Last Chance to Claim the Solar Tax Credit: Act Before It's Gone

Homeowners must install solar panels by the end of the year to claim a 30% tax credit on eligible costs. The credit, which covers solar, wind, and other renewable energy projects, is set to expire after 2023. The IRS reported over 1.2 million taxpayers claimed the credit in 2023, with an average tax break of $5,100. Solar panel installation timelines vary by state, but experts advise homeowners to act quickly due to the credit's elimination.

The residential solar tax credit, a key incentive for homeowners looking to adopt clean energy, is set to expire at the end of 2025. This significant shift in policy will require homeowners to act swiftly to secure the 30% tax credit on eligible solar costs. The IRS reported that over 1.2 million taxpayers claimed the credit in 2023, with an average tax break of $5,100 [1].

The solar tax credit covers solar, wind, and other renewable energy projects. To qualify for the full 30% credit, homeowners must have their solar systems fully installed and commissioned by December 31, 2025. This is a major change from earlier proposals, which included a phase-out over several years. The final law removes this option, leaving no partial credit for 2026 [1].

The commercial solar Investment Tax Credit (ITC) remains active, but with new rules. Projects that begin construction by July 4, 2026, can qualify for the full 30% commercial solar tax credit. These projects have up to four years to be completed under the standard safe harbor rules. Projects that start after that date must be placed in service by December 31, 2027, to get any solar ITC [1].

The executive order signed on July 7, 2025, directed the Treasury Department to eliminate wind and solar tax credits under Sections 25D, 48E, and 45Y, reinforcing the solar tax credit ending. While the commercial solar ITC remains at 30%, the order narrows the rules around what qualifies as "beginning construction." Only projects with clear physical onsite work may qualify for the solar tax credit moving forward [1].

The solar tax credit has been a powerful driver for clean energy adoption in the U.S. With its expiration, homeowners and installers face growing urgency to finalize projects before the end of 2025. Solar contractors are shifting into high gear, fast-tracking permitting and interconnection paperwork, and finalizing procurement and scheduling to secure projects under current rules [1].

The market reaction to the solar tax credit going away for homeowners has been swift. On the day of the announcement, solar stocks saw steep declines, reflecting the potential loss of one of the industry's most powerful demand drivers. Companies like Sunrun, SolarEdge, and Enphase Energy experienced significant drops in their stock prices [1].

While the residential solar tax credit will disappear after 2025, the commercial solar ITC remains in place. This presents an opportunity for residential installers to expand into light commercial projects. Schools, churches, office buildings, and municipal sites are all candidates that may still qualify for the federal solar tax credit [1].

For residential installers looking to diversify in 2025, now is the time to prepare. Contractors can continue growing even as the solar tax credit changes take effect by adjusting strategy and timelines [1].

References:
[1] https://www.greenlancer.com/post/solar-tax-credit-ending