By Mathilda DeCosse, volunteer, and Todd Larsen, Executive Co-Director
Time is running out to benefit from federal tax credits for installing residential solar power that are available thanks to the 2022 Inflation Reduction Act. With the passage of the Trump administration’s “One Big Beautiful Bill,” residential solar power systems need to be installed and likely placed in service by December 31, 2025 in order to qualify for the up to 30% solar tax credit in 2025. It’s unclear whether or not the credit may apply to systems that are installed but not in operation by December 31, but to be on the safe side, your system should be operational by the end of the year.
The tax credit has helped make the cost of solar panel installation less expensive for homeowners. With the credit, the average panel installation cost is about $20,000. Without it, people will have to pay thousands of dollars more.
There are still individual state or local incentives for installing solar panels that may still help reduce the cost of installing solar panels after December 31, but losing the federal tax credit is still a big hit to homeowners and sustainable energy efforts.
Installing solar panels makes sense for many homes. Homeowners save money on their electric bills and those savings can pay back the cost of installing panels within 7-10 years—with the rebate in place. Without the rebate, that payback period will be longer.
And there are the environmental benefits of installing solar power—the more our homes are powered by solar, the less we rely on the fossil fuel industry which continues to be one of the major drivers of climate change.
To qualify for the installation tax credit by the December 31 deadline, here’s what you should know:
Should I purchase the panels or lease them?
The credit is only available for purchased solar panels. Purchasing solar panels has several benefits, but the most important is that you will receive the entire benefit of your reduced electric bill throughout the life of the panels, which can last 25 years or longer.
If you do not have enough funds available to pay for panels outright, and can’t or don’t want to finance the cost of panels, solar leasing is an option.
With a lease, you pay $0 upfront to have panels installed, and the company that leases you the panels pays for repairs. But, the company that leases you the panels owns them throughout the lease, which lasts 15-25 years. During that time, you will pay a monthly fee to the company that installed the panels, which will eat into any savings you see on your electric bill. Also, it is very difficult to end a lease, and if you sell your home, you may need to arrange to have the panels installed on your next house (if you are moving locally) or try to get the new buyer to assume the lease.
Another option to finance solar is a Power Purchase Agreement (PPA) Similar to a lease, you have little to no upfront costs or maintenance but you do not actually own the equipment. In most cases this means the homeowner buys the energy produced by the solar panels at a fixed rate from a company that owns and pays for the panels. Separately, the home owner will still pay for any additional electricity that they need from their local utility. PPA’s are less common than leases since they are only allowed in certain states.
How do I choose an installer to work with? What red flags should I look for?
As the window to benefit from these federal tax credits rapidly closes, there is a real risk of unethical companies coming by and trying to push you to install panels quickly.
Fraud in the residential solar sector increased dramatically in recent years. Door to door salespeople may overinflate the savings to be gained by rooftop solar and lock unwary customers into predatory loans. In some cases, companies engage in shoddy work and even install non-functioning systems.
To protect yourself, it pays to do your homework:
- Ask local homeowners who installed solar if they were satisfied with their contractor. Reach out to companies that several people recommend.
- Be careful when searching online. Look for credible options. For example, installers that belong to the cooperative Amicus Solar are certified B Corps that partner with lenders like Clean Energy Credit Union ( community development financial institution) to obtain financing.
- You can search for qualified solar contractors in your area by using Energy Sage, which provides competing quotes from several solar installers near you.
- Make sure to look online at reviews, and if your state has an ethics pledge for solar installers, make sure the company has signed the pledge.
What are typical solar installation costs?
Solar Panels can range from $15,000 to $35,000 upfront without tax incentives. Ongoing maintenance can be $300-$500 each year, excluding any necessary replacements. For example, inverters are a part that often needs to be replaced at least once during a system’s lifetime.
The upfront cost of installation includes the price of the physical equipment, such as panels (6kW system: $7,000), inverters ($1,000- $6,000), and mounting hardware ($800), as well as installation costs, which are often priced according to the system being used. People should expect to pay around 20% of the system cost for installation.
How can I obtain financing that’s on the up and up?
Cash will always be the “cheapest” way to finance solar panels in terms of overall cost. But not everyone will have $25,000 available!
The most common options to borrow money are loans and installer financing. Loans can be granted through state programs (such as Property Assessed Financing), finance companies, or local bank or credit union solar loans. Installer financing often offers lower rates but may have higher origination fees. Many of these also require credit scores above 650.
Be careful if you are considering Property Assessed Financing as the source of your loan. A property lien will be placed on your home and your property tax bill will increase to pay back the loan. Your mortgage lender may prohibit such loans.
When obtaining financing, beware any mention of “free” products and services, along with anyone who says that the government will pay for your solar—it will not. Another warning sign is when a company suggests using tax credits to pay for solar without checking your eligibility. You should get a paper copy of any transactions, deals, or contracts. If you are not provided with these, the offer is a scam.
When financing, do not feel restricted to use the financing of the salesperson. You might be able to get a better deal by getting a loan from a bank or credit union. Explore lenders and find the best deal with low interest rates, lender fees and good terms. You could use our Get a Better Bank site to find local community development banks and credit unions near you that offer homeowner loans.
What should I expect for the installation process?
Generally, to place solar on your home, you will need to obtain a permit from your local government and undergo an inspection. Detailed permit fees and requirements vary heavily across jurisdictions. Residential solar permits typically take several weeks but some areas may grant them in a few days, so do your research and plan your timeline accordingly.
On the flip side, some areas may take months to approve a solar permit. Permit fees usually cost about $150-$300. After obtaining a permit, the physical solar installation typically only takes about two days. Once the system is installed, it must be inspected by your local utility and a municipal inspector, and connected to the grid to begin producing electricity. These final steps may take a few weeks.
Delays in physical installation are typically caused by issues such as unsuitable weather, unsafe conditions, or roof complexity. Though annoying, these complications are often resolved in a few days. Longer delays are often caused by time-consuming permit processes.
Are there states that support rooftop solar?
Many states, municipalities, and utilities provide rebates or credits for solar installation. Check the Unbound Solar site to see if there are incentives where you live.
What should I know about basic maintenance?
When cleaning, avoid kneeling or walking on the panels, as that could damage the mechanism. Never clean on a hot day as the sudden temperature change of water on the panels can cause cracking. Cleaning on cloudier days or in the morning is recommended to reduce risk of temperature shock.
For smaller solar panel systems, cleaning is not often required. Rain can usually get the job done. If your area is experiencing a dry spell, cleaning might be needed to clear the dust and debris collecting on the panels. If panels are mounted horizontally, this will also require more frequent cleaning. No matter the situation, solar panels should be cleaned at least twice a year.
If there is an electrical problem with the system, reach out to the system provider. Getting little to no energy even when it is sunny is a telltale sign of a damaged circuit.
What if rooftop solar isn’t an option for me?
If you live in an apartment building, or a house that is shaded by trees, solar is not a good option for you. But you may still be able to take part in advancing solar power by signing up for a community solar project. Community solar projects are larger-scale installations of solar panels located in your community. You take part by subscribing to the project, which can result in lower electric bills for you, while supporting the transition to solar energy. You can see if community solar is an option in your state here.
You can also take action to make your home more efficient by adding insulation, fixing drafty windows or doors, and installing more efficient air conditioners or furnaces. These fixes are often simpler than installing solar, but to receive federal tax credits (up to 30% of the costs) the work must be in progress by December 31, 2025.
And, if you want to receive a federal tax credit for the purchase of an electric vehicle and charging station, you must make your purchase by September 30, 2025.
