No solar tax credit? No problem. Most homeowners can still save big

The 30% residential solar tax credit—long considered one of the best solar incentives—is set to disappear after December 31, 2025. Under President Trump’s One Big Beautiful Bill Act (OBBBA), the credit will end abruptly in three months, with no phase-out period as originally planned. On the surface, that might sound like a devastating blow for solar savings, but the reality is more complex.

For millions of American homeowners, losing this credit won’t actually change their financial outlook when it comes to solar. The tax incentive only applies if you owe enough in federal income taxes to take advantage of it, so people like retirees on fixed incomes, families with little to no annual tax bill, and students just starting their careers couldn’t always cash in anyway. For these households, the cost of solar—and the savings it delivers—remain the same.

The residential solar tax credit is nonrefundable, which means it can only reduce the amount of federal income tax you owe—it can’t generate a refund or a check in the mail. In other words, if your tax bill is already low or nonexistent, you won’t see much benefit from this incentive.

However, one major benefit is that homeowners can carry forward unused credits to future tax years, so if you don’t have a tax bill this year, but you will in following years, you’re still able to take advantage of the credit. Still, the nonrefundable structure has always limited who can truly take advantage of the federal solar tax credit. 

Retirees who don't owe much federal income tax

Many retirees rely on sources of income like Social Security, which aren’t subject to federal income taxes. That means retired people often owe little to nothing in federal taxes—and without a tax bill, there’s nothing to apply the solar tax credit to. When your main income streams are tax-exempt, you simply don’t qualify for much of the benefit.

Unlike employed people, who may owe little in taxes one year, but can carry the solar tax credit forward to offset higher tax bills in future years, many retirees have a monthly income that rarely changes, meaning those future tax years with enough liability may never come. However, if you have multiple retirement accounts, it’s possible to create tax liability by working with a financial advisor in some situations. A licensed financial professional can help you assess your options.

Families or individuals with little to no annual tax bill

The solar tax credit can't be applied if other deductions or credits have already reduced your tax bill to zero. Many households with multiple children, substantial mortgage interest, or other significant deductions find their federal income tax bill reduced to zero before accounting for solar credits.

Similar to retirees, households with very low taxable income often don’t owe enough to claim the credit. Families earning below certain thresholds may have minimal federal tax bills after standard deductions and other credits. The solar tax credit’s nonrefundable nature means unused amounts can’t be converted into a refund or cash, limiting the potential financial benefits for those households.

Students or young adults just starting out

People early in their careers often earn less and may not have a high enough tax bill to benefit from the credit. Entry-level salaries, student loan interest deductions, and other factors common among young adults frequently result in minimal federal tax bills.

Renters who don't own their home

The solar tax credit only applies to solar energy system owners. If you don’t own your home, you don’t own the solar panels on it, and you can’t claim the credit. That’s why a significant portion of American households—those who rent rather than own their homes—could never take advantage of this incentive in the first place, meaning they aren’t missing out now that it’s disappearing.

Losing the residential solar tax credit was an unexpected shift, but the solar industry is strong enough to adapt. Even without federal subsidies, solar remains financially attractive for most homeowners because it eliminates or significantly reduces their increasingly expensive electric bills. Over the course of 25 years, most homeowners can save anywhere between $34,000 and $120,000 on their electric bills by going solar—far more than the value of the upfront tax credit.

Solar costs have also dropped dramatically over time. Ten years ago, a home solar installation cost $3.36 per watt—28% more than the average prices seen on EnergySage today. Meanwhile, rising electricity rates continue strengthening the financial case for going solar, making it a smart investment even without federal incentives.

Of course, the elimination of the residential solar tax credit (25D) makes solar slightly more expensive for some people. On average, an EnergySage solar shopper who goes solar in 2025 will break even in about seven years. Without the federal tax credit, that same system on the same roof would take just over 10 years to pay for itself. While that’s a longer timeline, it still represents a solid return for homeowners who plan to stay in their homes for more than a decade. Solar after the loss of 25D requires more patience, but it’s still worth it.

Federal policy isn’t the only factor that makes solar more affordable. Many states offer their own tax credits, which can be claimed in addition to federal incentives. Utilities, manufacturers, cities, and local governments often provide rebates, performance-based incentives, or other programs that remain unaffected by the federal credit’s expiration.

Homeowners may also benefit from net metering, a policy that allows them to sell excess solar energy back to the grid, offsetting their electricity costs even further. In some states, you can earn solar renewable energy certificates (SRECs) for the power your system produces, creating an additional income stream. These state and local programs can significantly shorten the payback period for solar panel systems, ensuring strong returns even without the federal tax credit.

For many households, losing a credit they couldn’t use anyway doesn’t change the real benefits of going solar: Lower electric bills, long-term savings, and protection against rising energy costs.

Even for homeowners who could’ve taken advantage of the federal tax credit but missed it, solar remains a strong investment on its own. While the end of the federal incentive is a notable policy shift, it doesn’t diminish the fundamental value of going solar. For most Americans, the economics of solar energy make it worth investing in.