Investing in solar energy can significantly lower both your electricity bills and carbon footprint, especially with tax incentives like the federal solar tax credit. Known officially as the Residential Clean Energy Credit (Section 25D), this incentive has made going solar much more affordable. But recent changes put the deadline within reach, making timing more critical than ever. Let’s unpack how the credit works, what just changed, who still qualifies, and how to make sure you don’t miss out.
What exactly was the solar tax credit?
The Residential Clean Energy Credit offers homeowners a dollar-for-dollar reduction on federal income tax equal to 30% of the system’s qualifying costs. This covers photovoltaic solar panels, battery storage, inverters, installation labor, and more. For example, on a $20,000 solar system, the credit would reduce your tax liability by $6,000, lowering your effective cost significantly.
But recent legislation has accelerated its end for homeowners: these savings no longer stretch into the 2030s as originally planned.
New deadline: act before it’s gone
As of July 2025, the “One Big Beautiful Bill” Act was signed into law, officially ending the Residential Clean Energy Credit after December 31, 2025. Homeowners must complete installations and incur qualified expenses before this date to claim the 30% credit.
This is a sharp turnaround—previously under the Inflation Reduction Act, the credit was set to apply through 2032 before tapering.
For commercial installations, solar leases, and PPAs, different rules still apply. These systems may still qualify under Section 48E if construction begins by mid-2026 and is placed in service by the end of 2027.
What does this mean financially?
Let’s walk through a typical example:
- Solar system cost: $20,000
- Federal tax credit (30%): $6,000
- If tax liability is $15,000, your liability drops to $9,000
- If you have a smaller liability of $5,000, you can apply $5,000 this year and carry over the remaining $1,000.
The IRS confirms unused credits can carry forward to future tax years.(IRS) But if you wait until 2026, this federal savings is gone.
Are you still eligible after 2025?
To qualify for the 30% credit in 2025, you must:
- Own the system; financed or paid, leasing or leasing buyouts don’t qualify under Section 25D.
- Have taxable income to offset.
- Install the system on your primary or secondary residence.
- Complete installation by December 31, 2025, with required costs incurred in that year.
Other incentives may still be available
While the Residential Credit ends soon, other incentives still exist:
- Commercial and lease-based systems (Section 48E) still qualify through late 2027.
- Battery storage under third-party ownership remains eligible into the 2030s.
- State, utility, and local rebates may offer additional savings—check your local programs.
With this shift in policy, the timing for residential solar has become urgent—and action is needed in the next few months.
Why installers and homeowners are racing against the deadline
With the 2025 tax credit deadline set, installers report surging demand. The solar industry anticipates an up to 85% drop in residential installations over the next decade if credits vanish.
Many are scrambling to complete installations, secure PPA agreements, or finance purchases before the end-of-year cutoff.
Concluding thoughts
The federal solar tax credit, once planned to span nearly a decade, is now ending for homeowners on December 31, 2025. If you’ve been considering solar, this is the moment to act. Not only does the 30% credit cut your cost significantly—it shortens payback time and increases long-term savings.
Beginning the solar process now is critical: for peace of mind, financial return, and locking in the full benefit. Sunhub stands ready to simplify every step and ensure you don’t miss this last window of opportunity.