President Trump signs bill killing the solar tax credit—what homeowners need to know

President Trump signed the "Big Beautiful Bill" into law on Independence Day, cutting the 30% residential solar tax credit by December 31, 2025—nearly a decade ahead of schedule. 

After marathon floor debates and record-breaking vote lengths, the bill cleared the House on July 3, just in time to meet the President's arbitrary July 4 deadline.

The credit was set to continue through 2034 under the Inflation Reduction Act. Instead, it disappears entirely on January 1, 2026, creating a compressed timeline that will cause significant market disruption.

For homeowners considering solar, the math is now simple: Act before the end of the year and save thousands, or wait and pay full price.

Homeowners have until December 31, 2025 to install solar panels and lock in the 30% federal tax credit—an average of $9,000 in savings.

The deadline particularly impacts working families who rely on the tax credit to make solar affordable as electricity prices continue to climb. A recent study from the Lawrence Berkeley National Laboratory shows that solar benefits aren't limited to wealthy households—in fact, 44% of households that went solar in 2023 earned less than $100,000 annually, with most (30.5%) of them earning between $50,000 and $100,000.

Without the federal credit, solar becomes significantly less accessible to middle-class homeowners seeking true energy independence.

The abrupt year-end cut only affects the residential solar tax credit (Section 25D of the U.S. Tax Code). Commercial solar projects and third-party-owned residential systems, such as leases and power purchase agreements (PPAs), use a different tax credit (Section 48E), which remains available for systems placed in service before 2028.

While companies offering leases and PPAs will continue to be able to claim the 30% tax credit, they still face restrictions. Projects beginning after July 4, 2026 must be completed by December 31, 2027.

And, to qualify for the tax credits, at least 40% of the components (by cost) in solar panel systems must not be sourced from any Foreign Entity of Concern (FEOC) in 2026, according to the Solar Energy Industries Association and the Residential Solar Association. That percentage jumps 5% each following year until reaching 60% in 2030, which could influence project costs and availability.

Third-party financing provides homeowners with an alternative path to solar savings. These arrangements can reduce monthly electric bills with little to no upfront cost—but the tax benefits flow to solar companies rather than homeowners.

The key difference is ownership. With leases and PPAs, homeowners enter 20 to 25-year contracts where the solar company owns the system and the power it generates. While this eliminates maintenance responsibilities, it also means lower long-term savings compared to owning a system.

By cutting the residential solar tax credit, Congress is eliminating the primary tool that helps families reduce their grid dependence, just as electricity demand surges and utility bills climb.

AI data centers are driving unprecedented electricity demand, with consumption expected to increase 130% by 2030. To meet this demand, utilities are expanding power generation and grid infrastructure—costs that get passed directly to homeowners through higher electric bills.

Rooftop solar can help defer or avoid large investments in infrastructure upgrades. It’s the fastest way to get more electricity to the grid. But, despite a growing number of these massive data centers coming online, Congress just ended the main incentive for this grid-stabilizing technology. Without distributed solar generation to help balance the load, the grid becomes more vulnerable to load-shedding requests, brownouts, and rolling blackouts. 

The average household could face about $143 more per year in electricity costs as utilities race to build new capacity. This makes losing the solar tax credit particularly costly for homeowners who could have locked in stable energy costs with their own solar systems while helping prevent the grid outages that become more likely as data centers multiply.

The residential solar industry supports over 100,000 jobs, with the vast majority being installers working for small, local businesses in every state across the country. Eliminating the credit will wipe out 62,000 American jobs by the end of this year, and almost 200,000 next year, according to the Solar Energy Industries Association.

In a recent EnergySage survey of over 150 solar installers, 92.3% said cutting the tax credit would dramatically harm their businesses, with nearly 6% saying they would exit the industry entirely. 

The uncertainty of these tax credits, combined with high interest rates and tariffs, has already contributed to industry layoffs and bankruptcies. Major players like Mosaic, a solar financing company, and Sunnova Energy, a national residential solar company, have filed for bankruptcy in recent weeks.

Solar installations will remain financially viable for many homeowners without the federal tax credit. Equipment costs have decreased significantly, and rising electricity rates support solar's economic case. However, losing the 30% federal tax credit means higher upfront costs and longer payback periods.

EnergySage's latest Marketplace Report shows solar prices hit a record low of $2.50 per watt in the second half of 2024. This represents a dramatic decrease from over $3.80 per watt in 2014, helping offset some of the impact of losing federal incentives.

Still, systems that previously paid for themselves in eight to 10 years with tax credits may now take 15 to 20 years to break even, depending on local electricity rates and available state and local solar incentives.

An 11-kilowatt system—the average quoted on EnergySage—costs around $28,160 before incentives. With the tax credit, that drops to about $20,000, but only if homeowners act before December 31, 2025.

Installation timelines typically run two to four months, and the solar industry expects a significant rush of installations in the second half of 2025. This could lead to longer wait times and scheduling challenges for homeowners who delay their decision.

The elimination of the residential solar tax credit represents a fundamental shift in federal energy policy, ending two decades of bipartisan support for home solar installations. For millions of American homeowners, the next six months represent their last opportunity to access this significant federal incentive.