The “Big Beautiful Bill” has officially been signed into law and it includes a repeal of the 30% federal solar tax credit.
This landmark financial incentive was key in advancing the growth of solar energy for decades and starting January 2026, it will no longer be available to all those that are interested in residential solar.
In this article, we’ll unpack what this new legislation means for the solar industry and for anyone interested in getting set up with solar before the credit ends officially in December 2025.
Overview of the Solar Tax Credit
The 30% federal solar tax credit, also known as the residential tax credit, has been a groundbreaking financial incentive in the solar industry for many years. It’s a crucial incentive because it provides immediate tax savings of 30% for new owners of solar systems and it also gives a tax break to solar companies and community solar developers. Essentially, it has been a huge driving force in pushing the clean energy agenda forward.
The repeal of the tax credit means that section 25D, the aspect of the tax credit that covers fully owned residential systems, will be cancelled on December 31st 2025. The commercial aspect (Section 48E) which concerns commercial solar projects and residential systems operated under lease or purchase power agreements (PPAs), is still in effect. However, solar systems under this clause need to be placed in service before December 31, 2027 to benefit from the credit. So if you own a home solar system under a lease or a PPA, you can still benefit from this portion of the tax credit—it just won’t be as beneficial as the full ownership option.
What are the economic repercussions of the tax credit repeal?
The impact of the solar tax credit going away extends far beyond reduced savings and the promotion of solar adoption. With the advent of AI, inflation, and the scarcity of non-renewable energy sources, electric prices have been on the rise. With the federal tax credit going away, homeowners will likely experience further rate hikes as energy demand continues to spike while the net supply of energy decreases. This is because less people will be incentivized to start generating their own solar energy which will increase the demand for grid energy. The grid is already weak, outdated and in need of upkeep so to keep up with this spike in demand while maintaining the grid, utility companies will have no choice but to raise their prices further.
Secondly in 2023, around 280,000 Americans worked in the solar sector and in 2024, the solar industry helped generate over $70 billion of private investment in the U.S . The tax credit played a major role in this progress because it helped raise awareness of the benefits of solar and made it more accessible thus boosting demand for solar energy and the growth of the industry as a whole. Thanks to the tax credit, more people were able to install solar panels in their homes. In addition, the growing need for solar panel installations meant more labor was needed to install these solar panels. However, with the tax credit ending, there will likely be a decrease in job prospects in the solar sector. A study by the Solar Energy Industries Association has shown that 330,000 American jobs would be lost as a result of the tax credit going away.
Moreover, removing the credit raises the upfront cost of going solar by 30%. This is already a significant barrier to entry for many individuals interested in going solar. In addition to higher upfront costs, the payback period for the typical homeowner will also increase as it takes homeowners longer to recoup their initial investment. In a nutshell, going solar will still get you savings down the line but your savings and ROI will just be a little less.
How will the end of the tax credit impact the environment?
Solar energy helps balance out the grid and the tax credit played a huge role in that. Since the credit made solar more affordable, it encouraged more people to see the value of solar and opt to have solar panels installed in their homes. This is important because when people produce their own renewable energy it is transferred into the grid. This helps to “clean” the grid. In other words, every additional kWh of solar energy that is fed into the grid helps reduce its reliance on harmful fossil fuels. Moreover when solar owners rely on solar energy during the day, less pressure is put on the grid making it more efficient and stable overtime.
However, with the removal of this financial incentive, less people will be interested or even financially able to go solar. When fewer people go solar, less solar energy is produced at scale. The less solar energy created, the more we rely on fossil fuels and coal, which are nonrenewable energy sources and terrible for the environment. Using those sources instead of solar also puts more stress on the grid.
But it’s not all bad…
Yes, it’s unfortunate that the solar tax credit is ending soon. But the solar industry is still thriving since solar energy is still more affordable than traditional, fossil-fuel energy, even before incentives. With solar photovoltaic energy being 75% cheaper than in 2014, going solar is still very much a viable option to help you safeguard your energy production and your quality of life for years to come.
Moreover, there are still plenty of other financial incentives available at the state level that help make solar worthwhile for you. For instance, solar owners in New York are eligible for a 25% state tax credit (up to $5000). Likewise, in Pennsylvania, new solar owners can receive a $500 rebate from PECO for new systems installed from September 1, 2024 onwards. Many states also offer property tax exemption for solar owners, as well as SRECs and net metering to allow customers to earn money or credits for the extra energy their panels generate. All you need to do is check with your municipality or state government to confirm what incentives you might qualify for as a residential solar system owner.
So yes, the federal solar tax credit is going away but you can still take advantage of it before it ends on December 31st, 2025. So don’t wait up! If you are ready to install solar panels on your home and want to benefit from this tax credit before it ends, reach out to us for a consultation and we’ll help you get started!