residence in the U.S. and purchased, not leased.
Check Also: What is the IRS Mileage Rate? Mileage Deductions Guide
How Does the IRS Verify Solar Tax Credit Claims?
1. Reviewing Form 5695 Submission
To claim the renewable energy credit, you must complete Form 5695 (Residential Energy Credits Form). In reviewing this form, the IRS will:
✔ Make sure the credit amount corresponds to the cost of the solar system
✔ Verify the property qualifies for the credit
✔ Avoid applying the credit to leased solar systems
A delayed refund, denial, or audit can be the result of incorrectly filling out Form 5695.
2. Cross-checking documentation.
In order to confirm your claim, the IRS may request supporting documents. Make sure you keep the following:
✔ Receipts & Invoices – Details of equipment and installation costs from your solar provider.
✔ Manufacturer’s Certification Statement – Verifies that the solar system qualifies for the tax credit.
✔ Proof of Payment – A bank statement or financing agreement showing the payment for the system.
✔ Utility Bills (if requested) – To confirm the installation and operation of the system.
Tax disputes can be prevented by having these records readily available.
3. IRS Audits & Verification Checks
To verify a claim, the IRS may conduct a tax audit if it detects inconsistencies. Typically, this occurs when:
🚩 The credit amount is unusually high when compared to typical solar system costs.
🚩 Previously, the taxpayer claimed the credit on the same property.
🚩 Non-eligible expenses are included in the claim (e.g., unrelated roof repairs).
🚩 As the solar system is leased, it is not eligible for the program.
The IRS may ask for additional documentation or compare your claim with third-party reports in an audit.
Check Also: Can You Check IRS Offset Online? Guide
4. Third-party verification
Data from the following sources may be used by the IRS to verify your claim:
- Solar panel manufacturers – To determine whether the system qualifies.
- Solar installation companies – Confirm details of the installation.
- State or utility incentive programs – The IRS may cross-check your records if you received state rebates.
- Lenders – Loan agreements may be reviewed if you finance your system.
The IRS may flag your return for review if there’s a mismatch between your claim and external data.
Common Issues That Trigger IRS Audits
Know these common mistakes to avoid IRS scrutiny:
🚫 1. Overstating Solar System Costs
- Credits are only available for eligible solar expenses, not for unrelated home improvements.
- Solar panels can only be supported by roof repairs.
🚫 2. Claiming a Credit for a Leased Solar System
- It is the solar company that receives the tax credit, not you, if you lease solar panels.
🚫 3. Claiming a Non-Primary Residence
- It is only applicable to your primary or secondary residence, not to rental or investment properties.
🚫 4. Claiming Credit More Than Once
- Solar tax credits can only be claimed once per installation. It can be carried over to future years if it is unused.
Check Also: When Does IRS Stop Accepting E-File? Key Details
How to Ensure a Smooth IRS Verification Process
✅ All documents (invoices, certifications, proof of payment) should be kept for at least three years.
✅ To avoid IRS review, complete Form 5695 accurately.
✅ Make sure you are eligible for the credit before claiming it (e.g., ownership, location).
✅ Expenses related to solar panel installation should only be reported.
Final Thoughts
IRS reviews Form 5695 claims, checks documentation, audits, and verifies claims with third parties. Maintaining accurate records and ensuring eligibility will allow you to claim your credit without any problems.
Do you plan to install solar panels? To maximize your tax savings, follow IRS guidelines. 🚀🔆
