The Solar Tax Credit in 2025: How it Works & What’s Changing

The federal solar tax credit is one of the most valuable incentives for rooftop solar in California, but it’s officially on its way out. A new law has set an official end date for the tax credit: December 31, 2025.

You can still claim it, but time is running out. To qualify, your solar system must be installed, inspected, and operational before the end of 2025. 

At Premo Solar, we’re committed to helping as many homeowners as possible claim the solar tax credit before it’s too late, but our schedule is filling up. Reach out today to secure your spot! 

Have questions about the solar tax credit, how it works, and what qualifies? Keep reading for a full breakdown. 

Key Takeaways 

• The federal solar tax credit covers 30% of total system costs.
• It applies to solar panels, labor, permitting fees, and battery storage.
• The credit is still available but will be eliminated for all residential solar installations completed after 2025. 

How the Solar Tax Credit Works 

The solar tax credit (formally known as the 25D Residential Clean Energy Credit) reduces your federal income tax liability by 30% of your total solar installation costs for the year you install solar panels for your home. 

Here’s an example of how it works:

1. Let’s say you spend $30,000 on a solar installation 
2. You qualify for a 30% tax credit, which is equal to $9,000 
3. You apply your credit to your federal income taxes when you file 
4. If you owe $10,000 in taxes, for example, your credit brings it down to $1,000 
5. If the credit is worth more than you owe, you can roll the remainder over to the next year 

But remember: This is a tax credit, not a rebate or a check in the mail. You have to owe federal income taxes to claim it. 

What’s Changing in 2025? 

On July 4, 2025, President Trump signed a new budget law that deals a major blow to clean energy incentives, including the federal solar tax credit.

The 30% credit will remain in effect for residential solar panels installed through the end of 2025, but after that, it’s gone. 

To qualify, your system must be fully installed, inspected, and “placed in service” (turned on and producing power) by December 31, 2025. If you miss that deadline, you miss out on your chance to save 30% on home solar panels. 

What Happens After 2025? 

After 2025, the federal solar tax credit will be eliminated. You will not be able to claim it for any solar equipment you install in 2026 and beyond.  

Who Can Claim the Solar Tax Credit in 2025? 

The good news is that, even though the solar tax credit is going away, you can still claim it in 2025.  

You may qualify for the solar tax credit if: 

• You own your solar system (leased systems do not qualify).
• The system is installed on your primary or secondary residence in the U.S.
• The system is new or being used for the first time (you can’t claim the credit on reused equipment).
• Your system will be up and running by the last day of 2025. 

What Equipment Is Covered By the Solar Tax Credit?

The tax credit applies to pretty much every expense involved in a home solar installation, including: 

• Solar photovoltaic (PV) panels
• Inverters  
• Mounting & wiring equipment 
• Solar battery storage systems 
• Installation and labor costs
• Permitting and inspection fees

How to Claim the Solar Credit on Your 2025 Taxes 

You can claim the tax credit for solar panels when you file your federal taxes for 2025. Here’s how:

1. Fill out IRS Form 5695
2. Add your credit information to your Form 1040 
3. Attach Form 5695 when you file
   

It’s a relatively straightforward process, especially if you work with a tax professional or use reputable tax software. Be sure to save your invoices and receipts to make filing easier. 

Don’t Miss Your Chance to Save 30% on Solar Panels 

If you’ve been thinking about going solar, now is the time to act. Delaying means missing out on your last chance to save 30% on your installation costs. 

At Premo Solar, we’ve helped hundreds of California homeowners make the switch to clean solar energy. If you’re ready to go solar, we can get your installation started quickly so you can claim the solar tax credit before it’s too late.

Claim the 30% solar tax credit before it’s too late. Call 831-901-3352 today for a free estimate.