The Solar Tax Credit Is Ending—Here’s What That Means for California Solar Installations
If you’ve been thinking about installing solar panels for your home or business in California, now’s the time to do it.
The “One Big Beautiful Bill Act” (OBBBA), signed into law on July 4th, makes major cuts to federal clean energy tax credits, including the residential and commercial solar tax credits.
The residential solar tax credit will now end on the last day of 2025, about a decade ahead of schedule. Your project needs to be fully installed by the end of the year to qualify. The commercial credit will last a little bit longer, but not much.
Keep reading to learn everything you need to know about the solar tax credit in 2025, including how it works, what’s changing, and how to claim it before it’s too late.
What Is the Solar Tax Credit?
The solar tax credit is a government incentive that makes solar panels more affordable for homeowners and businesses. It reduces federal income tax liability by 30% of your total system costs. You claim the credit when you file your taxes for the year you install your solar panels, allowing you to recoup almost a third of your installation costs very quickly after going solar.
Technically, there are two different solar tax credits—one for residential solar installations and one for commercial projects.
Residential Clean Energy Credit (25D) - For residential solar installations. Homeowners can claim a 30% tax credit for solar panels and/or battery storage.
Clean Energy Investment Tax Credit (48E) – For commercial solar installations. Businesses can claim a 30% credit or receive an equivalent direct payment if they’re tax-exempt.
What’s Changing with Solar Tax Credits Under OBBBA?
The basic structure of the tax credits isn’t changing. But OBBBA drastically reduces the amount of time you have to claim them. ]
Here’s what’s changing:
How to Claim the Solar Tax Credit in 2025
Start Your Project Right Away
If you want to claim a solar tax credit, you need to start your project soon. Solar installations take time, and with a rush to get in before the tax credit deadline, we could see longer wait times for permitting and approvals. Your safest bet is to start now.
Claiming the Residential Solar Tax Credit
To claim your credit:
Complete your installation by December 31, 2025.
File IRS Form 5695 with your 2025 federal tax return. This form calculates the credit based on your qualified solar expenses and applies it to your tax liability.
You don’t need to submit receipts, but you should keep them on hand to help you calculate your credit and in case of an audit.
Claiming the Commercial Solar Tax Credit
For commercial installations, the process is more complex:
In most cases, businesses should file IRS Form 3468 for the tax year in which the solar system was placed in service.
Complex projects may require additional documentation, especially if you’re claiming multiple tax incentives.
We encourage you to work with a qualified tax professional who understands clean energy tax credits. The rules for businesses and nonprofits can be nuanced, especially when combining incentives or structuring multi-year projects.
Ready to Get Started?
At Taylor Energy, we’re committed to helping as many homeowners and businesses as possible go solar and take advantage of this huge opportunity to save before it’s gone. Reach out to us today to learn more about your options and get your installation on the books.
Don’t miss your chance to save 30% on solar panels. Call (707) 760-0488 today for a free consultation.
Disclaimer: This information is provided for general educational purposes only and does not constitute tax advice. Always consult a qualified tax professional to understand how these incentives apply to your specific situation.
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