The 30% Solar Tax Credit Ends December 31, 2025. Here’s What Actually Changed Under OBBBA.
The Short Answer
The federal 30% residential solar tax credit (Section 25D) terminates for systems placed in service after December 31, 2025 under the One Big Beautiful Bill Act (OBBBA). If your solar system is installed and operational on or before that date, you can still claim the credit on your 2025 tax return. After that date, the residential credit as currently written does not apply. State and California-specific incentives continue regardless.
This page walks through what OBBBA actually changed, what “placed in service” means in IRS language, what other incentives still stack, and the real numbers for an El Dorado County homeowner deciding today, now that the deadline has passed.
What OBBBA Changed
Before OBBBA, the federal residential solar tax credit was set up to run at 30% through 2032, then step down to 26% in 2033, 22% in 2034, and zero in 2035. That schedule came from the Inflation Reduction Act of 2022.
The One Big Beautiful Bill Act (OBBBA), signed into law in 2025, accelerated that timeline. For Section 25D — the residential clean energy credit — the 30% credit now applies only to systems placed in service on or before December 31, 2025. After that date, the residential credit as currently written does not apply.
What did NOT change under OBBBA:
- The Section 48 commercial Investment Tax Credit continues on its own timeline. This applies to commercial properties and third-party-owned systems (PPAs and leases where a financier owns the equipment), not direct residential ownership.
- State-level incentives are independent of federal legislation. California programs continue regardless.
- Property tax exclusion for solar (California Section 73) continues — solar does not increase your property tax assessment.
- NEM 2.0 grandfathering for existing solar customers continues. If you have an NEM 2 system, you keep that rate structure for 20 years from your interconnection date.
The Section 25D residential credit termination is the change that matters for most California homeowners considering solar in 2025 or beyond.
What “Placed in Service by December 31, 2025” Actually Means
This is the part that costs people the credit if they get it wrong.
“Placed in service” is IRS terminology. It means the system is installed, connected to the home’s electrical system, and ready and available for its intended use. It is not the same as:
- Signing a contract
- Paying a deposit
- Receiving the equipment
- Even completing physical installation, if the system isn’t connected and operational
For solar specifically, “placed in service” typically requires:
- Panels and inverter physically installed on the property
- System wired into the home’s main electrical panel
- Permits passed inspection
- Permission to Operate (PTO) granted by PG&E or the local utility
That last step — PTO from PG&E — is often the slowest. Across California in 2024 and 2025, PG&E PTO turnaround has ranged from a few weeks to several months depending on workload, location, and whether the application required additional review. If you contract for solar in October 2025 but PG&E doesn’t grant PTO until February 2026, the system was not placed in service in 2025 and Section 25D does not apply.
Practical implication: If you want the 30% credit, you need to be planning toward an install date that gives you a meaningful buffer before year-end — not the install date itself. PG&E PTO timing is outside your installer’s control. A reasonable rule of thumb in California right now is to have your physical install done by October 2025 to give a comfortable PTO buffer. Tighter than that, you’re betting on PG&E’s timeline.
Stacking With Other Incentives That Still Exist
The federal 30% credit is the largest single line item in most California solar economics, but it’s not the only one. Several California-specific incentives continue regardless of OBBBA:
Tesla Powerwall Battery Rebate (offered through June 2026)
Tesla’s rebate program offered $500 per Powerwall battery, up to a $1,000 rebate for installations of two or more batteries, and ran through June 2026 (subject to Tesla’s program terms). Check the Tesla Powerwall rebate program page for whether a rebate is offered today. While both windows were open, it stacked with the federal credit for systems placed in service before the December 31, 2025 cutoff.
California Property Tax Exclusion (Section 73)
Solar systems are excluded from property tax reassessment in California through the active solar energy system exclusion. Adding solar does not increase your property tax bill. This continues independent of OBBBA.
NEM 2.0 Grandfathering (for existing solar customers)
If you already have solar interconnected under NEM 2.0, you remain on that rate structure for 20 years from your original interconnection date. This is a substantial benefit that does not transfer if you sell the home in some cases — it depends on the specific NEM agreement and how the new owner’s service is structured. (More on this in a future post on NEM 2.0 resale value.)
CARE / FERA Program Discounts
Income-qualified households can receive 20-35% discounts on PG&E rates through CARE (California Alternate Rates for Energy) or FERA (Family Electric Rate Assistance). These discounts continue and affect the math of whether solar makes sense for a given household.
State Sales Tax Considerations
California sales tax applies to solar equipment in some configurations and not in others depending on installation structure. Your installer can advise on the specifics for your situation.
The point: with the federal credit’s end-of-2025 deadline now behind us, solar in California can still pencil. The math just changes. The 30% credit was the largest single saving for direct-purchase systems, and its absence has to be made up somewhere — either in monthly bill savings, longer payback period, or stacking the incentives that remain.
Real Numbers: A Typical El Dorado County Home
Below are illustrative numbers for a typical El Dorado County household with central AC, an average annual usage of 12,000–14,000 kWh, considering a 9 kW solar + 2 Powerwall battery system. These are illustrative, not your specific numbers — your actual situation depends on your roof, your usage, your rate plan, and the install pricing your installer offers. Get a personalized audit for real numbers on your house.
| Line item | Installed in 2025 (Section 25D applies) | Installed in 2026 (Section 25D does not apply) |
|---|---|---|
| Gross system cost | $36,000 | $36,000 |
| Federal 30% credit | −$10,800 | $0 |
| Tesla Powerwall rebate (2 batt) | −$1,000 | −$1,000 |
| Net out-of-pocket cost | $24,200 | $35,000 |
| Difference | $10,800 more for installs after Dec 31, 2025 | |
For most El Dorado County households, that difference adds 3-5 years to the payback period and meaningfully changes whether the deal pencils as a Purchase. Customers who can’t get the credit in time may shift to a PPA or lease structure (where the financier captures the commercial Section 48 ITC and passes through pricing), which has its own tradeoffs.
The Decision Framework
If you’re an El Dorado County homeowner thinking about solar right now, here’s the honest framework:
The 30% credit window has closed
Eligibility came down to when a system was placed in service, including PG&E PTO — not the contract date. Systems placed in service on or before December 31, 2025 captured the credit; systems going in now do not. If a sales pitch today leans on the federal 30% credit for a new residential install, that pitch is out of date.
Solar without the federal credit — where every 2026 install starts
Solar can still make sense, but the math changes. The 30% credit absence is real. What you’re comparing now is: 25-year cost of staying on PG&E (with their ~10% historical rate increase trend) versus 25-year cost of solar (with a smaller escalator). For most El Dorado County homes paying $250+/month to PG&E, the long-term math still wins — just with a longer payback period than 2025 installs saw.
If solar isn’t a fit at all (smaller bill, heavy shade, plans to move), there are still other levers for bringing a PG&E bill down. Three real levers California homeowners can pull walks through rate plan optimization, load shifting, and which appliances are quietly doubling bills.
If you’re a fence-sitter
The deadline race is over, which removes the worst reason to rush. What’s left is the real comparison: your bill, your roof, your rate plan, and PG&E’s rate trajectory against today’s install pricing. That’s a math question, and it’s answerable in 24 hours with your actual bill.
If you’re an existing solar customer (NEM 2.0)
The federal credit timeline doesn’t affect your current system. But if you’re considering a battery add-on or system expansion: depending on whether the addition triggers re-permitting, you may move from NEM 2.0 to NEM 3.0, which has different export economics. Additions placed in service by December 31, 2025 could still capture the federal credit, and Tesla’s rebate program ran through June 2026; an addition going in now gets neither. Get audited specifically for the add-on math — including whether the addition risks your NEM 2.0 grandfathering.
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Get My Free Audit →Frequently Asked Questions
Yes. The federal residential 30% solar tax credit (Section 25D of the Internal Revenue Code) terminates for systems placed in service after December 31, 2025, under the One Big Beautiful Bill Act (OBBBA). Systems placed in service on or before that date qualify; systems placed in service after that date do not.
For residential homeowners under Section 25D, no — the credit terminated after December 31, 2025, so systems placed in service in 2026 do not qualify. For commercial and third-party-owned systems under Section 48, a separate Investment Tax Credit continues with its own timeline. Most California homeowners installing solar on their primary residence were looking at a Section 25D credit, which ended at the close of 2025.
The acceleration of the Section 25D termination was passed by Congress in OBBBA and signed into law. Tax credits are statutory — they exist or don’t exist based on legislation. The 30% residential credit’s termination at year-end 2025 is now law. Future Congresses could restore or replace it, but for systems placed in service in 2026 or later, Section 25D as currently written does not apply.
Originally, the Inflation Reduction Act extended the 30% credit through 2032 with a step-down in 2033 and 2034. OBBBA accelerated the timeline: the residential credit (Section 25D) ended after December 31, 2025. The window from OBBBA’s signing through the end of 2025 was the final period for residential homeowners to qualify.
California-specific incentives that remain regardless of the federal credit: the California property tax exclusion for solar (Section 73), state sales tax considerations, NEM 2.0 grandfathering value at resale (for existing solar customers), and CARE/FERA program discounts for income-qualified households. Tesla’s Powerwall battery rebate ($500 per battery, up to $1,000 for two or more) was offered through June 2026 — check Tesla’s current program page. Time-of-use rate optimization with battery storage continues to offer savings even without the federal credit.
Run the post-credit math for your house
The deadline has passed — the question now is whether solar still pencils for your specific house without it. Get audited and I’ll show you what’s realistic and what isn’t.
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