Urgent Solar Tax Credit Update: What the “One, Big, Beautiful Bill” Means for Homeowners & Businesses in 2025

No – at least not yet. The House of Representatives did pass a bill that would end the residential solar tax credit after 2025, but this is not final. The bill must also pass in the Senate and then be signed by the President to become law. There is strong opposition from solar advocates and many lawmakers (including some in the Senate) who support clean energy incentives. It’s possible the provision could be blocked or modified. However, given that the House has taken this position and the political landscape has shifted in 2025, we have to treat the threat as real. In other words, there’s a significant risk the credit could be reduced or eliminated early, so it’s best to plan as if 2025 may indeed be the last year for the full 30% credit for homeowners. If the Senate alters the bill or if a compromise extends the credit, that would be welcome news – but there’s no guarantee. We will update this guidance if the situation changes.

If the federal credit ends, solar in states without their own tax credit will lose a major portion of its financial incentive. You would be relying on the long-term utility bill savings, any net metering credits, and perhaps smaller incentives like rebates or property tax exemptions to make the economics work.

In California, for example, the federal 30% ITC has been a key part of solar payback calculations, especially now that Net Metering 3.0 has reduced the value of exporting solar energy to the grid. Without the ITC, a typical California homeowner might see payback times lengthen significantly (potentially several years longer). That said, California still has some of the highest electricity rates in the nation, so solar will continue to provide substantial savings on bills – it just will cost more upfront.

California also offers the Self-Generation Incentive Program (SGIP) for batteries and has a property tax exclusion for solar (meaning your property taxes won’t increase due to adding solar).

Those help a bit. In states like Nevada (no state income tax, thus no state credit) or Texas (no state credit), the scenario is similar: solar remains a good long-term investment to hedge against utility costs, but the loss of the 30% credit would make the initial investment higher. We encourage homeowners in these states to take advantage of the credit while it’s available.

We can also explore alternative financing and promotions (for instance, some installers may offer discounts or cashback deals, and there are often referral bonuses) to defray costs.

In short, the economics in no-credit states will still favor solar in many cases (due to high sun exposure or electricity prices), but the proposition is strongest with the credit – so its potential removal is definitely felt.

It’s always possible – the solar ITC has been extended multiple times in the past (2008, 2015, 2020, 2022). If, for example, political leadership changes in the future or if there’s a strong economic push for clean energy, Congress could vote to reinstate or even increase incentives.

However, betting on future policy is risky. The current effort is to eliminate it early, which is the opposite of an extension. If that succeeds, a revival would require passing a new law, presumably under an administration that prioritizes clean energy.

The soonest scenario for that might be after the next elections, etc., and there’s no guarantee. Also, once an industry incentive expires, it’s historically been harder to bring it back (extensions typically happen before expiration). The best strategy if you want the benefit is to use what’s on the books now. Think of the credit as a use-it-or-lose-it opportunity at the moment. If circumstances change and the credit is still around or comes back in some form, then great – but you wouldn’t have lost anything by going solar sooner.

In fact, you’d be benefiting from lower energy bills in the meantime. So our advice is to plan under the assumption the 30% credit won’t be around after 2025 (for residential) – and if it does survive or get re-extended, that’s a bonus (perhaps you could then claim it again on a battery upgrade or a second property, etc.). We’ll keep you updated on any political shifts that suggest a turnaround.

As of now, claiming the credit involves filing IRS Form 5695 (Residential Energy Credits) with your federal tax return for the year in which your solar was placed in service.

You calculate 30% of your qualified costs and that amount reduces your tax liability dollar-for-dollar. If the credit is larger than what you owe in taxes for that year, you can roll over the remainder to future years. None of that basic mechanism changes with the proposed legislation – the only change is whether the credit is available at all for a given year (and at what percentage). So if the bill passes, the IRS form would simply not have a residential solar credit line after 2025 (and eventually the form would be retired once all such credits are phased out). But for installations in 2023-2025, you would still use the form normally under existing rules.

A couple of reminders: you need to have a tax liability to use the credit (it’s nonrefundable – it won’t give you a negative refund beyond your tax due). Most working homeowners do have enough tax liability over a multi-year period to utilize it. Also, keep records of your expenditures (inverter, panels, mounting, electrical upgrades related to solar, permitting fees – all these count as eligible costs).

SolarTech provides our customers with a comprehensive packet and guidance for claiming the credit, and we stay updated on IRS rules.

If the bill passes, the IRS would issue updated guidance, but typically, any installations while the credit was law remain valid to claim. Always consult a tax professional if unsure. And note: the proposed bill does not claw back credits from people who already claimed them in past years – it only affects availability going forward.

Yes. State, local, and utility incentives are independent of the federal tax credit.

They each have their own funding sources and rules. For instance, if your state offers a rebate for solar, you will still get that rebate whether or not there’s a federal credit.

One thing to consider, however, is that some state incentives are calculated after the federal credit, or vice versa. For example, a state might allow you to claim their credit only on the portion after federal credit – those details vary.

Arizona’s $1,000 credit is a flat amount, so it’s unaffected by the presence of the federal credit (you’d just be more thankful for that $1k if the 30% is gone). Another consideration: if the federal credit disappears, state legislatures might introduce or expand state incentives to fill the gap – but again, that’s speculative and may take time. The reliable approach is to utilize whatever is currently on the table.

Many utilities have net metering caps or are reducing solar buyback rates, so that’s another reason to act sooner – you lock in any favorable terms before they potentially worsen.

On the flip side, if federal support is withdrawn, some states might strengthen net metering or mandates as a response to ensure solar adoption continues (we’ve seen states step up when federal policy lags, and vice versa). In summary, you will still benefit from other incentives like local rebates, state tax credits, solar renewable energy certificates (SRECs), etc., if available in your area. Our team can provide a full incentives overview for your location – check out our Solar Incentives by State resources or give us a call.

Even without the federal credit, going solar often makes financial sense, especially as utility rates rise. But with the credit, the case is outstanding, so you can imagine why we’re keen on helping folks capture it.