Time is running out for federal solar tax credits. Congress has proposed ending the 30% Residential Clean Energy Credit and other clean energy incentives by December 31, 2025, years earlier than planned. This means higher costs for solar installations, battery storage, and EV chargers starting in 2026. Here's what you need to know:
Residential Solar Tax Credit: Ends December 31, 2025 (was set to last until 2034).
Battery Storage & EV Charger Credits: Also expire by December 2025.
Impact on Homeowners: Solar installation costs could rise by 20–30%, stretching payback periods by 3–5 years.
Industry Impact: Potential loss of 250,000 jobs and $220 billion in investments by 2030.
If you're considering solar, act now to lock in savings before the deadline. Waiting could mean paying thousands more for clean energy solutions.
2025 Solar Tax Credit Cuts: What Homeowners Must Know (Section 25D)
Current Federal Clean Energy Tax Credits Explained
The federal government offers several key energy tax credits that make it easier for homeowners to invest in renewable energy and energy-efficient upgrades. These incentives provide financial relief, helping to offset the costs of adopting clean energy technologies. Here's a closer look at the main credits and what they offer.
30% Residential Clean Energy Credit
The Residential Clean Energy Credit is one of the most generous federal incentives available for homeowners. It covers 30% of the total cost for installing eligible renewable energy systems, such as solar panels, geothermal heat pumps, and battery storage systems.
According to the U.S. Department of Energy, homeowners can save as much as $7,500 on an average solar installation using this credit alone. The credit is nonrefundable, meaning it can reduce your tax liability to zero but won’t result in a cash refund. However, any unused portion can be carried forward to future tax years, ensuring that homeowners can maximize their savings.
The credit is set to remain at 30% through 2032, gradually decreasing to 26% in 2033 and 22% in 2034, before expiring entirely on December 31, 2034. This timeline gives homeowners a predictable window to plan their investments in clean energy systems.
To qualify, the homeowner must own the system (not lease it) and file IRS Form 5695 with their tax return. The installation must take place at a U.S.-based residence, which the IRS broadly defines to include houses, houseboats, mobile homes, cooperative apartments, condominiums, and manufactured homes.
Battery Storage and EV Charger Tax Credits
Starting in 2023, battery storage systems became eligible for the same 30% tax credit, even if they are not paired with solar panels. This change, introduced by the Inflation Reduction Act, makes it easier for homeowners to adopt energy storage technologies.
For those investing in electric vehicle (EV) chargers, the federal government offers a separate 30% tax credit for alternative fuel vehicle refueling property. This credit applies to both home and business EV chargers and is capped at $100,000. Originally scheduled to run through 2032, this credit supports the expansion of EV charging infrastructure across the country.
Homeowners can combine solar panels, battery storage, and EV chargers to create an integrated clean energy system. Each component qualifies for the 30% tax credit, making it possible to achieve energy independence while supporting the shift to electric transportation.
Energy-Efficient Homebuilder Tax Credit
In addition to homeowner-focused incentives, the federal government also provides tax credits for builders constructing energy-efficient homes. These homebuilder credits range from $2,500 to $5,000 per home, depending on whether the property meets Energy Star or Zero Energy Ready standards.
For homeowners looking to make efficiency upgrades rather than install renewable energy systems, the Energy Efficient Home Improvement Credit offers another option. Starting January 1, 2023, this credit covers 30% of eligible expenses, with an annual cap of $3,200. This includes $1,200 for general home improvements and $2,000 for heat pumps and biomass stoves or boilers.
Unlike its previous version, which had a $500 lifetime limit, the updated credit now resets annually, allowing homeowners to claim the maximum amount every year through 2032.
Credit TypeRateAnnual MaximumOriginal ExpirationResidential Clean Energy Credit30%No limitDecember 31, 2034Energy Efficient Home Improvement30%$3,200December 31, 2032Homebuilder Credit$2,500-$5,000 per homePer qualifying homeDecember 31, 2032
These tax credits provide a long-term framework for clean energy adoption, benefiting both homeowners and the industry. Homeowners can spread out their upgrades over several years, while manufacturers and installers can confidently expand their operations, knowing demand will remain steady through the 2030s. Understanding these opportunities is key to making informed decisions about clean energy investments.
What the One Big Beautiful Bill Would Change
The One Big Beautiful Bill builds on the existing tax credit system but introduces significant shifts, particularly by shortening the timeline for several key tax credits that were originally set to extend well into the 2030s. The proposed legislation is expected to cut more than $25 billion in tax credits available during the 2024 taxable year, which would reshape the financial landscape for renewable energy investments. According to the Solar Energy Industries Association (SEIA), these changes could lead to the loss of nearly 300,000 clean energy jobs and $220 billion in planned solar and storage investments by 2030. These adjustments directly impact the tax credit framework discussed earlier.
Residential Clean Energy Credit Ends December 2026
One of the most notable changes is the early termination of the Residential Clean Energy Credit, which would now expire on December 31, 2026 - nine years earlier than its current expiration date of December 31, 2035. This abrupt cutoff would mean higher costs for homeowners looking to install solar systems, as projects started after the new expiration date would no longer qualify for federal tax credits. For those contemplating solar installations, the timeline just got tighter. Similar reductions would also affect battery storage systems and electric vehicle (EV) charger incentives.
Credit TypeCurrent ExpirationProposed New ExpirationYears LostResidential Clean Energy Credit (Sec 25D)December 31, 2035December 31, 20269 yearsEnergy Efficient Home Improvement Credit (Sec 25C)December 31, 2033December 31, 20267 yearsAlternative Fuel Vehicle Refueling Credit (Sec 30C)December 31, 2033December 31, 20267 years
Battery and EV Charger Credits Would End
The proposed legislation also targets tax credits for battery storage systems and EV charger installations. Federal support for battery storage systems would end on December 31, 2025, while the EV charger tax credit would also expire at the same time. On top of eliminating these incentives, the bill proposes new annual fees for electric and hybrid vehicles, aimed at covering road repair costs.
Homebuilder Credit Would Be Eliminated
The New Energy Efficient Home Credit, which incentivizes sustainable construction, would also be eliminated under this bill. Without this financial support, builders may be less inclined to include renewable energy systems and energy-efficient features in new homes, potentially slowing progress in sustainable housing development.
These proposed cuts highlight ongoing political debates over federal energy policies. Abigail Ross Hopper, president and CEO of the SEIA, expressed her concerns about the broader consequences:
"If Congress does not change course, this legislation will upend an economic boom in this country that has delivered an historic American manufacturing renaissance, lower electric bills, hundreds of thousands of good-paying jobs, and tens of billions of dollars of investments primarily to states that voted for President Trump."
The ripple effects of these changes could significantly alter the trajectory of the residential renewable energy market and the broader clean energy sector.
How These Changes Affect Homeowners and Solar Companies
The proposed cuts to federal solar tax credits bring real financial and operational challenges to both homeowners and the solar industry. By removing these incentives, the economics of adopting solar energy would shift drastically, making it harder for many American families to afford clean energy solutions.
Solar Installation Costs Would Jump by 20-30%
Without the 30% federal tax credit, the cost of installing a typical solar system - currently averaging just over $28,000 - would increase by 20–30%. This would also stretch payback periods by an additional 3–5 years. For families on tight budgets or those considering moving soon, this longer timeline to see returns could make solar a far less appealing option.
Glen Brand, who leads policy and advocacy at Solar United Neighbors, expressed concern over the broader impact:
"It would put solar out of reach for millions of people... What the House has done is to put ordinary Americans in a really hard place. They are basically saying they aren't going to help people with rising energy costs."
This projected rise in costs has already triggered negative market reactions and sparked concern among industry experts.
The Solar Industry Could See Job Losses and Declining Demand
After the bill passed, major solar companies saw their stock values drop by 20–40%. Industry leaders warn that these changes could lead to the loss of up to 250,000 jobs and further reduce consumer demand. The residential solar market, which had already suffered a 32% decline in 2024, could see an even sharper downturn if the tax credits are eliminated.
Contractors, installers, and manufacturers in the solar sector face an uncertain road ahead. Smaller companies, in particular, may struggle to survive if demand drops significantly, forcing many to scale back or shut down operations.
Uneven Impacts Across States and Communities
The effects of these changes won’t be felt equally across the country. States without strong local incentives - especially those with high electricity costs or frequent extreme weather events - will likely bear the heaviest burdens. Homeowners in these areas will face longer break-even periods and steeper financial hurdles when considering solar investments.
Don Moreland, executive director of the Georgia Solar Energy Association, highlighted how critical solar can be during emergencies:
"Communities across Georgia are still recovering from Hurricane Helene, the most destructive storm in Georgia Power's 140-year history. Many areas lost power for over a week, but those with residential solar and battery systems had access to safe backup power during this emergency."
Mike Williams, senior fellow at the Center for American Progress, pointed out the disparity between states:
"Many blue states have their own clean energy policies, which will keep some of the investment afloat in those states. In most red states, all they have are the federal tax credits."
States like New York and Massachusetts, which already offer robust state-level incentives, may be better positioned to weather the loss of federal support. However, in states that rely heavily on federal incentives, homeowners will likely face the full brunt of rising costs. For communities already vulnerable to extreme weather, these changes could add another layer of financial strain.
How to Prepare for the Tax Credit Changes
With federal solar tax credits set to expire in 2025, homeowners should act quickly to lock in their savings before costs increase. To qualify, your solar system must be fully installed and operational by December 31, 2025. That means starting the process now - getting proposals, securing financing, and scheduling installation - is crucial. Here's how Option One Solar can help you meet this important deadline.
Start Your Solar Project Now to Keep Current Credits
Brian Lynch, a seasoned professional with over 20 years in the solar industry, stresses the importance of acting promptly:
"Secure proposals immediately to complete installation by December 31, 2025."
Missing the current 30% federal tax credit could mean losing out on savings ranging from $6,500 to $9,000 for the average homeowner . Adding to the urgency, rising demand is causing installers to book months in advance and making equipment harder to secure. Waiting too long could risk pushing your project past the deadline.
How Option One Solar Helps Meet Tight Deadlines
Recognizing the urgency of the situation, Option One Solar leverages its 54 years of experience in the energy sector - including work with NASA and SpaceX - to ensure projects are completed on time. But their services go far beyond just installing solar panels:
"We're on a mission to do more than install solar panels - we're here to transform the way you power your life. Our goal is simple: to help you break free from skyrocketing utility bills, protect your family from outages, and give you total control over your energy future."
Option One Solar specializes in customized solutions designed to fit each homeowner's unique needs. As they explain:
"Every system we design is tailored to fit your needs, your space, and your goals. With us, it's all about saving you money, building your energy independence, and giving you the confidence to power through anything."
From consultation and design to permits, installation, and final inspection, they handle every step of the process to ensure projects stay on track. Their 25-year warranty covers components, labor, and roof integrity, giving homeowners long-term peace of mind. For those still exploring their options, Option One Solar offers free custom solar quotes with no upfront costs.
Planning Your Solar Budget Without Tax Credits
While acting now to take advantage of federal tax credits is ideal, some homeowners may need to plan for a future without these incentives. Even without the federal credit, solar panels can still provide significant monthly energy savings. Current system costs, after applying the tax credit, average around $12,600. Without the credit, prices could start at approximately $18,000 or more.
For those preparing for higher upfront costs, exploring state-level incentives and financing options - such as solar loans, leases, or power purchase agreements - can help offset the loss of federal credits.
When navigating these options, homeowners should keep detailed records of all related expenses for tax purposes and to track their investment. Consulting with a contractor is also key to identifying which systems and equipment qualify for any remaining tax credits or local incentives.
Conclusion: Taking Action Before Tax Credits End
The One Big Beautiful Bill marks a major shift in federal clean energy policy, bringing an end to the 30% residential solar tax credit, battery storage incentives, and EV charger credits by December 31, 2025. For homeowners, this means time is running out to take advantage of these valuable savings.
Without the federal tax credit, upfront costs will rise, and payback periods will stretch longer. Considering that solar projects often take several months - from the first consultation to final installation and inspection - it’s clear why acting quickly is so important.
Option One Solar, with its years of experience, makes the process straightforward. They handle everything from permits to installation, ensuring your project is completed on time. Plus, they offer free custom solar quotes and back their work with a 25-year warranty, giving you peace of mind as you navigate the process.
Starting your solar project now doesn’t just lock in current savings - it also strengthens your energy independence. Solar energy remains a dependable way to cut down on rising utility costs and secure a stable energy future. While the tax credit is still available, it presents one of the most favorable opportunities for adopting solar in recent years. Waiting could mean facing higher costs and fewer incentives.
If you're ready to take charge of your energy future, don’t wait - this opportunity won’t last forever.
FAQs
What can homeowners do now to take full advantage of solar tax credits before they expire in 2025?
Homeowners looking to save big should move fast to install solar systems and finish all necessary inspections by December 31, 2025, to take advantage of the 30% federal tax credit. To claim this credit, don’t forget to include Form 5695 with your tax return for the year your installation is completed.
It's a good idea to start planning right away. Look into local and utility rebates, consult reliable solar providers, and schedule your installation promptly to avoid any unexpected delays. Acting now can help you secure these incentives before the deadline passes.
How will ending federal solar tax credits in 2025 affect the cost and payback period for solar installations?
If the federal solar tax credits are discontinued in 2025 as proposed, installing solar systems could become 20% to 30% more expensive. Without the current 30% tax credit, homeowners would face higher upfront costs, which could stretch the payback period for solar investments by an estimated 3 to 5 years. This shift might make solar energy a less attractive option for many.
The increased costs could deter some homeowners from switching to solar, potentially slowing the industry's growth and limiting its environmental and economic contributions. For those thinking about going solar, acting before these changes take effect could result in substantial savings.
What state-level programs or alternatives are available if federal solar tax credits are reduced or eliminated?
If federal solar tax credits are scaled back or removed, homeowners still have options to make solar energy more affordable by tapping into state-level programs. Many states provide rebates, grants, and performance-based incentives that help lower the initial costs of installing solar panels.
For instance, states like California, New York, and Massachusetts have developed programs specifically aimed at promoting renewable energy adoption. These incentives can take various forms, such as cash rebates for installations, tax exemptions, or credits for the electricity your solar system produces.
It’s a good idea for homeowners to explore the programs available in their state to identify the most beneficial options. Even without federal incentives, state-level support can play a key role in reducing the financial barriers to going solar.
