The solar tax credit is ending—we answer 10 questions keeping you up at night

The clock is ticking on one of the biggest solar incentives in American history. Homeowners have until January 1, 2026 to claim the 30% federal tax credit—a benefit that can shave thousands of dollars off your solar investment.

The average solar panel system costs around $28,000, or about $2.50 per watt, according to EnergySage's latest Marketplace Report. With the tax credit, that drops to approximately $19,400—a savings of roughly $9,000. But the “Big Beautiful Bill,” signed by President Trump on July 4, eliminated the tax credit years ahead of schedule.

Losing this credit could mean the difference between breaking even on your solar investment in seven years versus 11 years. In states without local solar incentives—like Georgia, Louisiana, Tennessee, West Virginia, and Arkansas—missing the tax credit could push your payback period to 15-21 years total.

Here's what you need to know to claim this credit before it's gone for good.

This article is for informational purposes only and should not be considered tax advice. Please consult with a qualified tax professional about your specific situation.

The short answer: Get quotes now.

The tax credit requires your solar panel system to be generating electricity by December 31, 2025. Most installers say the process of going solar takes 60 to 90 days between design work, permitting, installation, and final connections and inspections. And that's assuming no hiccups along the way.

"It took us about 60 days to go from contract to install, but then we had also done probably 30 to 45 days of research prior," said Lauren Bash, a Los Angeles homeowner, climate activist, and digital creator who recently went solar. "It's definitely not a ‘Wait till the last minute on December 31st to find your installer.’ I feel even a four or five-month leeway is probably the best."

Here's what the typical timeline looks like:

• Research and quotes: 1-2 months

• Contract to installation: 2-3 months

• Utility interconnection: 2-4 weeks (can vary significantly)

With installer capacity filling up fast due to the deadline rush, starting the process now gives you the best chance of completing your system in time to claim the credit.

This is where things get a bit murky. The new law states that systems must have "expenditures made" by December 31, 2025, which is different from the previous "placed in service" language.

A tax attorney EnergySage spoke with believes that, at minimum, your system needs to be installed by the deadline. While interconnection and full payment are likely not necessary, others could interpret the language differently.

The safest approach is to have your system up and running by December 31, 2025. But, if you can’t achieve full interconnection due to utility delays, there’s still a good chance you’ll be able to claim the credit as long as your installation is complete.

You typically don't need any specific documentation to claim the credit. But be sure to keep your receipts, installation, and interconnection records—just in case the IRS were ever to audit you.

Also, the tax credit will only apply to systems you purchase with cash or a loan. It applies whether an installer completes your system or you install it yourself.

The federal solar tax credit is exactly as it sounds—a credit against your tax bill, not a refund. If you don't have any tax liability for the year, you can't claim the credit. However, there are no income limits or a cap on the credit amount.

While the IRS doesn't specify an end date for credit rollovers, there's a possibility that Tax Form 5695 may no longer exist after 2025. However, the tax expert EnergySage spoke with believes that's unlikely, and said you'd still be able to roll over unused credits indefinitely based on current law—it would just be more complicated.

So, for example, if you owe $5,000 in taxes and your solar panel system qualifies for a $9,000 credit, you should still be able to roll over the remaining $4,000 to future tax years. But we recommend speaking with your own tax attorney to discuss your unique situation.

The 30% federal tax credit covers:

• Solar panels and equipment

• Installation labor

• Permitting fees

• Electrical work necessary for the system

It doesn’t cover:

• Roof replacement or repairs (even if needed for the solar installation)

• Loan origination fees or other financing costs

• Maintenance or service plans

• Cosmetic improvements to your property

This is becoming an increasingly valid concern as the solar industry faces economic headwinds. However, there are several ways to protect yourself:

• Choose an established installer: "Something that Sam, my Energy Adviser at EnergySage, had recommended that was super helpful was to look at how long they've been in business," said Lauren Bash. "We ended up going with an organization that's been around for 40 years, before solar was hot like it is now."

• Consider third-party protection: Services like Solar Insure can protect your system investment even if your installer goes out of business.

• Operations and maintenance opportunities: In EnergySage's recent contractor survey, multiple installers indicated they would expand into operations and maintenance services if the tax credit were cut. This could help ensure ongoing service availability.

• Equipment warranties remain intact: Installer bankruptcies don't affect your solar panels and equipment warranties through manufacturers. Solar panels typically last 25-30 years, so equipment reliability isn't usually the issue.

The key is doing your research upfront and working with installers with strong track records and financial stability.

Solar loans can make going solar accessible without requiring tens of thousands of dollars upfront. The good news is that loan payments are often lower than your previous electricity bills.

"It is almost always lower," said Ravi Mikkelsen, CEO of Atmos Financial, a national solar loan provider, when comparing solar loan payments to utility bills. "Sometimes, if they get a very short duration loan because they want to pay it off quickly, then it can be higher than the monthly bill, but then their return on their investment is higher as well."

While Atmos offers seven to 20-year solar loans, Mikkelsen noted that more than 90% of customers pay them off in less than six years.

What to look for in solar financing:

• Credit unions or community banks often mean lower rates and fees

• Avoid loans with hidden fees or prepayment penalties

• Make sure everything is explained properly upfront

• Understand who's actually providing the financing

There's much less urgency if you're considering a lease or power purchase agreement (PPA) instead of buying. These third-party-owned systems can still claim tax credits for systems that begin construction before July 2026 or are placed in service before 2028, but those tax credits will be available for the company that owns the system, not to the homeowner leasing the panels. You'll see much lower lifetime savings with leasing options compared to owning your system.

• Cash purchases: You can claim the full 30% credit in the tax year your system is installed. Based on EnergySage's conversation with a tax expert, it likely doesn't need to be fully paid for—though, again, it's possible that others could interpret that differently.

• Solar loans: We believe you can still claim the full credit even if you finance your system, and your loan doesn’t have to be fully paid off by the end of the year, according to our research. When financing with a loan, the credit has historically been based on the total system cost, not how much you've paid.

• Home equity lines of credit (HELOCs): Like Lauren Bash, many homeowners use HELOCs to finance solar installations. "We were able to pay solar in full, essentially, but finance it through the HELOC," she explained.

• Leases and PPAs: The tax credit goes to the company that owns the system, not to you directly. However, these financing options will remain available after 2025 since the commercial tax credit has a longer phase-out timeline.

Yes, batteries installed with your solar panel system in 2025 qualify for the full 30% tax credit.

Batteries make sense if you don't have favorable net metering rates, frequently experience power outages, or have access to programs like virtual power plants that can pay you for stored energy.

The timing is especially relevant given grid stability concerns. As a result of this bill, the grid is expected to become significantly less stable. A July 2025 report published by the Department of Energy predicts 100 times more power outages by 2030 compared to today. 

Similar to solar panels, batteries must be installed by January 1, 2026 to claim the 30% federal tax credit. Given grid stability concerns and the limited time window, installing a battery now alongside your solar panel system makes more financial sense than waiting.

However, if you plan to lease or enter a power purchase agreement for future battery storage, those systems will continue to qualify for tax credits until 2036—100% of current value through 2033, 75% in 2034, and 50% in 2035—though the credit won't go directly to you.

If you’re worried about the longevity of your battery system, don’t stress: They typically last 10-15 years, though this varies by manufacturer and usage patterns. Check the warranty terms to understand your specific system's expected lifespan.

Acting now could save you around $9,000 on your solar investment. For many homeowners, this represents four extra years of free electricity: Losing the 30% federal credit means systems that previously paid for themselves in 8-10 years may now take 15-20 years to break even.

But, even without the federal tax credit, solar will remain a smart investment for many homeowners. Solar costs have dropped dramatically—EnergySage data shows prices hit a record low of $2.50 per watt in late 2024, down from over $3.80 per watt in 2014. And analysts predict household electricity costs will increase by $83 to $152 per year as utilities build new capacity to meet surging demand from AI data centers. This makes solar's stable, predictable energy costs increasingly valuable.

"These are value-based decisions that we're making, and I think that's probably why a lot of people go solar, too,” said Lauren Bash. “There is some mission or value that's associated with this decision. And I think it's the long-term move, the long-term play."

The key is not letting the deadline pressure you into a decision you're not comfortable with. Do your research, get multiple quotes, and work with established installers who can realistically meet the timeline. With installer capacity filling up fast, the sooner you begin the process, the better your chances of claiming this significant tax credit before it disappears—possibly forever.