The 30% federal tax credits that made rooftop solar panels, home battery storage, and energy-efficient heat pumps meaningfully cheaper for homeowners are gone. The Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit, both created under the Inflation Reduction Act, ended for any property placed in service after December 31, 2025, after Congress moved up their expiration dates by nearly a decade in the One Big Beautiful Bill Act. A homeowner who spent $20,000 on solar panels in December 2025 could claim a $6,000 credit; the identical purchase made this year qualifies for nothing.
How the One Big Beautiful Bill Moved Up the Credits’ Expiration
Both credits were originally scheduled to run for years longer than they ultimately did. The Residential Clean Energy Credit, covering solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells, and battery storage, was set to phase down gradually through 2034 under the Inflation Reduction Act’s original schedule. The Energy Efficient Home Improvement Credit, covering heat pumps, insulation, exterior windows and doors, and home energy audits, was written to run through 2032. Neither credit made it that far.
The One Big Beautiful Bill Act, signed in July 2025, terminated both credits roughly eight years ahead of that original schedule, cutting off eligibility for any qualifying property or improvement placed in service after December 31, 2025. The IRS confirms the cutoff directly on its own program page: the Residential Clean Energy Credit “is not available for any property placed in service after December 31, 2025,” the agency states, ending what had been a credit with no annual dollar cap outside of fuel cell property.
The rollback was part of a broader trade embedded in the same law. Congress used the savings from ending clean-energy tax breaks, including the home solar and heat pump credits along with credits for electric vehicles and commercial clean energy projects, to help offset the cost of extending the 2017 individual tax cuts and adding new provisions such as an expanded standard deduction and new deductions for tips and overtime pay. Homeowners who benefited from cheaper solar and heat pump installations were, in effect, trading that subsidy for a different set of tax breaks written elsewhere into the same bill.
Free retirement updates: Keep more of your Social Security and savings with plain-English updates on the changes, deadlines, and costly mistakes retirees miss. Subscribe free.
What the Credits Covered and What They Were Worth
The Residential Clean Energy Credit worked as a straight 30% rebate with no dollar cap outside of fuel cell property, which topped out at $500 per half-kilowatt of capacity. That made it the more valuable of the two credits for large projects: a $30,000 solar-and-battery installation could return $9,000 in credit with no annual ceiling, and the credit carried no lifetime dollar limit for homeowners who spread purchases across several years. Qualified expenses included solar panels, solar water heaters, wind turbines, geothermal heat pumps, and battery storage systems of at least 3 kilowatt hours, installed at a primary residence or a qualifying second home.
The Energy Efficient Home Improvement Credit was smaller but covered items far more homeowners actually buy. It paid 30% of qualifying costs up to $2,000 per year for heat pumps, heat pump water heaters, and biomass stoves or boilers, plus a separate $1,200 annual cap covering insulation and air sealing, exterior doors up to $250 each, windows and skylights up to $600, and home energy audits up to $150. Starting in 2025, the Energy Efficient Home Improvement Credit also required manufacturers to register products and assign a Qualified Manufacturer Identification Number, meaning a homeowner had to buy from a listed manufacturer and report that number on their return just to collect the credit at all.
Both credits applied only to existing homes used as a primary residence, not new construction, and neither could be claimed by landlords or property owners who did not live in the home themselves. A second home used part-time qualified for the Residential Clean Energy Credit but not for fuel cell installations, and business use above 20% of a property reduced the available credit proportionally under both programs. None of those underlying restrictions changed; only the December 31, 2025 cutoff date did.
What Homeowners and Retirees Face After the Deadline
Because eligibility under both credits depends on when equipment is actually placed in service, not merely ordered or contracted, the practical deadline was stricter than it looked. A solar array or heat pump under contract in November 2025 but not installed and operating until January 2026 does not qualify for either credit, regardless of when the down payment was made. CNBC’s guide to claiming the credits notes that 2025 is the final tax year in which either one can be claimed, since installations completed on or after January 1, 2026 fall outside both programs entirely.
For a household that already claimed either credit on a prior-year purchase, the change does not claw back money already received. The Residential Clean Energy Credit’s carryforward provision still lets a taxpayer apply unused credit from a 2023, 2024, or 2025 installation to reduce a future tax bill. What ends is the ability to generate new credit: any solar panel, heat pump, or insulation upgrade completed in 2026 or later qualifies for nothing under either program, no matter how energy-efficient the equipment is.
AARP’s coverage of the change has emphasized the effect on retirees living on fixed incomes, who are more likely to delay a big-ticket purchase like a heat pump replacement or new insulation until they can afford it outright, and who relied on the 30% offset to make that timeline work. Without the credit, the same project now costs the full retail price, leaving a retiree weighing whether to replace an aging furnace or water heater this winter with one less financial cushion than a neighbor who finished the identical job in December 2025.
State rebate programs, utility incentives, and net metering arrangements are untouched by the federal repeal and remain available in many areas, but none of them replace a 30% federal credit with no dollar cap. The open question for homeowners still weighing energy upgrades is whether state and utility programs can absorb the gap the federal credits leave behind, or whether the pace of home solar and heat pump adoption slows now that the largest financial incentive behind it is gone.
This article was drafted with AI assistance and reviewed for accuracy against primary sourcing.
More Financial Reading
