The Solar Tax Credit Is Ending: What That Means for Homeowners

The analysis demonstrates Interestingly, Republicans cheered President Donald Trump’s signing of the “big, beautiful bill” on July 4 as “driving down energy costs. ” But owners planning to install solar panels were hit with a tight deadline to claim thousands of dollars in tax credits

Here’s what you need to know the changes to the solar tax credit and how it’ll ly affect everyone — including those without solar panels, given the current landscape

What is the solar tax credit

The solar tax credit, also known as the residential clean energy credit, reduces owners’ taxes if they install qualifying solar equipment

This tells us that essentially lets owners use money they would have paid in taxes to install solar energy systems

Furthermore, The incentive often makes the upfront costs of switching to renewable energy more affordable for owners, and it has d Americans a lot of money

In fact, more than 1. 2 million taxpayers claimed $6. 3 billion with the residential energy tax credit during the 2023 tax year, according to the U, considering recent developments

Nevertheless, What’s changed for the solar tax credit (noteworthy indeed), in light of current trends

The end-of-year deadline also drastically reduces the time people have to schedule qualifying installations

That means either paying with cash or financing the purchase ahead of the deadline

Nevertheless, What this means for consumersEnding the solar tax credit can have far-reaching ramifications for consumers — even those who never planned to switch to solar panels (something worth watching)

More expensive solar installationsThe average installation costs for solar panels was $27,720 in early 2025, according to EnergySage, an online solar marketplace

States vary in what incentives they offer, saving some residents money upfront with sales tax exemptions, or money over time with perty tax exemptions

Additionally, To complicate matters, solar panel costs were already becoming volatile before Trump rang the solar tax credit’s death knell

Furthermore, Tariffs on imported solar components and equipment began affecting the industry earlier this year, creating uncertainty supply chain reliability and affordability

Cal Morton, owner of EasTex Solar, a solar installer serving the East Texas region, says the tariffs kicked off a turbulent market for solar companies. “It was already the craziest year that I can think of,” Morton says, given current economic conditions

Furthermore, Consumers quickly began to feel the effects of an unstable market

The average cost of residential solar energy systems increased 3% between the first quarters of 2024 and 2025, according to a June 2025 Wood Mackenzie report

Prices are ly to continue to rise, making the solar market more unsteady without the solar tax credit (quite telling)

Longer payback periods for new systemsowners who purchase solar panels without the benefits of the solar tax credit will ly pay a higher price tag

Conversely, This translates to a longer gap between solar installation and even with a system’s savings, also known as the payback period

The average payback period for solar customers was just over seven years in early 2025, according to EnergySage

But owners in some areas were already looking at closer to 20 years before even on their purchases

Price hikes and the loss of the tax credit will ly lengthen those payback periods

Furthermore, Lease, PPA and battery trendsAs owners back away from solar panel purchases, companies that offer leases and power purchase agreements (PPAs) are ly to become the major competitors, says Chris Hopper, co-founder and chief executive officer of Aurora Solar, a software platform that lines the solar array design cess for installers, amid market uncertainty

The data indicates that se arrangements allow owners to generate solar energy without purchasing the equipment, while the companies that own the equipment receive a tax break (which is quite significant)

If a company passes on that tax break to the consumer, it can lower the overall cost of the system

Additionally, the deadline changes don’t apply to solar battery purchases

Less solar power and higher electricity billsThe elimination of the solar tax credit comes at the same time that the U

Energy market is experiencing a growing demand for power, Hopper says

Solar energy has been helping with that demand (something worth watching)

Power grid in the first quarter of 2025, according to the Wood Mackenzie report from June 2025

Although commercial solar jects can continue to see tax benefits longer than residential systems, they tend to take longer to put into operation

The lengthy timeline means less solar energy duction to support the growing need for more energy in the meantime

Energy Innovation, a non-partisan think tank specializing in energy, climate re and policy analysis, estimates that the loss of that additional energy will raise the cost of electricity for consumers

Janice DiPietro, chief integration and customer officer at ReVision Energy, a New England-based solar company, agrees (fascinating analysis), amid market uncertainty

She cites the combination of new tariffs, the loss of the solar tax credit and the increased demand for power as primary factors. “As a result, electricity rates will increase at a faster than average pace,” DiPietro said by, in today's financial world

Furthermore, The authorWhitney VandiverWhitney Vandiver is a lead writer and content strategist at NerdWallet

Her work has been published in the The Washington Post, the Los Angeles Times, The Independent and others