Form IT-255: Claiming the NY State Solar Tax Credit

The new york state solar tax credit form is IT-255, titled Claim for Solar Energy System Equipment Credit. It is filed with your New York State income tax return for the year in question, and the total it produces carries onto the credit schedule filed with that return.

It is a short form, which is misleading. Most of the work happens before the form: deciding what your qualifying expenditure actually was, and confirming that the property and the arrangement both meet the conditions the statute sets.

Where the form sits in the return

IT-255 is an attachment, not a standalone filing. It computes one number — the solar energy system equipment credit for the year — which then flows into the credit schedule accompanying your resident income tax return.

It is filed for the tax year in which the qualifying expenditure is treated as made, which for a purchased system is normally the year the equipment is placed in service. A system that is installed in one calendar year and commissioned in the next raises a timing question worth putting to a preparer rather than guessing at.

The credit itself is New York State’s, administered by the Department of Taxation and Finance. It is not related to the New York City property tax abatement, which is a different benefit with a different application, covered in the abatement filing guide.

What the New York State solar tax credit form asks for

In structure, the form asks four things. Whether the installation is at your principal residence in New York State. What the qualifying expenditure was. The statutory percentage applied to it. And whether any credit carried forward from an earlier year is being used now.

The credit equals 25% of qualified solar energy system equipment expenditures, subject to a dollar cap set in statute. The form applies the percentage and then applies the cap, so a larger system does not produce a proportionally larger credit once the cap is reached.

There is also an aggregate limit tied to the residence rather than purely to the return, which is what stops the same home from generating the maximum credit repeatedly through successive installations or successive owners. The full statutory conditions are set out in the equipment credit rules.

What counts as a qualifying expenditure

Qualifying expenditure means the cost of purchasing and installing solar energy system equipment at your principal residence. That covers the equipment itself and the labour to install it, including the associated electrical work that makes the system function.

It does not cover things that are not part of the solar energy system. Roof replacement done at the same time is the usual example: a roof is a roof even when the timing is driven by a solar project. Structural work, tree removal and general electrical upgrades unrelated to the array sit outside the credit in the same way.

One arithmetic point catches people out. As of September 2026 NYSERDA has no open NY-Sun block for homes in any utility territory; check NYSERDA’s NY-Sun dashboard for a new one. Where a contract does carry a NY-Sun incentive, it is paid through the contractor and appears as a reduction in the contract price, so the amount a homeowner actually pays is already net of that incentive. There is nothing further to subtract, but there is also nothing to add back — the qualifying expenditure is what you paid.

Leases and power purchase agreements can qualify

New York’s credit is unusual in this respect. Amounts paid under a written lease or power purchase agreement of at least ten years can constitute qualifying expenditure, which means a homeowner who never owns the equipment can still claim the state credit.

Because payments under such an agreement are made year after year, the credit is computed on what was paid during each tax year, and the form is filed repeatedly until the statutory limits are reached. That is a different filing pattern from a cash purchase, which produces one claim.

This has become a more consequential distinction since the federal residential credit ended, because it is now one of the few tax benefits a third-party arrangement still delivers to the homeowner directly. The trade-offs are set out in lease versus buy.

The credit is not refundable, but it carries forward

If the computed credit exceeds the state tax owed for the year, the excess is not paid out. New York does not refund this credit.

What it does instead is allow the unused portion to be carried forward to later tax years, within a limit of five taxable years under the long-standing rule. That is why a household with modest state tax liability can still use the full credit — it just takes several returns to do it.

Carrying forward means filing IT-255 again in the later year to apply the carried amount. The obligation to keep track sits with the taxpayer, and the records that support the original claim need to survive as long as the carry-forward does.

What the state credit does not do

It does not replace a federal credit, because for a system whose installation is completed in 2026 there is no federal residential credit to replace. The residential clean energy credit under section 25D terminated for expenditures made after 31 December 2025, so a New York homeowner buying a system now claims the state credit and nothing federally. An expenditure counts as made when the original installation is completed, so a system finished in December 2025 but switched on in January 2026 still falls under the old rules. That change is explained in the federal credit article.

It also does not reduce property tax, and it is not a rebate paid at the point of sale. NY-Sun, when a block for homes is open, operates as an upfront reduction through the contractor and is a separate mechanism entirely; as of September 2026 no such block is open in any utility territory.

Frequently asked questions