Residential Solar Tax Credit Eliminated Under the Big Beautiful Tax Bill: What It Means for Homeowners
By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group
The recently passed Big Beautiful Tax Bill made headlines for raising the federal estate tax exemption and increasing the SALT deduction cap, but not all of the provisions were taxpayer-friendly. One particularly significant change that’s flying under the radar is the elimination of the 30% Residential Solar Tax Credit—a program that’s been central to the rise in home solar installations over the past decade.
If you're a homeowner considering solar, you now have a deadline: install by December 31, 2025, or you’ll lose access to this valuable credit entirely. And the ripple effects could go well beyond individual tax savings.
Let’s break down what’s changing, what it means for homeowners and the energy grid, and how the solar industry may be reshaped by this policy shift.
What Is the Residential Solar Tax Credit?
The Residential Clean Energy Credit—commonly referred to as the 30% solar tax credit—allows homeowners to deduct 30% of the cost of installing solar panels, battery storage systems, and other qualifying equipment from their federal tax bill.
For example, if your solar installation costs $30,000, the credit could reduce your federal tax liability by $9,000. This credit has been one of the most effective incentives for encouraging adoption of clean energy at the residential level.
The Credit Is Going Away—Here’s the Timeline
Under the Big Beautiful Tax Bill, the federal solar tax credit is officially repealed for residential homeowners after December 31, 2025. Here’s what you need to know:
Installations must be fully complete and placed in service by December 31, 2025 to qualify for the 30% credit.
There is no phaseout—the credit simply ends.
The repeal applies to all residential installations, including solar panels, inverters, and eligible battery storage systems.
This means homeowners considering solar need to act quickly, as installations can take several months from contract to completion.
Higher Utility Bills on the Horizon?
The elimination of the solar credit could also have macro-level consequences. Here's why:
Fewer homeowners are likely to install solar once the credit expires, meaning less distributed generation contributing to local grids.
At the same time, electricity demand is rising sharply:
AI data centers are consuming massive amounts of power
More Americans are charging electric vehicles (EVs) at home
Electrification trends are increasing energy use in heating, cooking, and water systems
With less residential solar feeding energy back into the grid and more demand pulling from it, utility companies may need to invest in expensive infrastructure upgrades—costs that could ultimately be passed on to consumers in the form of higher utility bills.
In other words, the removal of the credit doesn’t just impact those who install solar—it could raise costs for those who don’t.
Solar Installation Industry Faces Uncertainty
The solar industry, which has grown rapidly in recent years, could face significant headwinds after the credit expiration. Many residential solar installers have built their business models around the financial appeal of the 30% tax credit.
Once that incentive disappears:
Residential demand is expected to drop sharply, especially among middle-income homeowners.
Smaller solar installation companies—which rely heavily on residential volume—could experience contraction, layoffs, or closures.
The market may shift focus to commercial-scale solar, battery backup systems, and states with additional local incentives—but that won't be enough to fully offset the change.
Consumers should be prepared for less pricing competition, longer wait times, and fewer installer options if demand falls off and the industry consolidates.
Final Thoughts: Should You Move Forward With Solar Now?
If you’re on the fence about going solar, the window to maximize your benefit is narrowing. Here's what you should consider:
Act soon: Begin the planning process now to ensure you can complete installation before year-end 2025.
Get quotes from multiple installers: With high demand expected before the credit expires, early planning can help avoid cost inflation and scheduling delays.
Run the numbers: Even without the credit, solar can make financial sense depending on your local utility rates, energy usage, and how long you plan to stay in your home. But with the credit? The payback period shortens considerably.
Summary
The 30% residential solar tax credit ends after December 31, 2025.
Homeowners must install and place systems in service before that date to claim the credit.
Fewer installations and higher energy demands could mean higher utility costs for everyone.
The solar installation industry may contract, affecting consumer pricing and service availability.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Frequently Asked Questions (FAQs):
What is the 30% Residential Solar Tax Credit?
The Residential Clean Energy Credit allows homeowners to deduct 30% of the total cost of installing solar panels, inverters, battery storage, and related equipment from their federal tax bill. For example, a $30,000 system could reduce your tax liability by $9,000.
When does the solar tax credit expire?
Under the Big Beautiful Tax Bill, the federal residential solar tax credit ends after December 31, 2025. To qualify, systems must be fully installed and placed in service before that date. There is no phaseout—the credit simply disappears beginning in 2026.
Does the credit apply to battery storage systems?
Yes. The 30% credit covers qualifying home battery systems that store energy from solar panels or the electric grid. However, these installations must also be completed by the end of 2025 to qualify.
What happens if I install solar after 2025?
After December 31, 2025, there will be no federal tax credit for residential solar installations. Homeowners installing after that date will need to rely solely on any available state or utility-level incentives.
How could this change affect utility bills?
Without the federal incentive, fewer homeowners are expected to install solar panels. Combined with growing electricity demand from electric vehicles, AI data centers, and home electrification, utilities may face higher costs that could ultimately raise rates for all consumers.
How might the solar industry be impacted by the credit’s repeal?
Residential solar demand is expected to decline sharply after 2025. Smaller installation companies could face consolidation or closures, while consumers may see higher prices and longer wait times as the market contracts.
Should homeowners move forward with solar now?
If you’re considering solar, it’s best to act soon. Starting early ensures installation before the 2025 deadline and locks in the 30% tax credit. Even with strong local incentives, the loss of this federal benefit could significantly increase system payback times after 2025.
