The End of the 30% Solar Tax Credit for Homeowners: What You Need to Know

The federal solar tax credit has long played a central role in helping homeowners afford the transition to solar energy. The introduction of new legislation referred to as the “Big Beautiful Bill” is changing everything solar.

The bill introduces major cuts to federal tax incentives that will go into effect at the end of 2025, including removing the 30% residential solar tax credit for homeowner-owned systems years ahead of schedule. If you’re planning to go solar and want to get the most value for your investment, now is the time to understand these changes and how they may (or may not) impact your bottom line depending on where you live.

The Biggest Change is the removal of the 30% Residential Solar Tax Credit at the End of 2025

The biggest shift in this bill is the decision not to extend the Section 25D federal tax credit for residential solar. This credit currently allows homeowners to deduct 30% of the cost of their solar system from their federal taxes providing thousands in potential savings.

Under the new rules:

• Residential solar systems installed by the end of 2025 are still eligible for the 30% credit.

  
  

• Starting in 2026, homeowner-owned systems will no longer qualify.

  
  

• Only third-party-owned systems (like leases and power purchase agreements) will still receive tax credit benefits under the extended commercial credits (Section 48E/45Y).

  
  

This means homeowners planning to own their systems outright have a clear deadline: complete installation before December 31, 2025 to claim the 30% tax credit.

What This Means for Homeowners in Other States

In many parts of the country, the loss of the 30% federal tax credit could significantly affect solar affordability. In states with lower electricity rates, especially those under $0.15/kWh the payback period for solar will grow longer, and some homeowners may reconsider whether it’s worth the upfront cost without the federal incentive.

Why It’s Still Worth It in California

Here in California, however, the economics of solar remain compelling even without the tax credit.

Utility rates in many parts of the state are already extremely high. In some areas:

• Tier 1 rates start around $0.40 per kWh

  
  

• Tier 2 usage can climb to $0.51 with some Tiers climbing to $0.60 per kWh

  
  

With rates like these, homeowners are paying some of the highest electricity prices in the country. That makes solar not just a green investment but a powerful financial one. Even without the 30% tax credit, California homeowners can still save substantially over time by installing solar and avoiding years of high utility bills as the rates continue to climb.

The elimination of the credit can extend the return on investment, but in California’s market, solar still pays for itself and then some. This is especially true for households with high electricity usage, where offsetting expensive Tier 2 & Tier 3 rates can lead to significant monthly savings.

Third-Party Systems and Commercial Projects Still Get Support

While homeowner-owned systems lose eligibility in 2026, commercial solar and leased residential systems will still benefit from the extended 30% tax credit so long as:

• Projects start construction within 12 months of the bill’s signing

  
  

• Or are placed in service by the end of 2027

  
  

Energy storage will be eligible for the full 30% tax credit through 2033 for commercial systems and residential leases and PPAs.

New Manufacturing Rules and FEOC Requirements

The bill also adds new requirements for solar and storage system components, targeting foreign entities of concern (FEOCs)—primarily China.

Starting in 2026:

• 40% of solar system components must come from non-FEOC sources, increasing 5% annually.

• Storage systems must be 55% non-FEOC by 2026, also increasing over time.

  
  

• To qualify for the domestic content bonus incentive, projects must use:

  
  

  • 45% U.S.-made components for projects beginning after June 16, 2025

  • Increasing to 55% by 2027

    
    

These rules aim to strengthen American manufacturing but may also result in higher prices or supply constraints in the future as most solar manufacturers are outside the US

Final Takeaway: Act Now to Maximize Savings

The “Big Beautiful Bill” is removing solar incentives, but that doesn’t mean the benefit vs the cost of solar in California is gone.

• If you want to own your solar system and claim the 30% federal tax credit, the clock is ticking: install by the end of 2025.

  
  

• Even without the credit, California homeowners still stand to gain by going solar due to the state’s sky-high utility rates.

  
  

• Third-party-owned systems and commercial installations will continue to benefit but ownership gives you the most control and long-term value, especially for when you plan on selling your home.

  
  

If you’re considering solar, now is the time to take action. Lock in your system, protect yourself from rising utility costs, and secure your energy future before the rules change.

The End of the 30% Solar Tax Credit for Homeowners: What You Need to Know

If you want to start the process to meet the December 2025 deadline give Planet Solar a call. We are here to help with two offices in California: Fresno and Palm Desert. If you have any questions, call one of our solar experts. You can reach us at 800-859-7652 or submit your information here and we will call you.

The End of the 30% Solar Tax Credit for Homeowners: What You Need to Know