On July 4th, Donald Trump signed his megabill—called the “One Big Beautiful Bill” or OBBB for short—into law. The OBBB solar provisions and implications are vast. With the preface that solar.com is not providing legal or tax advice, here’s what you need to know about this Megabill’s direct and indirect impacts on residential solar. 

Solar.com’s One Big Beautiful Bill Resource Center:

• FAQs about the OBBB
• Homeowner guide to going solar in the OBBB rush
• What homeowners need to know about leasing solar post-OBBB
• Archive: tracking the OB3 through the House and Senate 

 

 

Big Beautiful Bill Summary: What Does it Mean for Solar?

The headline change to solar from the OBBB is that the 30% solar tax credits will be ending soon. However, there are important distinctions between the different types of tax credits and their phase-out schedules. 

The 30% Consumer Solar Tax Credit (25D)

The consumer claimed tax credit under Section 25D is going away at the end of 2025. These credits are claimed by consumers who own their own solar array (and/or battery storage system), either by paying cash or financing it through a loan. The language in the bill specifically states that “expenditures made” after December 31, 2025 are not eligible to be claimed on individuals on their federal tax returns.

The current understanding is that the system must be fully installed by the end of 2025 to qualify for this credit before it’s gone—signing a contract or placing a deposit is likely insufficient to meet the “expenditures made” threshold. Our team is seeking legal guidance to clarify this point, but for now, it’s safest to assume installation must be complete by December 31 to qualify.

Practically, this means that homeowners interested in going solar and owning their array should start their project as soon as possible and carefully vet whether their selected contractor can complete the project before the end of the year. The typical “contract to installation” cycle is around 3 months. But in some parts of the country, permitting can take significantly longer and installation times can push 6 months from contract signing—which means it might already be too late, in some areas, to go solar and claim the tax credit. 

Many sales originators and installation companies have been reporting record homeowner demand for solar as the OBBB worked its way through the House and Senate. This increased demand will also strain installers’ ability to complete projects by the end of the year. 

 

 

Solar Tax Credits for Leases, PPAs, and Businesses (48E)

The business tax credit for solar, claimed under Section 48E ends at the end of 2027, but with an important distinction. Homeowners who want to go solar and access the tax credit but aren’t able to have their project completed by the end of 2025 still have an opportunity to enter into a Third-Party Ownership (TPO) arrangement. TPO solar is typically in a lease or Power Purchase Agreement structure where a business owns the solar array and sells the power back to the homeowner, either at a fixed rate (lease) or on a per kWh basis (PPA). 

Since the solar array is owned by a third party, they claim the tax credits under section 48E, which stays open until the end of 2027. The value of the tax credit (and depreciation), which is claimed by the TPO, reduces the cost of the lease or PPA. So while the 25D tax credit can’t be claimed by homeowners directly after 2025, entering into a TPO structure still allows homeowners to benefit from the 48E tax credit. 

Review solar.com’s consumer guide to leases with the One Big Beautiful Bill as law.

The 48E “loophole” for residential solar

Since tax credits for Third-Party Owned residential solar are claimed under the same section of the tax code as very large solar projects, they benefit from the same tax treatment. The OBBB contemplates that the “mega” projects take years to develop and construct, so ending the tax credits clean at the end of 2027 would likely strand billions of dollars of investment and would have serious negative impacts on the electric grid. Interconnection queues in the US are filled with far more solar than any other type of generation technology, and society needs that power. 

The loophole allows for projects that Commence Construction prior to one year after the bill is signed (July 4, 2026) up to four years to place the project in service to claim the tax credit. This is known as a safe harbor rule, and largely applies to utility and commercial-scale projects that can take years to complete.

There are a few ways for companies to demonstrate they’ve Commenced Construction prior to the end of 2027, and residential solar companies will likely utilize these strategies to continue to offer tax credit advantaged leases and PPAs post 2027. Why does this matter? Investing in solar is a significant commitment, and having confidence the manufacturers and installers involved in your project are around to support the installation is important. This extra runway will help create a glide path for parts of the industry to evolve into a post-tax credit economic model. 

On July 8, President Trump issued an Executive Order directing agencies to deliver a report regarding safe harboring rules within 45 days, specifically relating to how the Treasury defines “commence construction.” Until that report is delivered, there will be some uncertainty around the “commence construction” milestone, and which projects will qualify for extra time to be placed in service. Given the faster construction cycle for residential leases, this Executive Order likely won’t have much effect on homeowners.

Energy Storage Tax Credit Retention

Energy Storage Systems (ESS) or batteries retained their tax credits under 48E (third-party owned) through 2033 before a phase-out occurs. This is the same tax credit phase-out schedule for nuclear, geothermal, and hydro. However, these projects must comply with FEOC rules (see below). 

The preservation of ESS tax credits under 48E helps protect homeowners who invest in solar today but may face utility rate changes in the future that devalue solar exported back to the grid. Having the option to install a battery through a lease arrangement at a later time will help preserve the value of solar. (Note – it’s always better, and more cost-efficient, to install both solar and ESS at the same time, when possible). 

Manufacturing Tax Credits (45X)

The US has seen a renaissance in US manufacturing since the IRA was passed, with factories capable of producing over 50 GW of annual solar panel production either brought online or under construction. These factories created billions of dollars in economic investment and created, collectively, tens of thousands of jobs. The OBBB acknowledged these facts and preserved the 45X solar tax credits through 2032. 

However, a lot of factories were placed in the US by Chinese-owned or controlled companies, and those factories will likely lose access to the 45X credits under FEOC restrictions. 

While this has lower relevance to homeowners than the consumer-facing tax credits, it’s important to consider whether the company and factory supplying the technology to an individual’s project will be able to support warranty claims for the life of the system.

Restriction of Tax Credits that Benefit Foreign Entities of Concern (FEOC)

One of the major changes to energy tax credits under the OBBB compared to the IRA is the restrictions on Foreign Entities of Concern from benefiting directly or indirectly from US taxpayer support. The FEOC rules are complex and voluminous, impacting both the supply and demand parts of the value chain. Simply put, an FEOC country is a “Foreign Entity of Concern” and, for practical application in the solar industry, effectively references Chinese companies. 

For homeowners rushing a project in during 2025 to claim the consumer tax credit under 25D, there is no direct implication to FEOC rules for projects. However, homeowners should be considerate of whether factories and companies will stay in the US market after the restrictions take effect. Simply having a US entity operating a US factory is insufficient in the long-term, as it also considers whether the company has FEOC debt or equity above certain ratios, FEOC nationals as Executive members, rely on intellectual property from FEOC companies, whether its principle place of business is in a FEOC country, or other metrics defined by the law. 

Even non-FEOC companies face FEOC restrictions under “material assistance” rules, which phase in starting in 2026 and examine the percentage of FEOC subcomponents in a project relative to non-FEOC components. 

The good news is that businesses monetizing the tax credits under Section 48E will run the audits and take the risks on claiming tax credits under the complex FEOC restrictions.

Solar Thermal Tax Credits 

Tax credits to support solar thermal applications (hot water) are ending for both consumer (25D) and business (48E) claims. 

Energy Efficiency Tax Credits

Section 45L or consumer tax credits for energy efficiency projects end at the end of 2025 under the OBBB. Homeowners with older or less efficient homes may want to consider making efficiency upgrades prior to the end of the year.

EV Tax Credits Ending

New and used tax credits for purchasing an electric vehicle end on September 30, 2025 in an accelerated phase-out of the tax credits to encourage consumers and businesses to adopt electric vehicles. 

A Final Note

The solar.com editorial team has gone to great lengths to provide accurate information in simple-to-understand language. See something we missed or find an error? Please CONTACT us at newsroom@solar.com. If you’re doing research on the OBBB and found this article helpful, please link back to this article to help others find it. 

And finally, we believe informed homeowners make smarter solar decisions. The biggest compliment you can make is by getting no-obligation binding quotes for your home solar projects via solar.com. We never sell or remarket your information. You’ll be assigned a dedicated Energy Advisor to help you navigate the process with the same care and trust we hope we’ve earned through producing content like this. 

As President Trump continues his second term, the future of America’s solar incentives has taken a definitive turn. On July 4, 2025, the One Big Beautiful Bill was signed into law, officially ending the 25D federal solar tax credit for homeowners on December 31, 2025. Here’s what this means for homeowners, installers, and the future of clean energy.

This content is for informational purposes only and does not constitute legal or tax advice.

Jump to a section:

• What is the solar tax credit? 25D and 48E explained
• Is the solar tax credit going away?
• Is 2025 a good time to go solar?
• Is the entire Inflation Reduction Act at risk?
• How did this happen? The Big Beautiful Bill and the Solar Tax Credit

 

 

The One Big Beautiful Bill (OBBB) is a massive piece of legislation with many parts. For more information on how it impacts residential solar, check out Solar.com’s One Big Beautiful Bill Resource Center:

• The OBBB is Now Law: Here’s How It Impacts Solar
• Frequently Asked Questions About Solar and the OBBB
• Homeowner’s Guide to Going Solar in the OBBB Rush
• What You Need to Know About Leasing Solar post-OBBB

 

What is the 30% tax credit for solar? 25D and 48E Explained

The solar tax credit allows solar system owners to receive a federal tax credit worth up to 30% of the eligible cost basis of a solar and/or battery storage installation. For instance, a project with an eligible cost basis of $30,000 would entitle the owner to receive a $9,000 tax credit in the year the project was placed in service (i.e., fully installed). In most cases, it is the highest-value residential solar incentive and has been available nationwide for two decades.

There are actually two federal tax credits that apply to residential solar and battery systems. The key differences are who gets to claim them and when they expire, now that the One Big Beautiful Bill is law.

Tax Credit	Applies To	Claimed By	Ends
25D	Homeowner-owned solar systems (cash and loan purchases)	Homeowner	Dec 31, 2025
48E	Third-Party Owned residential systems (leases and PPAs)	Leasing company	Dec 31, 2027

 

Federal Solar Tax Credit Income Limit

There is no income limit for claiming the 25D solar tax credit. There is also no upper limit on the value of the tax credit—as long as you have the federal tax liability to claim it against. If the tax credit amount exceeds your tax liability, the unused portion can be carried into future tax years. Consult a licensed tax advisor for advice regarding your personal tax situation.

Is the solar tax credit refundable?

No. As a nonrefundable credit, the solar tax credit can only be used to reduce your federal tax liability, and, in turn, reduce the amount of tax you owe or increase your refund. It is NOT a check that automatically comes in the mail. Check out our guide for how to claim the solar tax credit using Form 5695.

Brief history of the solar tax credit

The solar panel tax credit actually originated during the oil crisis in 1978. It was then brought back in 2005 and, with some tweaks and changes, has persisted ever since. It’s often referred to as the “Solar Investment Tax Credit” or ITC for short.

The Inflation Reduction Act of 2022 extended the tax credit at a 30% rate through 2032, after which it would have declined by 4% per year through 2034. The solar tax credit has been a relatively durable piece of policy and has survived both Republican and Democratic administrations, recessions, wars, and other policy uncertainty. Trump himself extended the solar tax credit at the end of his first term (the COVID year).

 

 

Is The Solar Tax Credit Going Away in 2025?

Yes—with Trump’s One Big Beautiful Bill as law, the 25D solar tax credit expiration is set for midnight on December 31, 2025. Residential solar systems installed by this deadline would still qualify for a 30% federal tax credit, and there is no retroactive component in this law that strips the tax credit from homeowners who have already claimed it lawfully.

In 2026 and after, there will be no residential tax credit for homeowners to claim for their investment. However, homeowners can still benefit from the 48E solar tax credit for Third-Party Ownership (TPO) arrangements installed before the end of 2027. In TPO arrangements, such as leases and Power Purchase Agreements (PPAs), the leasing company claims the tax credit and the homeowner benefits from lower payments for their system.

Early versions of the One Big Beautiful Bill closed off the 48E tax credit for residential solar and battery systems, but the Senate removed this language for the final version that became law.

See 20-year solar industry veteran Brian Lynch and Solar.com lead writer Sam Wigness discuss the threat to residential solar tax credits and what the near and long-term future looks like for the solar industry.

How can I claim the residential solar tax credit before it’s gone?

If you believe solar is the power of choice for your home, get proposals quickly to put your project on track for installation by the end of the year. Solar projects typically take several months from contracting to installation, but we can expect these timelines to grow as demand increases to install before December 31 and claim the 25D solar tax credit before it’s gone.

Give yourself the best chance to install in 2025 and claim the 30% tax credit. Get started today on solar.com to get multiple quotes from vetted local installers.

 

 

Why is the federal government ending residential solar tax credits?

During the campaign, President Trump and Republican elected officials called for the “repeal of the Green New Deal” — a name Trump uses to refer to the Inflation Reduction Act (IRA). The IRA was the Biden administration’s cornerstone policy and was a broad bill that included several pieces of favorable policy for the solar industry and, most importantly, extended the solar panel tax credit through 2034.

During Trump’s first week in office, he published an Executive Order that directed the Federal Government to suspend spending funds under the “Green New Deal.” This Executive Order was broadly worded and ultimately legally unenforceable, and it was rescinded a week later. However, it caused many people to question whether the IRA, and the solar tax credit, would be dealt an untimely fate.

Even as President, Trump himself can not cancel an existing law. He can, however, work with his legislative bodies in the House and Senate to repeal the law or pass a superseding law that alters the IRA—which is exactly what he did with the One Big Beautiful Bill.

 

Is 2025 a Good Time to Go Solar?

If you’ve been considering going solar but not yet signed a contract, right now is absolutely the best time to lock in your home’s full savings potential while there’s still time to qualify for the full 30% solar tax credit. Although interest rates are stubbornly high, they likely won’t be substantially lowered in 2025. If they’re lowered in the future, solar loans can easily be refinanced— and your utility won’t be slowing down their rate increases anytime soon.

Let a solar.com Energy Advisor develop a proposal for you and work with local contractors to competitively price your project. Get started today with no obligation so you’re ready to claim your tax credit.

Will projects built in 2025 qualify for the residential solar tax credit?

Yes. Based on the bill signed into law on July 4, projects installed in 2025 will qualify for the 30% solar tax credit. There is no language in the OBBB that retroactively strips the tax credit from homeowners who claim it lawfully.

It would be politically very difficult and would cause substantial economic havoc for the Trump Administration to retroactively rescind a tax credit that’s part of established law. Any attempt to do this would undoubtedly face substantial legal challenges.

The tax credit industry is much larger than the homeowner tax credit, and it’s been sized at hundreds of billions of dollars under the IRA, helping support hundreds of thousands of jobs directly and indirectly. A retroactive repeal would shake the foundation of investor confidence, not just in solar but just about everything that’s tied to policy.

 

 

Is the rest of the Inflation Reduction Act (IRA) at Risk?

Yes. Republicans made drastic cuts to the IRA through the budget reconciliation process as a way to pay for the Tax Cuts and Jobs Act (TCJA) extension. In May 2025, the House Ways and Means Committee introduced a measure that would weaken or remove several parts of the IRA—primarily incentives for wind and solar energy. That measure was passed by the full House on May 22 and sent to the Senate.

After some back and forth, the Senate kept the termination of the 25D solar tax credit at midnight on December 31, 2025. Residential systems will need to be installed by then to qualify for a 30% tax credit before it’s gone. In a minor win, the Senate also removed language that blocked access to the 48E tax credit for residential leases and PPAs. Trump signed this version into law on July 4, and residential leases and PPAs will have access to the 48E tax credit through the end of 2027.

 

Our best advice: Get proposals now to put yourself on track for a 2025 installation and tax credit eligibility.

 

The Big Beautiful Bill and Solar Tax Credit: How it Happened

We meticulously tracked the One Big Beautiful Bill through Congress to understand its impact on solar tax credits. Here’s a timeline of how this law was formed.

July 4 Update: President Trump signed the “One Big Beautiful Bill” (OBBB) into law, cementing an early termination of the 30% solar tax credit claimed by homeowners at the end of 2025. To claim this credit before it’s gone, homeowners need to have their systems installed by December 31, 2025.

July 3 Update: The “One Big Beautiful Bill” has been passed by both Chambers of Congress and is headed to President Trump’s desk to be signed into law. This bill includes an early termination of the 30% solar tax credit claimed by homeowners (25D). Homeowners will need to have their systems installed by December 31, 2025 to qualify for this credit before it’s gone.

Here’s is how this law impacts residential solar:

• The 30% solar tax credit claimed by homeowners (25D) would be terminated at midnight on December 31, 2025. Homeowners who have their systems installed before the end of the year can still claim this credit against their federal tax liability.
• The 30% solar tax credit for leases and PPAs (48E) would be available through the end of 2027. In a lease or PPA arrangement, the installation company claims this tax credit and passes the savings to the homeowner through lower lease payments or a buy-out agreement.
• Home battery storage would qualify for the 48E tax credit through 2032. This credit will be available for retrofits (adding battery storage to existing solar) and standalone systems (installing battery without solar) through lease agreements.

July 1 Update: The Senate voted on and passed its version of the “One Big Beautiful Bill.” The Senate text now heads back to the House of Representatives. If the House makes further changes, the bill goes back to the Senate (and so forth) until both Chambers agree on a final version and send it to the President’s desk for final signature. We will continue updating this article as new udpates are released.

June 30 update: The Senate updated its bill text over the weekend and included several key changes to the residential solar tax credits. Click here for a more substantial breakdown of these updates, or read the bullet points below for how this affects residential solar.

• 30% Consumer Solar Tax Credit (25d): In the latest Senate draft, the deadline to install residential systems eligible for the 30% tax credit claimed by homeowners is back to December 31, 2025. After this date, the 25D tax credit is terminated, and homeowners will no longer have a solar tax credit to claim directly.
• 30% Solar Tax Credit for Residential Leases and PPAs (48E): The latest Senate draft allows residential installation companies to claim 30% tax credit for residential solar leases and PPAs. Access to the 48E tax credit was explicitly excluded in previous House and Senate drafts, but is now back on the table for several more years. It’s important to note that the 48E credit is claimed by the installation company, and the savings are passed on to homeowners through lower lease payments.
• Foreign Entity of Concern (FEOC) Restrictions The Senate tightened restrictions on using components from FEOC-controlled or influenced companies and created a new excise tax for projects that use these components beginning in 2028. For residential solar, this introduces new risks to using components from Chinese-owned or controlled companies.

These are likely the final updates to energy policy in the “One Bill Beautiful Bill” before it is signed into law (likely before July 4).

June 26 update: We were expecting to see updated bill text from the Senate this week, but it keeps being pushed back. As of writing this, it still seems likely we’ll see a new version of the “One Big Beautiful Bill” prior to the July 4th recess. While the renewable energy provisions are important to all of us, they’re on the margins of the bill’s debate.

The industry has used this time to advocate for a phase-down of the tax credits to allow the market a more natural evolution to a post-subsidy environment, and this message seems to be resonating. We’re hearing that tax credits for residential solar are “in play” in discussions and some of the technical issues in the prior drafts are being addressed. Whether this stays into signed law and what exactly these changes will be are unknown.

What We’re Watching:

• Will the Consumer tax credit (25D) receive a gradual phase-out similar to the Corporate tax credits? Or will they end 180 days after the Bill passes, as is the current language? And if the 25D is preserved, will it have “FEOC” provisions associated with it, similar to the 48E tax credits?
• Will Residential leases once again qualify for the tax credit as part of the phase down? They were explicitly excluded in the House bill and the previously released Senate draft.
• Will the phase-out continue on the previously proposed Senate draft of 16% in 2026 and 6% in 2027?
• Will the domestic content bonus stay on the drawdown or be maintained at 10% for systems that qualify (commercially owned only)? 

What Seems Likely

2025 is still the best time to go solar, and systems that are placed in service this calendar year will be eligible. There is no proposal from either the House or the Senate for a retroactive repeal of the tax credit. 

FEOC restrictions will remain, and they are intensive. FEOC restrictions would disallow companies under Chinese control or influence from benefiting from US taxpayer assistance, and components that receive “material assistance” from Chinese companies have an escalating ramp or requirements in the Senate draft. Note that using components from Chinese companies would potentially disallow the entire project from realizing the tax credits. 

June 16 update: The Senate Finance Committee released its text for the “One Big Beautiful Bill” with proposed changes to phasing out the 30% residential solar tax credit. Instead of ending on December 31, 2025, the Senate is proposing to end the 25D solar tax credit 180 days after the bill is signed into law. Assuming the One Big Beautiful Bill is signed into law sometime in July, we’re this to be in January 2026. Residential solar systems will need to be installed by this deadline to qualify for a 30% tax credit.

May 22 update: The House of Representatives passed the budget reconciliation bill, including the measure to terminate the 30% residential solar tax credit at the end of 2025. The “big, beautiful” budget bill will head to the Senate, where a final vote is expected before the August recess, and possibly before July 4. If passed as currently written, residential solar and battery systems placed in service by December 31, 2025 will still qualify for the Residential Clean Energy Credit.

May 13 update: The House Ways and Means Committee is proposing an end to the residential solar tax credit as part of the reconciliation process. If passed, systems placed in service (i.e., installed and inspected) by December 31, 2025 will still qualify for a 30% tax credit.