The Solar and Battery Tax Credit: Will It End in 2025? Act Now to Save!
- Diamond Solar Solutions
- 17 hours ago
- 6 min read
If you've been considering investing in solar energy solutions for your home or business, 2025 may be your final chance to take full advantage of the Residential Clean Energy Credit—commonly known as the federal solar tax credit or Investment Tax Credit (ITC).
The Residential Clean Energy Credit has been a game-changer for homeowners and businesses looking to invest in solar panels and battery storage systems. Offering a 30% tax credit on the cost of installing solar photovoltaic (PV) systems and battery storage, this incentive has made renewable energy more affordable and driven widespread adoption across the United States. This credit has played a vital role in making solar in El Dorado County, Placer County, Amador County, Sacramento County, and the Bay Area more accessible and affordable.
However, recent legislative proposals could terminate this credit for residential systems by December 31, 2025, nearly a decade earlier than its planned phase-out under the Inflation Reduction Act (IRA). Here’s what you need to know about the potential end of the solar and battery tax credit and why acting now could save you thousands.
What Is the Solar and Battery Tax Credit?
The Residential Clean Energy Credit, established under Section 25D of the U.S. Tax Code, allows homeowners to deduct 30% of the cost of installing qualified clean energy systems, including:
Solar PV panels for generating electricity.
Battery storage systems (minimum 3 kWh capacity), even if installed without solar.
Solar water heaters, geothermal heat pumps, and small wind turbines.
Eligible costs include equipment, labor, wiring, and permitting fees, without a cap on the credit. For example, a $40,000 solar system could yield a $12,000 tax credit, directly reducing your federal tax liability. The credit is nonrefundable but can be carried forward to future tax years if you don’t owe enough taxes to use it all in one year. That’s a huge savings for homeowners interested in solar and battery backup in Placerville, Cameron Park, El Dorado Hills, and surrounding areas.
Originally extended through 2032 by the Inflation Reduction Act (IRA), this credit was expected to phase down to 26% in 2033 and 22% in 2034 before expiring in 2035. But recent legislative changes might end the 30% credit prematurely—by December 31, 2025.
Why Is the Tax Credit at Risk?
A budget bill passed by the U.S. House in May 2025—dubbed the “Big, Beautiful Bill”—proposes eliminating the 30% residential credit by the end of 2025. If passed by the Senate, this would override the IRA timeline. This is part of a broader effort to fund extensions of the 2017 Tax Cuts and Jobs Act (TCJA), which could cost $4 trillion over the next decade. The bill also accelerates the phase-out of commercial clean energy credits and restricts leasing arrangements, impacting the solar industry broadly.
The proposal has sparked significant concern:
Industry Impact: The Solar Energy Industries Association (SEIA) warns that ending the credit could jeopardize 287 U.S. factories and 292,000 jobs by 2028, disrupting an “American manufacturing renaissance” driven by the IRA.
Economic Consequences: Over 80% of IRA-backed clean energy projects are in Republican districts, risking their local economies.
Energy Grid Stability: Solar and battery storage are expected to account for 93% of new U.S. electric capacity in 2025. Terminating the credit could slow clean energy deployment, risking blackouts as demand rises for AI data centers and electrification.
The bill still needs Senate approval, and bipartisan support for clean energy in some Republican-led states may lead to changes. However, the current proposal offers no gradual phase-out, creating urgency for homeowners.
Why Act Before December 31, 2025?
If you live in El Dorado County (Diamond Springs, Cameron Park, Shingle Springs, Rescue, Placerville, El Dorado Hills, South Lake Tahoe), Placer County (Granite Bay, Roseville, Rocklin, Loomis) Amador County (Jackson, Sutter Creek, Ione), Sacramento County (Fair Oaks, Elk Grove, Natomas, South Sacramento), in the Bay Area or surrounding locations, now is the time to act! If the bill passes as written, systems must be fully installed and operational by December 31, 2025, to qualify for the 30% credit. Here’s why you should consider acting now:
Significant Savings: The tax credit can save thousands. For a $40,000 solar and battery system, the credit is worth $12,000—money directly off your federal tax bill. This reduces the effective cost to $28,000! Losing out on this could increase costs by 30% overnight.
Long-Term Benefits: Solar panels and batteries lower energy bills, increase property value, and provide energy independence. Pairing solar with battery storage ensures backup power during outages, especially valuable in areas like Placerville, South Lake Tahoe, Rescue, Somerset, and Cool, prone to PSPS wind & fire events, harsh winters, or grid instability.
Avoid the Rush: Industry experts predict a surge in installations as the deadline approaches, potentially overwhelming installers and delaying projects. Not all projects will be installed in time. Booking now secures your spot and ensures completion by the deadline.
Avoid Compounded Issues: As the deadline nears, installers across El Dorado, Placer, Amador, Sacramento Counties, and the Bay Area will face high demand. Permits will be delayed, equipment may run low, and not all projects will get completed in time.
Hedge Against Legislative Uncertainty: While the Senate may modify the bill, the risk of losing the credit is real. Installing in 2025 guarantees eligibility, regardless of future changes.
Who Qualifies for the Credit?
To claim the 30% tax credit in 2025, you must:
Own the system with a cash or financed purchase. (Leasing or power purchase agreements don’t qualify, although they are also affected at the installer/lease owner level).
Install at a U.S. residence (primary or secondary home, not rentals).
Have the system installed and operational by December 31, 2025.
Owe federal taxes (the credit reduces your federal tax liability, and unused portions can carry forward to future tax years).
Battery storage systems qualify independently if they have at least 3 kWh capacity, making them ideal for homeowners with existing solar systems or those seeking backup power.
How to Claim the Credit
Keep Your Records: Save invoices, contracts, and financing agreements. for your solar and/or battery storage project.
File IRS Form 5695 with your 2025 federal tax return to calculate the credit.
Consult a Tax Professional: Ensure accuracy and maximize savings, especially if combining with state incentives.
Challenges and Considerations
Accessibility: The credit benefits those with federal tax liability, which may exclude low-income households or retired individuals. However, with planning some retirees may be able to create tax liability by initiating a distribution from retirement accounts such as a Traditional IRA or 401(k). (Consult your Tax professional for more information.)
Upfront Costs: You’ll need to pay for the system upfront or through financing, with savings realized during tax season.
Legislative Uncertainty: The Senate may extend or modify the credit, but waiting risks missing the deadline.
What You Can Do Now
✅ Get a Free Quote
Contact Diamond Solar Solutions today to get a quote and schedule installation for 2025. We can guide you through permitting and incentives. We install solar and battery backup systems in Placerville, Cameron Park, El Dorado Hills, Granite Bay, Loomis, and surrounding areas, and throughout El Dorado, Placer, Amador, and Sacramento Counties, and the Bay Area.
✅ Check for Local Rebates
Take advantage of California’s SGIP Battery Rebate or SMUD’s VPP Battery Program to reduce costs even further.
The Bigger Picture
The potential end of the solar and battery tax credit could slow the U.S.’s transition to renewable energy, ceding ground to countries like China in clean energy manufacturing. It also risks higher electricity costs and grid instability as demand grows, especially with the exponential growth of AI computing needs. However, the credit’s bipartisan history—extended by Presidents Bush, Obama, Trump, and Biden—suggests hope for a compromise.
Looking Ahead
But there’s still time. Installing your solar energy solution in El Dorado, Placer, Amador, or Sacramento County in 2025 guarantees you’ll lock in the credit and save big.
🌞 Ready to Get Started?
Contact Diamond Solar Solutions today to schedule your solar installation and secure your solar and battery backup system in El Dorado County, Sacramento County, Placer County, Amador County, and beyond. Let's build a cleaner, safer, more resilient energy future—before the deadline passes!
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