Big Changes to the Solar Tax Credit: What the “One Big Beautiful Bill” Means for You
If you've been thinking about going solar or you're in the solar industry, you’ve probably heard about the sweeping legislation signed on July 4, 2025—the One Big Beautiful Bill (OBBB). This law significantly alters federal clean energy tax credits, including how and when homeowners and commercial entities can qualify for solar incentives.
Here’s a breakdown of what’s changing and how it might affect you.
What changed?
For Homeowners (Section 25D):
The 30% federal tax credit for residential solar remains in place, but only through December 31, 2025.
To qualify, the system must be fully installed and paid for by the end of this year.
There is no longer a “start-of-construction” exception—contracts alone aren’t enough.
For Commercial and Leased Projects (Section 48E / 45Y):
These credits have shifted to a “technology-neutral” format, available to any clean energy source that meets emissions and labor standards.
Two ways to qualify:
Start construction by July 4, 2026, or
Place the project in service by December 31, 2027
New sourcing requirements apply, disqualifying systems that include components from “foreign entities of concern” (FEOCs)—primarily affecting China-sourced equipment.
What’s new from the White House?
On July 8, 2025, President Trump signed an Executive Order directing the U.S. Treasury to tighten enforcement of the new tax credit timelines. Specifically, the order:
Calls for revised “start of construction” rules within 45 days of the law’s enactment.
Aims to prevent developers from using stockpiled equipment or minimal site activity to claim construction has begun.
Targets safe harbor practices—especially the “5 percent test” and “physical work test”—used by commercial developers to lock in tax credits.
This move is politically significant. While the bill itself set fixed expiration dates, the Treasury has discretion over how eligibility is defined, especially for commercial and leased residential systems. The order does not affect customer-owned residential systems (Section 25D), which still must be completed and paid for by December 31, 2025.
If you’re planning a commercial or leased project, you’ll need to watch for Treasury’s new guidance by August 18, 2025. It’s possible that:
The 5 percent test (based on spending a minimum on project equipment) could be eliminated.
The physical work test could be tightened, requiring more substantial and continuous construction activity.
The Administration may skip public comment and issue final rules immediately, though doing so could open the door to legal challenges.
How does this affect me?
If you're a homeowner:
You still have access to the full 30% tax credit, but only if your system is installed and fully paid by December 31, 2025.
This is your last guaranteed window to claim the credit.
If you're a developer or business:
You need to begin real construction by July 2026—or risk losing eligibility.
You’ll need to follow closely how “construction” is redefined by the Treasury.
Supply chain scrutiny is now stricter. Equipment from certain foreign manufacturers could disqualify your project.
Final thoughts
The One Big Beautiful Bill puts solar and clean energy tax credits on a tighter schedule, and the executive order adds another layer of urgency and uncertainty—especially for large-scale or leased projects. For homeowners, the message is clear: 2025 is the final year to claim the 30% tax credit. For commercial stakeholders, this is a critical time to evaluate compliance strategies, timelines, and sourcing.
Need help determining where your project stands? Let’s talk—because these new rules are moving fast, and planning ahead is no longer optional.