A big federal tax credit for homeowners who get solar panels will end this year, meaning a window for significant savings on going solar is closing fast.
The 30% credit has long been the biggest single incentive for residential solar panel adoption, and its expiration is a significant blow for what has been a fast-growing industry. For homeowners, its elimination significantly changes the calculus of whether solar panels make financial sense compared with paying utility electrical rates. "It's clear that as a result of this bill that we're going to see electricity bills spike all around the country," Emily Walker, director of insights at EnergySage, said in an interview.
The residential clean energy credit, which provided taxpayers who bought solar panels using cash or a loan with a credit of up to 30% of the system's cost, expires at the end of 2025. It had previously been expected to run for nearly another decade, but congressional Republicans voted to end it early in a major tax and spending bill President Donald Trump signed this month.
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For now, the end-of-year deadline means there will be a rush by consumers who want to go solar to get their systems installed and operational before 2026. Considering it can take months to get a system installed and connected to the grid -- and that installers will likely see a rush of clients that could drag things out -- experts suggested acting quickly if the tax credit is a must-have.
"If a homeowner is interested in going solar, they need to start the process right now," Walker said.
What happened to the solar tax credit?
The residential clean energy credit, which covers things like home batteries and geothermal heat pumps in addition to solar panels, has been around in some form or another since George W. Bush was president. The latest extension and expansion of it came in 2022 when President Joe Biden signed the Inflation Reduction Act. Congressional Republicans and President Trump saw the credit and other spending authorized by the IRA as a target for elimination this year to help pay for an extension of 2017's tax cuts in what Trump called the One Big Beautiful Bill Act.
This credit and a few others will be eliminated effective 2026, but other credits, including one that applies to companies that offer residential solar leases and power purchase agreements, will be phased out over the following years.
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