The clock is ticking, and the window to take advantage of solar tax credit is running out.
Thanks to the One Big Beautiful Bill Act, which was passed by Congress earlier this summer, homeowners only have until the end of 2025 to lock in the full 30% tax credit on solar installations before it disappears.
What deadlines should you know about before the solar tax credit expires? How much can you cut from your solar costs with the tax credit? We answer these and more questions in the article below.
What is the solar tax credit, and what changes are coming?
With the federal solar tax credit (which is sometimes referred to as the investment tax credit), homeowners can claim 30% of solar panel installation costs as a credit to their federal tax bill. Since its implementation in 2006, the incentive has allowed millions of taxpayers to reduce the costs of switching to renewable energy. In fact, data shows that over $6.3 billion were claimed in just one year!
Under the Inflation Reduction Act framework, the tax credit was set to gradually decrease through 2034, until disappearing by 2035. However, the ‘Big Beautiful Bill’ signed in July, has abruptly eliminated the tax credit nearly a decade ahead of schedule. If you’ve thought about going solar, now is the last moment to do it before the incentive disappears.
What’s the deadline to qualify for the tax credit?
According to the new timeline, solar panels that are fully installed and capable of operating by December 31, 2025 still qualify for the full 30% credit. However, if you’ve paid for your system in 2025 and plan to install it after the deadline, you won’t be able to take advantage of the incentive.
Keep in mind that solar project installation can be a time-consuming process. Some contractors have long wait times, and often, it can take between 60 and 90 days to complete everything (and that’s assuming there are no speed bumps along the way). To avoid unnecessary stress and unpleasant surprises, don’t put off the decision too long.
How will this decision impact homeowners?
As you can expect, phasing out the solar tax credit has far-reaching ramifications. Most importantly, switching to solar will now be much more expensive. Anyone who wishes to upgrade their home with solar panels will have to rely on utility and state-based incentives, as well as third party ownership structures that can help reduce the up front price of a solar investment.
As a result, the electricity rates may increase at a faster pace than average.
Of course, some states offer far better support for solar than others. For instance, New York’s 25% state tax credit (up to $5,000) and Massachusetts’ long-running SMART program make going solar far more affordable compared to places like Indiana, where incentives and net metering options are limited.
Moreover, the sudden elimination of the solar tax credit is occurring at a time when demand for power is growing significantly. While commercial solar projects will be able to enjoy tax benefits longer than residential projects, they typically take more time to complete. This means that there will be less solar energy production to support the growing need. As a result, the electricity rates may increase at a faster pace than average.
How to claim the federal solar tax credit
If you act now, you could save thousands of dollars on your solar investment. Here’s how you can claim your federal solar tax credit in 2025:
Find out if you’re eligible. To qualify for the tax credit, you must be the owner of your solar energy system (leasing it won’t do). Likewise, you need to have a tax bill to take advantage of the incentive.
Fill out the IRS Form 5695. Regardless of whether you’re filling out the form yourself or with your accountant, make sure you have all the documentation ready.
Complete Schedule 3 and Form 1040. After filling out the IRS Form 5695, you’ll also need to complete additional paperwork, such as Schedule 3. This allows you to claim nonrefundable and refundable credits. Don’t forget about Form 1040 – you’ll need it to file your tax return.
Final thoughts
The solar tax credit has been a boon to homeowners who want to switch to solar panels.
Unfortunately, the One Big Beautiful Bill has abruptly cut the solar tax credit short. The good news? Homeowners still have time to benefit. By installing solar before the end of 2025, you can save thousands that would otherwise be lost.
If you wish to make an upgrade before it’s too late, get in touch with our team at Good Faith Energy! Our installation spots are limited – call or fill out the form now to reserve your place.
Fact Checked by Lita Legzdina on 09/25/2025