Whitney Vandiver, Nerdwarette
Republicans signed President Donald Trump on July 4th, “reducing energy costs” and “big, beautiful bill.” However, homeowners planning on installing solar panels have been hit by a tight deadline to charge thousands of dollars in tax credits.
In addition to cutting federal funds, the nearly 900-page bill eliminated the solar tax credit that homeowners could charge to install solar panels on their property.
Here’s what you need to know about changes to the solar tax credit and how it affects everyone, including those without solar panels.
What is the solar tax credit?
The solar tax credit, also known as the Home Clean Energy Credit, reduces taxes for homeowners when you install qualified solar equipment. Essentially, homeowners can use the money they pay with tax to install a solar energy system. Taxpayers can charge up to 30% of the cost of installing new clean energy systems on their facilities.
This incentive has often made the advance costs of switching to renewable energy more affordable for homeowners, saving Americans a lot more money. In fact, more than 1.2 million taxpayers claimed $6.3 billion in housing energy tax credits during the 2023 tax year, according to the US Treasury Department. The rooftop solar electrical system accounted for 60% of these claims.
What has been changed for the solar tax credit?
The current version of the solar tax credit was introduced as part of former President Joe Biden’s Inflation Reduction Act of 2022. This continued tax cuts for homeowners who installed solar panels until 2034. The IRS had planned to phase out the credits rather than ending sharply in 2033.
However, Trump’s bill will end the solar tax credit on December 31, 2025. It cuts off nine years of potential savings for consumers who were considering a particular renewable energy system. The end of the year deadline significantly reduces the time you have to schedule a qualified installation.
Homeowners who want to claim solar tax credits for the 2025 tax year will need to make financial transactions before the new deadline of December 31st, says Hector Castaneda, certified professional accountant and president of Castaneda CPA and Associates. This means paying in cash or funding your purchase ahead of deadlines.
What does this mean for consumers?
Ending the solar tax credit will have a widespread impact on consumers. This is even for those who hadn’t planned to switch to solar panels.
More expensive solar equipment
According to Energysage, an online solar marketplace, the average installation cost for solar panels in early 2025 was $27,720. The federal solar tax credit saved homeowners an average of $8,316 and reduced the price to $19,404.
But anyone who buys solar panels for a home after 2025 should only rely on state-based incentives to save money. The states have different incentives they offer, with some residents saving money ahead of time with sales tax exemptions or property tax exemptions saving money over time. But when combined with local tax credits and rebates for solar power, the state incentives won’t make up for the loss of thousands of dollars for homeowners after 2025.
To complicate the matter, the costs of solar panels were already shaky before Trump rang out his confession of death on the solar tax credit. Tariffs on imported solar components and equipment began to affect the industry earlier this year, creating uncertainty regarding supply chain reliability and affordability.
Cal Morton, owner of Eastex Solar, a solar installer serving the East Texas region, says tariffs have launched a turbulent market for solar companies. “It was already the craziest year I could think of,” Morton says.
Consumers quickly began to feel the impact of the volatile market. According to a June 2025 Wood Mackenzie report, the average cost of residential solar energy systems increased by 3% between the first quarter of 2024 and 2025. Prices are likely to continue to rise, and the solar market will become more volatile without the solar tax credit.
Longer payout period for new systems
Homeowners who buy solar panels without the benefits of solar tax credits will likely pay a higher price tag. This also creates a longer gap between solar installation and system savings, also known as the payback period.
According to Energysage, the average payback period for solar customers was over seven years in early 2025. However, homeowners in some areas had already considered nearly 20 years before breaking their purchase. Price increases and tax credit losses could extend these recovery periods.
Lease, PPA, and battery trends
Companies offering leases and power purchase agreements (PPAs) as homeowners away from purchasing solar panels are likely to become major competitors, said Chris Hopper, CEO of Aurora Solar, co-founder and CEO, Chris Hopper, a software platform that streamlines the solar array design process for installation.
Homeowners could still save money by leasing solar panels from 2025 onwards, or joining a PPA by July 4, 2026, when solar company tax credits changed. These arrangements allow homeowners to generate solar energy without purchasing equipment, but businesses that own equipment will receive a tax credit. When businesses hand that tax deduction to consumers, they can reduce the overall cost of the system.
Additionally, changes to deadlines do not apply to solar battery purchases. Homeowners who purchase batteries to use as storage systems, such as pairing with new or existing solar energy systems, can claim tax credits to offset up to 50% of their costs. The credits were discontinued in 2034 and end on December 31, 2035.
Less solar power and higher power prices
The elimination of the solar tax credit comes at the same time as the US energy market is experiencing a growing demand for electricity, says Hopper. Solar energy has helped with that demand. According to a June 2025 Wood Mackenzie report, in the first quarter of 2025, utilities were responsible for 69% of the new power generation capacity added to the US power grid.
Commercial solar projects can continue to see tax incentives longer than residential systems, but tend to take longer to operate. A long timeline means that solar energy production is low in the meantime to increase the need for more energy.
Energy Innovation, a nonpartisan think tank specializing in energy, climate research and policy analysis, estimates that its additional energy losses will increase consumer electricity costs.
Janice Dipietro, Chief Integration and Customer Head of New England-based solar company Revision Energy, agrees. She cites a combination of new tariffs, losses in solar tax credits, and increased demand for power as a major factor.
“As a result, electricity bills increase faster than average,” DiPietro said in an email.
Whitney Vandiver writes for Nald Wallet. Email: wvandiver@nerdwallet.com.
Article with Solar Tax Credits Ended: That’s what it means for homeowners to have originally appeared on Nerdwallet.
Original issue: July 22, 2025 11:00am edt
