Homeowners Rush to Install Solar Panels Before Trump Cuts Tax Credits

Energy efficiency is an issue on many people’s minds as we trudge through the cold winter months. And this year the topic may be more relevant than ever.

A new presidential administration has some speculating that federal energy-efficient tax benefits, including federal solar panel and electric vehicle (EV) tax credits, may be going away.

The Biden administration expanded and extended the solar federal tax credit under the Inflation Reduction Act (IRA). Since then, 750,000 families claimed tax savings. Now, there's enough solar capacity nationwide to power over 37 million homes, according to the Solar Energy Industries Association.

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But on the campaign trail, President-elect Donald Trump pledged to overhaul the IRA, including some of its clean energy tax credits. That has reportedly caused some folks to accelerate plans for home solar installations.

Here’s more to know amidst the uncertainty and ways your family can potentially save on energy bills.

How does the solar panel tax credit work?

The federal government currently offers tax credits for energy-efficient home improvements under the Inflation Reduction Act (IRA).

The federal solar tax credit, also known as the “Residential Clean Energy Credit:”

• Allows a deduction of up to 30% of qualified system costs.
• Is in effect through the end of 2032 (the credit decreases annually after that date until 2034).

The solar credit is available for water heaters, fuel cells, battery storage technology, and other qualifying projects. Not only can these clean home improvements lower your tax bill, but you may dip into some cost savings.

For more information, read Kiplinger’s report, IRS Solar Tax Credit Payouts Soar.

Is the solar tax credit going away?

So far, the incoming president hasn't commented directly on whether the solar tax credit is up for the chopping block. However, a recent NPR report highlights how uncertainty surrounding the popular clean energy tax credit has caused some homeowners to accelerate their solar installation plans.

For instance, a Boston-area resident quoted by NPR described his efforts to expedite a home solar panel project, completing it before the end of last year. The urgency stemmed partly from concern the new administration might reduce or eliminate the solar tax credit.

The report suggests this could be part of a broader trend as consumers and solar companies brace for potential policy shifts that could significantly impact the renewable energy landscape.

Notably, these concerns may be for good reason besides the tax credit: tariffs on foreign solar panels have been imposed before.

Solar panel sales and tariffs

• Seven years ago, solar tariffs began as part of a Trump administration bill that included washing machines.
• The tariff started at 30% for foreign imports and decreased by 5% each year.
• Three years ago, President Biden extended the then-15% tariff for another four years.
• Earlier this month, the Biden administration also enacted a 50% tariff on Chinese “solar cell” imports.

To see how these tariffs might affect solar panel production, here are a couple of quick facts about foreign solar investment:

• Chinese production companies serve almost half of the U.S. solar market, according to the Institute for Energy Research.
• However, foreign solar panel investment in the U.S. has increased, with one company investing over $2.5 billion in expanding U.S.-based manufacturing operations.

Additionally, as Kiplinger has reported, Trump plans to enact 20% tariffs on all imported goods.

Both enacted and proposed tariffs could drive up foreign solar panel prices, pricing out potential customers, and thus, their ability to claim the solar tax credit.

Energy efficiency tips: Winter cost savings

We may just have to wait and see what happens with tax policy as the new presidency unfolds. As Kiplinger has reported, Trump has called for one "big, beautiful [reconciliation] bill" to address the border, taxes, and energy.

For now, homeowners may save in other ways. Consider these energy efficiency tips.

• Maintain your HVAC. Regularly scheduled maintenance and prompt removal of blockages (like fallen branches, leaves, and debris) may ease the burden on your heating and cooling system by resulting in less runtime.
• Purchase smart appliances. While they often come with a heftier price tag than their non-smart counterparts, a “smart” appliance may let you schedule energy usage around local energy rates, potentially cutting down your monthly bill.
• Look around your interior. Air leaks can occur from old caulk and weather stripping around windows, doors, ceilings, and attics. Timely repairs may save you up to 15% on heating and cooling costs, according to Energy Star.

Finally, check your state’s Department of Revenue website for energy-related tax credits or rebate programs.

For example, California (one of the leading states in solar panel sales) offers a state-level credit of up to $5,000 for qualifying energy-efficient improvements. Other states, like Arizona, have also enacted their version of a solar tax credit.

Related Content

• Is the EV Tax Credit Going Away? What You Need to Know
• Tariffs Could Make Your Shopping Pricier
• Tax Credits for Energy-Efficient Home Improvements