With a federal tax credit ending early, installing home solar is about to get more expensive

On their small farm in Wahoo, Nebraska, Rhonda McClure and her husband toss a few pumpkins over the fence to a flock of ewes. They sell market lambs and wool, some of which Rhonda uses as a fiber artist, along with garden produce and compost.

She said they’ve always tried to use sustainable practices on their farm, including rotational grazing, geothermal energy and most recently — solar.

“The solar just fits in with trying to be as independent and careful of the environment as we can,” McClure said.

For the McClures, harnessing energy from the sun allows them to reduce their reliance on fossil fuels and keep their energy costs down over the long run.

A solar array they added in 2021 to help power their well and home reduced their summer energy bills from several hundred dollars per month to as low as $4, McClure said.

They added a solar battery this spring to release energy at night and act as a back-up during regional power outages.

“It’s provided a good deal of security for us to know that if we’re off grid for a while, if something happens, we can get by,” McClure said. “We have water and heat and the essential services here, for us and our livestock.”

Now they’re wrapping up another solar project, largely to provide air conditioning for a new outbuilding used to store and process wool, teach classes and host large groups of people.

McClure said they likely would have waited to install it next spring. But they bumped up the timeline when they found out the Residential Clean Energy Credit was rapidly expiring. Congress voted this summer to eliminate it at the end of 2025 through the One Big Beautiful Bill.

An incentive for home solar

The federal tax credit covers 30% of overall project costs for home solar, along with wind, geothermal, fuel cells and battery storage.

Some version of a residential solar tax credit has been around for decades with short-term extensions becoming the norm since President George W. Bush. But the 2022 Inflation Reduction Act under President Joe Biden kicked the deadline to 2032 for the full credit, followed by a rate phase down.

The Biden administration said the tax credit and two dozen others in the Inflation Reduction Act would “save families money on their energy bills and accelerate the deployment of clean energy, clean vehicles, clean buildings, and clean manufacturing.”

Over 752,000 households claimed the Residential Clean Energy Credit on their 2023 taxes. Incentive-driven consumer demand and market stability also supported growth in domestic solar manufacturing, according to the Solar Energy Industries Association.