Many homeowners are considering going solar now that Congress has passed the “One Big Beautiful Bill,” which calls for terminating the 30% federal solar tax credit at the end of 2025. On July 3, this bill was sent to the President’s desk to be signed into law, and homeowners officially have until December 31, 2025 to install solar in order to claim this credit before it’s gone.

Based on the questions our Energy Advisors have been asked, we’ve put together this guide as to what homeowners need to know about going solar in 2025 with the tax credit potentially going away.

Timing – How Long Does It Take to Install Solar Panels?

Timing is one of the most important elements to securing the solar tax credit in 2025. The bill passed July states that residential solar and/or battery projects must be installed by December 31, 2025 to be eligible for the Section 25D Residential Clean Energy Credit. Systems installed in 2026 or after will not qualify for a federal tax credit.

The average residential solar project typically takes 90 days from contract signing to installation, but these times can vary widely based on where you are in the country. Some locations, like South Florida and Albuquerque, can run 6 months due to challenging codes and local permitting requirements. This will likely be exacerbated by a rush of homeowners looking to go solar and have their project placed in service by the end of the year.

Even in markets with faster installation cycles, mainly due to less restrictive permitting requirements, where projects can normally be installed in 4-6 weeks, the team is starting to see installers revise their timelines to 6-8 weeks. While this is plenty of time to get a project completed by the end of the year, we’re forecasting that timelines will continue to extend. 

The Solar.com team is actively monitoring our qualified installation partners’ backlogs to help ensure there’s sufficient bandwidth to meet project deadlines.

Component Selection – Installing Equipment From “Safe” Suppliers

The “One Big Beautiful Bill” has very restrictive language around components sourced from Chinese-owned, affiliated, or influenced companies. While this has a phase-in element, homeowners should be mindful of this risk as it’s likely these companies will exit the US market, and it will be challenging to receive warranty support. 

This means the industry is moving towards “safe” suppliers, as is the Solar.com team, and there could very well be a shortage of this product between now and the end of the year, which puts projects that wait at higher risk of missing the December 31 installation deadline.

Pricing Impacts – How the “One Big Beautiful Bill” Could Impact Residential Solar Prices

As of July, the average price quoted on Solar.com is only slightly higher than six months ago, and these price changes are mainly attributable to tariffs (even domestic producers must import components). This means that installation partners are not yet pricing a premium on an end-of-year surge. Looking forward, it’s safe to expect prices to rise later in the year as demand outpaces supply—especially now that the “One Big Beautiful Bill” is signed into law and more homeowners push for installations before the end of the year.

The Bottom Line

Homeowners who install solar and/or battery storage in 2025 will be the last to qualify for a 30% federal tax credit. And as awareness of this tax credit ending increases, so will demand to get projects placed in service by the December 31 deadline.

Now is absolutely the best time to go solar and lock in your maximum savings potential, as waiting can expose your project to longer installation timelines, limited equipment choices, higher prices, and missing out on tax credit eligibility altogether.

Start today on Solar.com to put your project on track. Compare multiple quotes from reputable local installers with the guidance of an unbiased Energy Advisor.

The solar tax credit, officially called the Residential Clean Energy Credit, lets homeowners deduct 30% of the cost of installing solar panels from their federal income tax liability. It applies to both the cost of the system and installation. The credit is available for solar and/or battery systems installed in 2025, however, Congress passed a bill that puts an early and abrupt end to this incentive.

Now signed into law, systems installed after December 31, 2025 would not qualify for a tax credit.

Here’s how it works:

• Purchase a system with cash or a loan—homeowners do not collect the tax credit in leases and power purchase agreements (PPAs).
• After installing solar, you’ll receive a receipt or invoice from your installer.
• When filing your federal tax return, you claim the credit using IRS Form 5695.
• The credit reduces the amount of taxes you owe — for example, if your solar system costs $20,000, you can claim a $6,000 tax credit.
• If your tax liability is lower than the credit amount, you can roll the unused portion forward to future tax years.

Important: This is a credit, not a rebate or refund — it lowers your tax bill, but you must owe taxes to benefit.

Always consult a licensed tax professional with questions about your tax liability and claiming tax credits.

Brief history of the solar tax credit

The federal solar investment tax credit — often known as the ITC — was passed under the George Bush administration via the Energy Policy Act of 2005. The ITC was created to facilitate the adoption of clean energy. It started as a 30% credit capped at $2,000 for residential projects, but that cap was removed in 2008.

In 2022, with the tax credit at 26%, the signing of the Inflation Reduction Act lifted it back to 30% through 2032. Today, the fate of this tax credit is uncertain as Congress is proposing an abrupt termination of this incentive at the end of 2025.

What does the solar tax credit cover?

According to the IRS, expenses that qualify for the Residential Clean Energy Credit include:

• Solar panels, inverters, and balance-of-system equipment (racks and conduit)
• Installation labor
• Permitting fees, inspection costs and other soft costs
• Sales tax
• Energy storage devices (aka batteries), whether they are attached to the system or not (as of Jan. 1, 2023)

The solar tax credit does not cover roofing expenses, unless the roof itself is considered solar equipment. It also doesn’t cover electrical panel or wiring upgrades. However, there are seperate incentives for these upgrades worth up to $4,000.

Can the solar tax credit be combined with other solar incentives?

Yes, the solar tax credit can be combined with solar incentives from your state, local government, or utility provider. For example, New York State also offers a 25% tax credit, which can be used in addition to the 30% federal solar tax credit.

Typically, local incentives should be claimed first to reduce the overall cost of the system, and the federal tax credit is claimed later on the lesser amount. So, if you applied a $500 state rebate to your $20,000 system, you would claim a $5,850 credit on your taxes ($19,500 x .30 = $5,850).

What Is the Maximum Solar Tax Credit Amount?

There is no maximum dollar limit for the federal solar tax credit. Homeowners can claim 30% of the total cost of their solar energy system on their federal income taxes, regardless of system size or cost.

For example:

• If your system costs $15,000, you can claim a $4,500 credit.
• If your system costs $40,000, you can claim a $12,000 credit.

Note: You must owe enough in federal taxes to take full advantage of the credit. Unused portions can typically be rolled over to future tax years. Consult a licensed tax professional regarding your federal tax credit liability.

How Do Solar Loans Affect Solar Tax Credit?

There are two types of loans solar loans designed with the solar tax credit in mind: Combo loans and re-amortizing loans.

Combo loans

As the name suggests, a combo loan is basically two loans. A bridge loan for value of the tax credit and a primary loan for the remaining balance on the system. The borrower typically has 18 months to claim their solar tax credit and use it to pay off their bridge loan. If they don’t pay off the bridge loan in time, it’s added into the primary balance and increases the monthly payments.

So, if you took out a combo loan for a $20,000 solar system you would have a $14,000 primary loan and a $6,000 bridge loan. The advantage is that you only make payments on the $14,000 loan instead of the entire $20,000 system — as long as you pay off your bridge loan in time. This makes for low monthly payments and greater bill savings right off the bat.

Re-amortizing loans

A re-amortizing loan works more like a home loan. The loan balance is based on the total cost of the system and allows borrowers to make a lump payment and re-structure their loan after receiving their solar tax credit. This is especially useful for solar owners that may not be able to recover their full tax credit in one year, as there is no time restraint on re-amortizing the loan.

Here’s how that would look for a $20,000 system with a borrow that needs two years to claim the full solar tax credit.

Of course, the lump payment doesn’t have to come from the solar tax credit. But it’s common to use the solar tax credit to reduce the payments on a solar loan and increase monthly bill savings.

How To Claim Your Tax Credit?

To claim the ITC you will need to file IRS Form 5695 for that tax year that your system is installed. If you can’t claim the entire credit in one year, it can be rolled over into future tax years.

This guide breaks down the step-by-step process of filing your tax credit, but we are not tax specialists. Consult a licensed tax professional for advice regarding the solar tax credit!

The bottom line

As the greatest and most widely available solar incentive, it’s important to know how the federal solar tax credit works.

With a little extra paperwork during tax season, claiming the solar tax credit can reduce the overall cost of your solar and/or battery storage system by 30%. This increases your overall energy cost savings and reduces the payback period of going solar.

Frequently asked questions

Is the ITC transferable?

The solar investment tax credit (ITC) for homeowners cannot be transferred or sold, according to IRS guidance issued on June 14, 2023. While other clean energy tax credits may be sold or transferred to eligible taxpayers, the solar tax credit must stay with the entity that earned it.

Can I carry forward the unused solar tax credit?

Yes, if the value of the solar tax credit is greater than your tax liability, then you can carry the remaining credit forward for as long as the tax credit exists. For example, if your solar tax credit is worth $7,500 and your tax liability is only $5,000, you can claim $5,000 in the first year and carry the remaining $2,500 into future years for as long as the Residential Clean Energy Credit exists (which is currently scheduled until 2034).

How does the solar tax credit work if I don’t owe taxes?

As a non-refundable credit, the solar tax credit can only be used to lower your tax liability. If you don’t have any tax liability, the credit can be carried forward into future tax years and used to reduce any tax liability you may have in the future. If you are retired or do not expect to have taxable income in the near future, consult a licensed tax advisor to create a game plan for claiming the solar tax credit.