On July 4, 2025, President Trump signed into law Congress’s budget reconciliation bill, H.R. 1—commonly known as the One Big Beautiful Bill. This legislation brings significant changes to the federal tax credit for residential and commercial solar and battery systems. Under this new law, homeowners who purchase their systems with cash or a loan will no longer be eligible for the 30% federal tax credit after December 31, 2025.
Previously, this solar tax credit was available through 2034. With the new timeline, homeowners planning to buy and install solar or battery systems (using cash or a loan) now have a shorter window to qualify for these savings. In this blog, we’ll explain what the change means and how to plan ahead to secure your 30% federal tax credit if you're purchasing your system outright before the window closes.
Planning solar in 2026 or later?
The federal solar tax credit for homeowner-owned systems is no longer available. If you’re reading this after 2025, use this article to understand how the credit changed—and evaluate solar based on long-term electricity savings, available state or local incentives, and energy independence rather than federal tax benefits.
Key changes to the federal solar and battery tax credit
Residential solar and battery purchases (Section 25D)
The 30% investment tax credit (ITC) for homeowners who buy their systems outright (cash or loan) will expire after December 31, 2025. To qualify, homeowners must have purchased the system and incurred qualifying expenses (such as installation or equipment costs) by this date.
Leases and power purchase agreements (PPAs)—as well as the ITC for commercial solar—remain eligible through 2027 (Section 48E)
Homeowners using leases or PPAs—where a third party owns the system—can still benefit from the tax credit until the end of 2027. Additionally, commercial entities (businesses, schools, churches, etc.) also remain eligible for the tax credits. These systems will need to meet increasing U.S. manufacturing content requirements starting in 2026.
Battery storage systems stay eligible under third-party ownership
The ITC for standalone battery systems continues through 2032 under third-party ownership. After 2025, homeowner-owned batteries will no longer qualify.
New U.S. content requirements for solar tax credit eligibility
Starting in 2026, projects seeking the additional 10% Domestic Content Bonus Credit—such as those using leases, PPAs, or financed by commercial entities—must meet minimum U.S. content thresholds. Currently, at least 40% of the system cost must come from non-foreign entities of concern (FEOC) in 2026, rising to 60% by 2030. These thresholds apply only to the bonus credit, not to the standard 30% ITC.
To learn how this applies to commercial systems, read our detailed blog on the Domestic Content Bonus Credit.
How the tax credit change affects homeowners
This update changes how and when homeowners can take advantage of solar incentives. If you’re planning to buy and own your system outright, the window to qualify for the full 30% federal tax credit is now shorter than expected.
Upfront costs may rise after 2025
Homeowners planning to purchase their systems with cash or a loan can still take advantage of the 30% federal tax credit—but only until the end of 2025. Starting your project early could help ensure you qualify, lower your upfront costs, and set yourself up for a stronger return on investment.
Potentially faster payback for systems installed before 2026
Installing your system before the end of 2025 means you can take advantage of the full 30% federal tax credit—possibly reducing your upfront costs and speeding up your return on investment. In states like California, this could mean a payback period of around 7 years instead of 9. In places like Georgia or Tennessee, acting now could help shorten the typical 13–19 year payback timeline significantly, depending on local incentives and electricity rates. While losing the 25D tax credit may extend payback periods, rising electricity prices under the new law could help offset that impact—especially in states with higher utility rates.
State and local incentives may still help
Beyond the federal tax credit, many states offer additional programs that can improve your overall return—like rebates, net metering, and solar renewable energy credits (SRECs). These vary by location and may remain in place even after the federal credit phases out, giving you more ways to save.
High demand expected before the deadline
As the deadline approaches, many homeowners may rush to schedule installations. That could lead to longer wait times, limited availability, or delayed installs—so planning early can really help at this time.
Steps homeowners can take immediately
If you’re planning to go solar or add battery storage, here are a few steps to consider:
Act early: Starting your project well before the 2025 deadline helps ensure enough time for system design, permitting, utility approvals, and installation. Demand may increase closer to the deadline, so acting early can help you avoid delays and secure the 30% tax credit.
Compare ownership and lease options: Owning a solar system can offer greater long-term savings, full access to incentives, and added home value. Solar leases and PPAs may lower upfront costs, but because the system is owned by a third party, they may offer less flexibility or long-term value than purchasing a system outright.
Look into state and local programs: In addition to the federal tax credit, many states offer incentives such as net metering, solar rebates, or SRECs. These can continue to provide savings even after the federal credit expires, depending on your location.
Claim your tax credit correctly: After your system is installed, you'll need to file IRS Form 5695 with your federal tax return to claim the credit. It’s a good idea to consult a tax professional to ensure your system qualifies and your documentation is in order.
Final thoughts on the solar tax credit changes
This policy change represents a significant shift in the federal approach to solar incentives for homeowners. But solar energy remains a valuable tool for better managing utility bills, increasing energy independence, and supporting a more resilient power grid.
If you're considering solar or battery storage, now is the ideal time to explore your options and make an informed decision. With Enphase, you get access to a network of trusted installers, a 25-year limited warranty on microinverters, products made at U.S. contract manufacturing facilities that meet domestic content requirements, and dependable support—making it easier to go solar with confidence. Programs like Enphase Care ensure your system remains supported even if your original installer is no longer available, giving you added peace of mind. Backed by a strong track record and long-term financial stability, Enphase offers dependable support homeowners can count on for years to come.
FAQs: Changes to the federal solar and battery tax credit
Yes. While the federal solar tax credit significantly reduced upfront costs, many homeowners still find solar worthwhile based on long-term electricity bill savings, rising utility rates, and energy independence. Over the lifespan of a solar system—often 25 years or more—avoided utility costs can deliver meaningful savings even without federal incentives.
To claim the 30% federal tax credit as a homeowner, all eligible expenses must be incurred by December 31, 2025. Currently, there is no transition rule for residential systems that start in 2025 but complete after the deadline. To maximize your chances of qualifying, it’s safest to complete both the purchase and substantial installation work within 2025. If only part of the system is installed or paid for before year-end, you could consult a tax professional to confirm your eligibility.
The credit typically covers solar panels, inverters (including Enphase microinverters), battery storage, wiring, mounting hardware, and installation labor. It may also apply to permitting fees, inspection costs, and sales tax in some states. Always check with a tax advisor to confirm which costs are eligible for your specific installation.
The 30% tax credit is nonrefundable, meaning it reduces the amount of federal income tax you owe, but it won’t result in a cash refund. However, if you don’t use the full amount in the first year, the remaining credit can typically roll over to future tax years.
No, batteries are not required to claim the solar tax credit. You can still receive the 30% credit on a solar-only system. However, if you install qualifying battery storage (at least 3 kWh capacity), it can also be included in the credit—if installed and purchased by December 31, 2025 for homeowner-owned systems.
Yes, you may be able to claim the credit for qualified upgrades, such as adding new solar panels, battery storage, or expanding your system—as long as the additions are installed and paid for before December 31, 2025, and meet the eligibility criteria.
Yes. As long as you own the system (even if you're paying through a loan) and the installation meets all eligibility requirements, you can still claim the 30% federal tax credit. The credit is based on the total cost of the system—not just what you’ve paid upfront.
