Given Republicans being dominant with Trump’s administration and Republican majorities within the Senate and House, a number of Inflation Reduction Act-conceived clean energy credits are to be phased out or watered down within budget reconciliation, or, as better known to lawmakers, within July 4’s” One Big Beautiful Bill. The 30% solar tax credit, also known as the 25D Residential Clean Energy Credit, includes similar credits.
We will narrow our discussion to modifications to the 25D solar tax credit and their impact on residential homeowners considering solar energy.
New Updates to the “One Big Beautiful Bill” and to the Homeowner’s Tax Credit
July 4 Update: President Trump signed into law the “One Big Beautiful Bill” (OBBB), securing a 30% tax credit sought by homeowners through December 31, 2025. To be considered eligible for such credit before it’s lost, homeowners should have their systems installed by December 31, 2025.
After the OBBB in Both Chambers of Congress
July 3 Update: The “One Big Beautiful Bill” has been signed by the Senate and House and is now on President Trump’s desk to be signed into law. The bill contains an early termination of homeowners’ 30% claimed solar tax credit (25D). Homeowners will be required to have their systems installed by December 31, 2025, to be eligible for the credit before it becomes unavailable.
It works as below with residential solar:
- The 30% residential tax credit homeowners were using (25D) was set to be phased out by midnight on December 31, 2025. Homeowners who have their system installed by year-end can still apply their credit to their federal tax liability.
- These 30% lease and PPA tax credits (48E) were to be claimed by projects by the end of 2027. The installation company takes advantage of this tax credit during a lease or PPA project and passes it on to the homeowner in the form of lower lease fees or a buyout agreement.
- The 48E tax credit applies to home battery storage through 2032. Lease purchase agreements on retrofits (adding a battery to an existing PV system) and standalone systems (adding a battery with no PV) are acceptable.
July 1 Update: The Senate voted and conformed to their own copy, a so-called “One Big Beautiful Bill” copy. The Senate copy returns to the House of Representatives. The bill should undergo any further changes proposed by the House (and so on) until both Chambers achieve a mutually satisfactory final copy and send it to the President’s desk to be signed. We will keep our article up to date as new information becomes available.
Update of June 30: The Senate revised its bill language over the weekend and incorporated several substantive changes to the residential solar tax credit. Click here to view a longer analysis, or scroll below to view bullet points outlining how they impact residential solar.
- 30% Consumer Tax Credit for Solar (25d): In their existing Senate legislation, the December 31, 2025, installation date, which allows homeowners to claim residential systems and qualify for a 30% tax credit, is extended to December 31, 2025. It then expires, so homeowners are no longer eligible to claim their 25D tax credit.
- 30% Tax Credit for Residential Leases & PPAs by 48E: The new Senate agenda includes residential installation providers becoming eligible to receive a 30% tax credit for residential solar leases & PPAs. Previous House & Senate bullet points, however, did specifically exclude the 48E tax credit from becoming eligible, but it appears to remain eligible for several more years. Keep in mind that 48E credit is provided by the installation provider, resulting in savings that are passed on to homeowners through deciphering lease payments.
- Foreign Entity of Concern (FEOC) Prohibitions Senators: Broadened prohibitions from using materials from FEOCs or entities dominated by FEOCs and imposed a new excise tax on projects that use these materials after 2028. In residential solar, new risks are associated with using materials from China-owned or China-dominated entities.
These are likely to be the final energy policy actions to come within the “One Bill Beautiful Bill” until it is signed into law by a president (most likely by July 4). We urge homeowners considering going solar to obtain bids immediately, schedule their installation date, and secure their home’s entire saving potential.
Update from June 26: We were expecting a new bill text from the Senate during the week, but it has been constantly postponed. To date, however, a new version of the “One Big Beautiful Bill” still appears to be our path sometime prior to the July 4th recess. While provisions involving renewable energy are up and close to everyone’s heart, they’re right at the periphery of priority with what matters to the bill.
The sector has been campaigning over the course of its time to call for a phase-down, providing the market with a more normalized transition to an unsubsidized world, and that specific message appears to be gaining traction. We’re being cautioned that residential solar tax credits are “in play” during negotiations, and certain technical problems within previous incarnations are being corrected. If that holds through signed legislation and what, exactly, those changes are, remains to be seen.
What We’re Watching:
- Will the 25D Consumer Tax Credit be phased down, as with Corporate Tax Credits? Or they will end 180 days after the Bill passes, as with existing language. And if they are, then 25D would be exempted with “FEOC” provisions, as with 48E tax credits?
- Will rental apartments be eligible during the phase-down to qualify for the tax credit? They are excluded from the House bill and the previously released Senate draft.
- Will the phase-down by the previously agreed Senate draft of 16% from 2026 and 6% from 2027 be continued?
- Will the drawdown domestic content requirement incentive be continued or remain 10% for eligible systems, with eligible parties being commercially operated, but only?
What’s Most Likely
2025 remains the best year to go solar, and projects coming into operation during this calendar year are eligible. There exists no bill by the House or Senate to retroactively end the tax credit.
Prohibitions by FEOC are to be continued and are defined. Prohibitions by FEOC would deny entities under Chinese command or control from receiving US taxpayer dollars, and sections that involve taking a “material benefit” by Chinese entities have a ramp-up or conditions being added within Senate drafting. Keep in mind that taking part in Chinese entities could essentially exclude a full project from receiving tax credits.
Update from June 16: The Senate Finance Committee released its version of the “One Big Beautiful Bill,” which includes proposed changes to sunset the 30% residential solar tax credit. Unlike the previously agreed-upon December 31, 2025, the Senate’s proposed 25D solar tax credit ending date comes 180 days after signing into law. Signed into legislation in July, we hope to be in January 2026. Home solar arrays installed by then should still qualify to get a 30% tax credit.
May 22 Update: The budget reconciliation act, with provisions to end the 30% residential solar tax credit on December 31, 2025, passed the House of Representatives. The “big, beautiful” budget bill moves to the Senate, where votes are to be completed by the August recess, hopefully by July 4. If signed into legislation as drafted, residential solar and battery systems installed by December 31, 2025, will still be eligible, however, for the Residential Clean Energy Credit.
May 13 Update: The Ways and Means Committee is calling for a residential solar tax credit ending during reconciliation. It would be 30% and stay that way if passed, with projects entering service by December 31, 2025, still being eligible.
Will The Tax Credit For The Sun Be Abolished In 2025?
Yes—with the Budget Reconciliation process (also reported by media outlets as Trump’s “One Big Beautiful Bill”) —Congress agreed to the conclusion of a 30% residential solar and battery storage tax credit, 25D, by year-end 2025. Signed into legislation by President Trump on July 4, credits are phased down after 2025.
Both Houses of Congress finally agreed to phase out the 25D residential solar tax credit after December 31, 2025. Homeowners buying residential solar systems by then, though, would still be eligible to receive a 30% federal tax credit. Starting in 2026 and beyond, homeowners would no longer be able to claim a residential tax credit when purchasing.
Prior Bills also switched to the 48E tax credit for leased solar strings, where the company takes a 30% tax credit and indirectly benefits from lower costs, as does the homeowner.
The Senate subsequently struck out that sentence, so leased strings are still eligible to receive such tax credits until December 2027.
Tune into 20-year industry vet Brian Lynch and Solar.com lead writer Sam Wigness to listen to them break down residential solar tax credits being challenged and where things go near- and long-term with the solar industry.
What Can Be Done to Fix the Residential Solar Tax Credit Expiring?
If your preferred energy source is solar, purchase orders should be placed well in advance to ensure your project is installed by year-end. Average solar projects require several months from the date of contracting to the date of installation, but lead times are expected to rise as demand continues to increase to meet the December 31 deadline for qualification under the 25D solar tax credit before it expires.
Treat yourself to the finest opportunity to install by 2025 and be eligible to claim the 30% tax credit. Begin today with solar.com and receive several bids from pre-screened, local installers.
Why are they said to want to end residential solar tax credits?
Both Republican presidential hopeful Donald Trump and Republican elected leaders campaigned with a “repeal of the Green New Deal,” a term Trump applies to the Inflation Reduction Act (IRA). The IRA was a gargantuan bill with a litany of beneficial policy strokes for the solar industry, but, more significantly, it continued to extend the tax credit through 2034.
Early in Trump’s initial week as president, he issued a statement releasing an Executive Order that instructed the Federal Government to withhold funding dollars regarding the “Green New Deal.” This Executive Order was very vague and became legally unenforceable, and a week later, it was retracted. It did, however, give rise to speculation that the IRA, and by extension, the solar tax credit, might be given a premature burial.
Even as president, Trump was never able to eliminate an existing statute. He can, however, cooperate with his legislative branch from within among the House and Senate to overturn legislation or enact a superseding act redefining the IRA, to which end he did with his own “One Big Beautiful Bill.”
It’s a 30% Tax Credit for Solar Energy Systems
Technically, it is called the ‘Residential Clean Energy Credit,’ but it provides residential homeowners with already installed solar systems with a tax credit of up to 30% based on the solar project’s eligible cost basis. A project with an eligible cost basis of $30,000 could qualify a homeowner for a tax credit of $9,000 during the year the project became operational.
It actually originated from the 1978 oil crisis. It was, however, reactivated in 2005, and with a few alterations and additions, still exists to this day. It’s, however, more popular by its name, the “Solar Investment Tax Credit” or ITC, but with a shortened title.
2022’s Inflation Reduction Act renewed to 2032 at 30%, then reduced by 4 percent annually to 2034. The solar tax credit has been a remarkably stable aspect of policy, enduring Republican and Democratic presidencies, recessions, wars, and other policy uncertainties. Trump himself renewed the solar tax credit to the end of his first term (the COVID year).
Has the Inflation Reduction Act been undermined?
Yes. The Republicans significantly pulled back from the IRA during budget reconciliation to fund an extension of the Tax Cuts and Jobs Act (TCJA) to some degree. The House Ways and Means Committee drafted a provision throughout May 2025 to narrow or repeal several sections of the IRA, including the full repeal of a 30% solar tax credit for homeowner-owned solar and battery installations by the end of 2025. The provision passed a full House vote on May 22 and was referred to the Senate.
The Senate, by a see-saw game, clung to the 25D solar tax credit during the midnight hour of December 31, 2025. The residential installations must be installed by then to be eligible to receive a 30% tax credit; they lost it. The Senate, by a slim margin, by a narrow victory, also struck language to close a door to the 48E tax credit to residential leases and PPAs. Trump signed this version of the legislation into law on July 4, and residential leases and PPAs will be eligible to access the 48E tax credit through December 31, 2027.
Will 2025 Projects Be Eligible to Qualify for the Residential Solar Tax Credit?
Yes. The July 4 signed legislation gives constructions developed by 2025 a 30% solar tax credit. There’s no requirement by OBBB that becomes effective after the fact to withhold from homeowners who rightfully claim it by taking their tax credit.
It would be politically extremely difficult and economically damaging to a very large extent to deny retroactively a tax credit core to existing legislation by the Trump Administration. It would surely encounter extreme legal challenges.
The associated industry to tax credits is often much larger than the tax credit to homeowners, and it has been multiplied by several multiples to hundreds of billions with the IRA, supporting approximately half a million direct and indirect jobs. Retroactive repeal would shake the foundations of confidence among investors, to say nothing of those in the solar industry, but nearly across the board in policy.
Catch Up with 2025’s Top Homeowner Rebates and Deals
If you have been considering going solar but never signed a contract, now is the perfect time to secure your home’s complete savings potential, as you still have enough time to be eligible for a full 30% solar tax credit. While rates are constantly up, they are going to be essentially reduced by 2025. Even if they are reduced further later, solar loans are refinanceable—at no charge to you, I should suggest—and by then your utility won’t be withholding their rate increases anytime soon.
