The One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, introduces major changes to solar energy incentives in the U.S., impacting both homeowners and businesses. Key takeaways:
Residential Solar: The 30% federal tax credit ends on December 31, 2025, with no phase-down or continuation period. This could increase the payback period for solar systems from 8–10 years to 15–20 years.
Commercial Solar: Businesses can still benefit from tax credits for systems placed in service by December 31, 2028, after beginning construction within 60 days of enactment to qualify under Section 48E/45Y.
Foreign Entity Restrictions: Effective January 1, 2026, new projects involving prohibited foreign entities cannot access tax credits.
Acting before the deadlines is crucial to securing savings. Homeowners should install solar by the end of 2025 to claim the full credit, while businesses must carefully plan projects to meet compliance requirements. Without federal incentives, state and local programs, along with battery storage options, can help offset costs and maintain savings.
‘Everything You Need to Know Before the Solar Credit Ends’
Tax Credits and Incentives Under the Act
The One Big Beautiful Bill Act brings major changes to federal tax credits for solar energy, drawing a clear line between residential and commercial solar buyers. It reduces long-standing incentives and introduces stricter compliance rules.
New Solar Tax Credit Rules
For homeowners, residential solar systems completed by December 31, 2025, qualify for a 30% federal tax credit. After that, the credit ends entirely with no phase out as originally planned.
On the commercial side, the Clean Electricity Investment Credit will remain available at its current rate for systems beginning construction within 60 days of the bill’s enactment and placed in service by December 2027.
How Changes Affect Homeowners vs. Businesses
Homeowners now face a tight timeline if they wish to maximize their savings. Installing solar before December 31, 2025, allows them to claim the full 30% federal tax credit, providing substantial savings by lowering the system's overall cost. This deadline is especially critical for middle-income families with sufficient tax liability looking to upgrade to solar. In 2023, nearly 44% of households that installed solar earned less than $100,000 annually. Missing the deadline could make solar installations much less affordable.
For businesses, while the timeline is more forgiving, the process has become more complicated. Commercial solar projects must now adhere to stricter compliance standards, such as rules governing foreign involvement and domestic content requirements. The Section 48 commercial solar tax credit is already more intricate than the residential credit, and the proposed reductions add further uncertainty and legal red tape for long-term planning. These changes make it essential for businesses to act swiftly and carefully to secure their incentives.
New Rules and Requirements
The Act also introduces restrictions on who can access tax credits. Taxpayers linked to countries deemed a threat to U.S. national security are no longer eligible. Additionally, tax credit eligibility now depends on meeting new requirements for U.S.-made components. These provisions, upon legal analysis, strongly suggest that businesses will likely incur increased expenses for documentation and legal reviews to ensure compliance, thereby adding further complexity to future projects.
These updates not only shorten the window for federal incentives but also shift the financial dynamics of solar energy projects. Acting quickly has become crucial to take full advantage of the remaining benefits.
How the Act Affects Solar Costs
The removal of these key federal tax incentives significantly increases the effective costs of solar installations and stretches the time it takes for homeowners and businesses to see return on their investment.
Changes in Solar Installation Costs
Take this hypothetical example: an 11-kilowatt solar system priced at about $30,000 previously benefited from a 30% federal tax credit, reducing its net cost to about $21,000. Without this credit, that full $9,000 falls squarely on the buyer, and the payoff period jumps from 8–10 years to a much longer 15–20 years with rising amortization timelines.
According to EnergySage's latest Marketplace Report, solar equipment prices hit a record low of $2.50 per watt in the second half of 2024. However, the absence of federal incentives offsets these cost reductions, making solar less affordable overall.
For residential projects, the loss of the primary tax credit is a major setback. On the other hand, commercial solar projects can still benefit from the Section 48E tax credit provided they meet deadlines and foreign entity rules. Homeowners who opt for third-party ownership models, such as leases or Power Purchase Agreements (PPAs), may indirectly benefit from these credits. That said, these arrangements typically offer much smaller long-term savings compared to owning a system outright.
Energy Cost Comparisons Before and After
Installing solar before December 31, 2025, remains the most cost-effective option while federal tax credits are still available. Looking back at the previous example:
Timeline | System Cost | Federal Credit | Net Cost | Monthly Savings* |
Before Dec 31, 2025 | $30,000 | $9,000 (30%) | $21,000 | $180–220 |
After Dec 31, 2025 | $30,000 | $0 | $30,000 | $180–220 |
*Monthly savings depend on factors like location, utility rates, and system size.
Without federal incentives, the return on investment becomes far less swift, as the extended payback period delays the financial benefits of going solar. While third-party ownership options like leases and PPAs remain viable, they typically yield lower long-term savings compared to outright ownership, even though the initial barrier to entry is significantly lower.
Why Energy Bills May Go Up
The loss of federal support doesn’t just affect installation costs - it’s also likely to drive up electricity bills for households and businesses. Annual household energy costs are expected to increase by approximately $110 or more, with some states seeing hikes of over $200. Businesses could face as much as a 10% rise in energy expenses, which might squeeze profit margins and strain grid reliability.
How to Get the Most from Solar Under the New Law
Even with reduced federal support, solar energy remains a smart investment. By tapping into state and local incentives and working with experienced providers, you can still optimize your solar setup and make the most of the changing regulatory environment.
Using State and Local Incentives
State and local programs can fill the gap left by reduced federal support. These programs often provide rebates, tax credits, and performance-based payments to encourage solar adoption. Additionally, net metering policies - which allow you to sell excess energy back to the grid - vary depending on where you live. Understanding these regional rules is essential when planning your system. Partnering with a knowledgeable solar provider can make navigating these local benefits much simpler.
Expert guidance is critical when it comes to navigating the complexities of solar regulations. Reputable providers, like Option One Solar, help ensure compliance with changing laws while maximizing your incentives.
Experienced installers also simplify the process by explaining contract terms, financing options, and solar policies. For example, Option One Solar offers expertise in handling permits, installations, and ongoing support, ensuring you meet all regulatory requirements.
Adding Battery Backup Systems
Adding a battery storage system to your solar setup can significantly boost its value and are essential to maximizing your energy savings in today’s solar energy climate. Batteries allow you to store excess energy during off-peak hours and use it later when electricity rates are higher, cutting down your overall energy costs. This is far more beneficial than selling your power back to the grid for far less than it’s worth under current net metering policies. In states like California, where utility rates have been climbing for years, this strategy can lead to substantial savings.
Beyond savings, battery systems offer energy security. Acting as a personal power backup, they keep your home running during outages and grid failures. Unlike traditional generators, batteries are silent, require little maintenance, and don’t rely on fuel, making them a hassle-free solution.
The adoption of battery storage is growing fast. In 2023, about 12% of solar installations included battery systems, with that number expected to reach 28% by 2028.
If you’re considering adding battery storage, consult a professional installer. They can guide you through available programs in your area, assess your eligibility, and help you seamlessly integrate battery systems into your solar setup.
Why the One Big Beautiful Bill Act Matters for Solar Buyers
The One Big Beautiful Bill Act (OBBBA) marks a major turning point in the U.S. clean energy sector, particularly for those considering solar energy. This legislation introduces new timelines and conditions that significantly affect solar investments for both homeowners and businesses.
What Homeowners Need to Know
For homeowners, the OBBBA creates a sense of urgency. The federal tax credit of 30% - an advantageous factor in making residential solar systems more affordable - will no longer apply to installations completed after December 31, 2025. This deadline is a game-changer. Early estimates suggest that installing a system before the cutoff could save homeowners around $9,000 depending on the size of the system.
On top of that, household energy costs are expected to climb. Projections indicate an average annual increase of at least $110 per household, with some states seeing hikes of over $200 as early as next year. Acting now not only locks in savings but also provides a buffer against these rising costs.
To offset the loss of federal incentives, homeowners should take full advantage of state and local programs. Partnering with experienced providers like Option One Solar can make a big difference, as they can guide homeowners through the changing incentive landscape and ensure timely installation. These challenges for homeowners mirror the hurdles faced by businesses.
What Businesses Need to Know
For commercial solar buyers, the timeline is even tighter. Projects must begin construction within 60 days of the bill's enactment and be completed by the end of 2028 to qualify for tax credits. This narrow window leaves little room for delay.
"Wind and solar developments face a compressed window to secure [investment tax credits] where projects may want to target commencing construction within the next 12 months to satisfy the start of construction exception."
- Frost, Brown and Todd
Additionally, businesses must navigate new Foreign Entities of Concern (FEOC) restrictions that complicate supply chains and eligibility for benefits. This adds a layer of complexity, requiring careful scrutiny of supply sources and ownership structures to avoid disqualification.
To maximize the 30% tax credit, businesses should prioritize projects that comply with prevailing-wage requirements. Acting quickly and meeting all regulatory requirements is essential for businesses aiming to make the most of this opportunity.
The Future of Solar Energy
While the OBBBA introduces challenges, solar energy remains a cornerstone of America's energy strategy. Beyond financial considerations, the legislation has broader environmental and economic implications.
At the same time, advancements in technology continue to drive down costs. According to EnergySage's latest Marketplace Report, the price of solar reached a record low of $2.50 per watt in the second half of 2024. These technological improvements make acting now even more advantageous, as policy changes could extend the time it takes to see a return on investment.
Despite the shifting policy landscape, the core benefits of solar - cost savings, energy independence, and environmental responsibility - remain strong. Even without the tax credit, the fundamental long-term advantages of switching to solar energy are still very much present. Reduced energy bills, energy independence, and fixed energy costs still remain steadfast in the wake of this new legislation. Navigating the new regulatory environment swiftly and strategically is key to maximizing these advantages while they last.
The Clock is Ticking — Don’t Miss Out
Don’t wait and miss your window—federal solar incentives are disappearing fast. If you’ve been on the fence about going solar, now is the time to act. Lock in your 30% tax credit before it’s gone and start saving on energy for decades to come.
Strike while the iron’s hot—lock in Your 30% solar incentive before It’s gone forever!
FAQs
Q: How can homeowners save the most on solar installations before the federal tax credit changes beginning 2026?
A: If you're thinking about reducing energy costs at a favorable upfront cost, now's the time to act. Installing solar panels before the federal solar tax credit comes to a close at the end of 2025 can save you a lot of money. Right now, homeowners can claim 30% of their installation costs as a tax credit, which helps offset those upfront expenses for those with sufficient federal income tax liability. But if you wait until after 2025, you'll miss out on the full savings.
Getting started sooner rather than later means you could lock in significant savings and start reducing your energy bills right away. Since planning and installation take time, moving forward now ensures you’ll meet the deadline and get the most out of this opportunity.
Q: How do the new foreign entity restrictions affect commercial solar projects, and what steps can businesses take to comply?
A: Foreign Entity of Concern (FEOC) restrictions take effect for projects with construction beginning after December 31, 2025. To comply, businesses must ensure no “material assistance” from prohibited foreign entities (e.g., China, Russia, Iran, North Korea) throughout their supply chains. Additionally:
Audit your supply chain to confirm all sources and parts are FEOC-compliant.
Begin construction within 60 days of bill enactment to secure eligibility for the Clean Electricity Investment Credit and stay ahead of FEOC and content restrictions.
Document compliance with certificates or affidavits from suppliers to establish eligibility during audits.
Acting early and maintaining supplier transparency is the best way to ensure commercial solar projects qualify for tax incentives.
Q: What are some affordable options for homeowners and businesses to install solar panels now that federal incentives have decreased?
A: Even as federal incentives decline, solar ownership remains a smart and affordable investment—especially for those focused on long-term savings and energy independence. Owning your system outright maximizes lifetime value, offers the greatest return on investment, and eliminates reliance on third-party providers.
Many states still offer local rebates and property tax exemptions that reduce upfront costs and improve overall savings. Additionally, the falling cost of solar equipment—now averaging $2.50 per watt—makes self-financed systems more accessible than ever.
Choosing high-efficiency panels and working with a trusted installer ensures you’ll capture the full value of your investment over decades. Even without federal credits, owning your solar system offers lasting protection against rising energy prices and gives you complete control over your power.
