House Approves Terminating the Residential Solar Tax Credit

June 16 Update: The Senate Finance Committee released its bill text that changes the end date of the 25D residential solar tax credit from December 31, 2025 to 180 days after the bill is signed. This new deadline will be debated and voted upon by the full Senate, before heading back the the House, and ultimately to the President’s desk to be signed into law.

The House of Representatives voted on May 22 to approve the Budget Reconciliation Bill, including the measure to terminate the 30% Residential Clean Energy Credit for solar and battery storage on December 31, 2025. Residential projects placed in service (installed & inspected) by this date will still be eligible for the 30% tax credit. The bill will now head to the Senate, where it is expected to pass in some form before the August recess.

The federal solar tax credit or “Investment Tax Credit (ITC)” is, in many cases, the most valuable solar and battery incentive available to residential solar owners. Claiming the credit can reduce your federal tax liability by 30% of the total cost of installing solar and/or battery storage. For instance, investing $30,000 in solar would allow you to claim a $9,000 credit on your federal tax return for the year it is installed and inspected.

As part of the Inflation Reduction Act (IRA), the federal solar tax credit is currently scheduled to remain at 30% through 2032 before gradually phasing out by 2035. The Budget Reconciliation Bill measure to eliminate this credit almost 10 years early is not set in stone, as it still needs approval from the Senate before heading to President Trump for a signature.

Let’s take a look at what’s next for the “Big, Beautiful” Budget Bill and the fate of the 30% residential solar tax credit.

What happens next for the residential solar tax credit?

With approval from the House of Representatives, the Budget Reconciliation Bill heads to the Senate.

Most pundits think the Senate will pass the budget reconciliation bill before the summer recess in early August, but it’s unclear if an abrupt end to the residential solar tax credit will still be included as currently proposed. The budget reconciliation bill includes cuts to several clean energy tax incentives created by the Inflation Reduction Act—both for businesses and homeowners—many of which have bipartisan support and have boosted manufacturing in Republican-held districts.

There will almost certainly be resistance to IRA cuts from swing-state Senators and changes to the reconciliation bill before it is signed into law. However, homeowners don’t have the luxury to wait and find out if the residential solar tax credit survives. Solar projects typically take several months from design to installation, and starting the process in August puts their project at risk of not being installed by December 31 and losing their tax credit eligibility.

Over the summer, the solar industry and everyone who cares about a consumer’s choice to save money with solar should reach out to their federally elected representatives and let them know that they support the Residential Clean Energy Tax Credit (25D). 

What happens to residential solar without a homeowner tax credit?

The budget reconciliation passed by the House in May not only terminates the 30% solar tax credit claimed by homeowners (known as 25D), it also restricts businesses from claiming the 48E tax credit on third-party-owned residential solar installations, such as leases and power purchase agreements (PPAs).

If signed into law as written, this would effectively remove any path for homeowners to access a federal tax credit for installing solar and/or battery storage and reduce the savings potential of adopting these technologies. The residential solar industry would certainly experience a substantial contraction, especially among smaller contractors who aren’t able to survive the market downturn.

Industry veteran Brian Lynch joined us to discuss what the near- and long-term looks like for residential solar with tax credits.

How to claim the solar tax credit before it’s gone

If you’ve been thinking about solar, now is absolutely the best time to go forward with your project. Solar projects typically take several months from design to installation. However, as we’ve seen across the country, every time there is a negative change to policy, homeowners rush to grab the last of the incentives, and projects get delayed due to backlogs. So, we expect installation times to grow as the year progresses.

Because the system needs to be placed in service (i.e., installed and inspected), this means projects contracted after the summer are at risk—so don’t delay. Start a project on solar.com today to compare solar quotes quickly and put your project on track for installation in 2025.

We’ll update this article and post new ones as updates are made. 

And finally if you care about small businesses in your community, and the choice to have access to clean energy that you own instead of relying on a bank to sell you power (or buy it from your utility) reach out to your federally elected representatives and let them know you care about the Residential Clean Energy Tax Credit!