Solar Tax Credit Ended: What Homeowners Need to Know

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law (Public Law 119-21). Among hundreds of provisions, Section 13701 terminated the Residential Clean Energy Tax Credit under Section 25D of the Internal Revenue Code.

The original deal was 30% through 2032, then stepping down to 26% in 2033 and 22% in 2034. That schedule is gone. The credit ended December 31, 2025. Period.

I know this is frustrating if you were planning to install solar in 2026. I've gotten dozens of emails from homeowners who were budgeting for that 30% reduction. The timing caught a lot of people off guard since the law passed quickly and took effect immediately for new installations.

Maybe. It depends entirely on when your system was installed, not when you paid for it.

If your solar panels, battery storage, or other qualifying equipment was placed in service by December 31, 2025, you can claim the credit. "Placed in service" means operational and producing electricity for your home. Signing a contract doesn't count. Paying a deposit doesn't count. Having panels sitting on your roof waiting for inspection doesn't count.

Here's where people got burned: some installers told customers that paying in full by December 31st would qualify them. That was wrong. The IRS has been consistent on this for years. Installation completion date is what matters. If your installer didn't finish until January 2026, you're out of luck for the Section 25D credit.

The good news: if you do qualify, the carryforward rules didn't change. If your 2025 tax liability couldn't absorb the full credit, you can carry the unused portion forward to future tax years.

For context, here's what Section 25D offered before it ended.

The credit covered 30% of costs for solar photovoltaic systems, solar water heating, battery storage (3+ kWh capacity), wind turbines, geothermal heat pumps, and fuel cells. That included panels, inverters, wiring, labor, permitting, and sales tax. No dollar cap on residential systems.

A typical $25,000 solar installation generated a $7,500 tax credit. Not a deduction. A credit. Dollar-for-dollar reduction in what you owed the IRS. If your federal tax bill was $8,000, you'd pay $500. If it was $5,000, you'd pay nothing and carry $2,500 to the next year.

This was a significant financial incentive. Combined with falling equipment prices, it helped push residential solar adoption to record levels in 2024 and 2025. Now that incentive is gone for new installations.

Section 25D is dead, but Section 48E survived. Sort of.

Section 48E is the Clean Electricity Investment Tax Credit. It's a business credit, not a residential one. But here's the workaround: if you lease a solar system or sign a Power Purchase Agreement (PPA) instead of buying, the installer claims the business credit and (theoretically) passes some savings to you through lower lease payments.

Section 48E remains available through 2027 for projects that begin construction by July 4, 2026. After that, it phases out based on emissions targets. The IRS four-year safe harbor rule means construction start date matters, not completion date.

Is this as good as a 30% credit on a system you own? No. Leases and PPAs mean you don't own the equipment. You're paying for electricity, not building an asset. The economics are different. But if you want solar and the direct credit is gone, this is one remaining path with federal support.

The federal credit is gone, but state programs continue.

Massachusetts still has SMART (Solar Massachusetts Renewable Target) incentive payments and the MA SREC II program. Ohio offers PACE financing through certain jurisdictions. Pennsylvania has net metering and the Sunshine Solar Program loan options. Texas... well, Texas has cheap electricity but minimal solar incentives.

State and local rebates vary wildly by location. Some cities offer property tax exemptions for solar installations. Some utilities provide production incentives. The DSIRE database maintained by NC State tracks these programs.

But I'll be honest: most state incentives are a fraction of what the 30% federal credit was worth. They might knock $1,000-3,000 off your project. Nice, but not the $7,500+ that Section 25D provided. The math on buying solar got harder in 2026.

It depends on your situation. And your patience.

Solar payback periods just got longer. A system that paid for itself in 6-8 years with the credit might now take 9-12 years. If you're planning to sell your house in 5 years, that math doesn't work. If you're staying put for 20 years, solar can still make financial sense.

Equipment prices continue falling. Panels that cost $3/watt installed in 2020 run closer to $2.50/watt now. Batteries too. Competition among installers is fierce. Some of the credit loss may get absorbed by lower prices over time.

But here's my real concern: most homeowners don't realize how much they can save without any installation. Without buying equipment. Without waiting years to break even. Without climbing on their roof or hiring contractors.

I'm talking about your electricity rate.

Solar was always a long-term play. You spend money now and get it back over years. That works for some people. But there's something that works faster.

In Ohio, Pennsylvania, Massachusetts, and Texas, you can choose your electricity supplier. Right now. Today. It takes about 5 minutes and costs nothing. If you've never shopped rates, you're probably paying your utility's default rate, which is almost never the lowest option.

The average Ohio household using 1,000 kWh/month can save $200-400/year just by switching to a competitive supplier. No installation. No upfront cost. No waiting 8 years to break even. The savings start on your next bill.

I know this sounds like I'm changing the subject from solar. But think about it: if you were considering solar to save money on electricity, you should also consider whether you're overpaying for electricity right now. Many people are.

With the federal solar credit gone, the economics of reducing your electricity bill shift.

Solar was essentially a prepayment for 25 years of electricity. You paid upfront, the sun delivered free power. Smart if you could afford it and planned to stay put. The credit made the upfront cost manageable.

Now? That upfront cost is 30% higher. The breakeven is further out. The risk is greater.

Rate shopping is the opposite. Zero upfront cost. Instant results. No risk if you pick a plan without early termination fees. You can switch every year to chase the best rates.

If you live in a deregulated state, you should be doing this regardless of your solar plans. In Ohio, check your AEP Ohio or Duke Energy bill against competitive rates. In Pennsylvania, compare PECO or PPL rates. In Massachusetts, look at what Eversource or National Grid charges versus competitive suppliers. In Texas, you have 100+ retail providers competing for your business.

ElectricRates.org lets you compare rates in about 30 seconds. Enter your ZIP code, see what you're missing.

Net metering is still around in most states, but it's getting less generous.

Net metering lets solar owners send excess power to the grid and get credit on their bills. Full retail credit in some states. Below-retail in others. Some utilities are fighting to reduce it further.

Ohio has net metering for systems up to 25 kW. Pennsylvania varies by utility. Massachusetts has SMART incentives tied to net metering. Texas... Texas has various buyback programs but no statewide net metering mandate.

The point: even if you install solar, you're still connected to the grid. You still have an electricity bill. You still benefit from shopping for better rates on the power you do buy. Solar and rate shopping aren't either/or. They're complementary. But only one of them is available to everyone, immediately, at no cost.

Here's my honest take.

If you installed solar by December 31, 2025: claim your credit. Use IRS Form 5695 and carry forward any unused portion. You made it under the wire.

If you missed the deadline: get quotes, but be realistic about the longer payback without the credit. Consider Section 48E lease options if ownership economics don't work. Check state incentives on DSIRE.

If you're still deciding: don't wait for Congress to bring the credit back. It might happen. It might not. The current political environment doesn't favor it. Make your decision based on today's rules.

Regardless of your solar plans: check your electricity rates. This isn't a pitch. It's math. If you live in Ohio, Pennsylvania, Massachusetts, or Texas and you've never compared rates, you're almost certainly overpaying. That's money you can save starting next month. No installation. No credit applications. No waiting.

Solar was a great deal with the 30% credit. Now it's just an okay deal for some people. Rate shopping is a great deal for nearly everyone in deregulated states. Start there.