The federal solar tax credit has long been a powerful motivator for American homeowners considering a transition to solar energy. For years, it has helped reduce the financial barrier to clean energy adoption, spurring widespread growth in the residential solar market. However, looming legislative changes could soon bring this era of generous solar incentives to a close—much sooner than previously expected.
If you’ve been contemplating a rooftop solar installation in San Diego, the message is clear: it’s time to act. Here’s why.
The Solar Tax Credit for San Diego Homeowners: A Quick Refresher
The federal solar tax credit—officially known as the Residential Clean Energy Credit (Section 25D of the U.S. tax code)—allows homeowners to deduct 30% of the cost of installing a solar energy system from their federal taxes. This includes equipment, labor, and permitting costs. Under the Inflation Reduction Act passed in 2022, the 30% credit was scheduled to remain in place through 2032, gradually tapering off before disappearing in 2035.
For context, a typical residential solar system costs around $28,000 before incentives. With the 30% tax credit, homeowners can recoup roughly $8,400—a compelling reason many people have taken the solar plunge.
But now, proposed budget changes from the U.S. House of Representatives could abruptly eliminate these benefits much earlier than planned, dramatically shifting the economics of going solar.
What’s Changing—and Why It Matters for San Diego Homeowners
The House’s 2025 budget proposal calls for ending the 25D residential solar tax credit for systems installed after December 31, 2025. This proposed cutoff accelerates the phase-out of the credit by nearly a decade. If passed, the sudden sunset of the tax credit would represent a major policy reversal that could send shockwaves through the solar industry.
The proposal also includes significant changes to the commercial solar tax credit (Section 48E), which applies to third-party-owned systems, such as those installed by companies that lease solar systems or offer power purchase agreements (PPAs). The changes would restrict eligibility based on the origin of photovoltaic components, barring credits for systems using parts manufactured in countries considered “foreign entities of concern,” like China.
This provision could disqualify a large swath of the current solar market, which heavily relies on Chinese-manufactured panels and inverters. Starting in 2026, many solar installers may find themselves ineligible for the commercial tax credit unless they source more expensive domestic components.
Why This Is Urgent for San Diego Homeowners
For homeowners, the proposed legislative changes represent more than policy posturing—they directly impact return on investment and long-term savings. Eliminating the 30% tax credit could add thousands of dollars to the out-of-pocket cost of going solar. With this window potentially closing by the end of 2025, it’s crucial to act now to lock in today’s incentives.
Demand for installations is expected to surge in 2025 as word spreads and more homeowners try to get systems installed before the deadline. That rush could lead to longer wait times, supply constraints, and scheduling bottlenecks—especially if installers are inundated in the second half of the year. Starting the process early in 2025, or even in 2024, can help ensure you beat the rush and maximize savings.
Moreover, those exploring third-party options like solar leases or PPAs should be particularly cautious. With tighter rules on component sourcing, many providers may pull back from offering these arrangements—or pass higher costs along to customers. Either way, the affordability and accessibility of third-party solar could be significantly diminished starting in 2026.
Potential Market Consequences
The end of the tax credit is likely to reshape the residential solar landscape. Without the incentive, solar could become less attractive in regions with moderate sunlight or lower electricity rates, where the financial payback is already marginal. Industry experts predict a sharp increase in installations during 2025, followed by a major downturn in 2026 if the credits are eliminated.
This “solar cliff” could stall the industry’s momentum at a critical time in the global push toward decarbonization. Analysts fear that the sudden drop in demand may lead to layoffs, bankruptcies, and project cancellations across the solar value chain.
The Broader Context: Energy Policy and Politics
The proposed rollback of solar incentives is part of a broader political debate around clean energy, manufacturing, and foreign trade. Some lawmakers argue that solar subsidies disproportionately benefit Chinese companies and want to push the industry toward domestically sourced components. Others see the rollback as a retreat from climate progress, warning that it undermines the goals of the Inflation Reduction Act and U.S. emissions targets.
Regardless of where you stand politically, the policy shift introduces a significant element of uncertainty for both consumers and solar providers. The best way to protect your investment—and your energy future—is to move decisively while the current incentives are still in place.
What You Should Do Next
If you’re considering going solar now in San Diego:
- Get a quote now from Stellar Solar
- Ask about lead times: Make sure you understand how long the permitting and installation process will take in your area.
- Consult a tax advisor: Confirm your eligibility for the 30% tax credit and how it may apply to your specific tax situation.
Conclusion
Time is running out for San Diego homeowners to take full advantage of the federal solar tax credit. With proposed changes threatening to curtail or eliminate these benefits by the end of 2025, delaying could mean missing out on thousands in savings. By acting now, you can secure today’s incentives, reduce your energy bills, and contribute to a more sustainable future.
