The Home Energy Credits Are Gone, Seven Years Early
The 30% residential clean energy credit and the home efficiency credit both terminated at the end of 2025 with no phase-down, leaving 2026 buyers of solar, batteries and heat pumps without a federal subsidy.
Homeowners who installed solar panels in December received a 30% federal tax credit. Homeowners who installed identical panels in January received nothing.
The residential clean energy credit, which covered solar, batteries and certain other systems, terminated for property placed in service after December 31, 2025 — seven years ahead of its original schedule. The energy efficient home improvement credit, which covered insulation, windows, doors, heat pumps and home energy audits, expired on the same date.
Neither stepped down gradually. Previous expirations of the solar credit moved from 30% to 26% to 22% over several years. This one ended at full value on a fixed date.
The demand cliff
The result was an enormous pull-forward of installations into late 2025 followed by a collapse. Installers who had spent the autumn working through record backlogs entered the new year with sales pipelines that had emptied.
For an industry built substantially around a subsidy, the adjustment is severe. The economics of residential solar without a 30% credit depend entirely on local electricity rates and the details of how a utility compensates exported power.
Where it still works
Those local factors vary enormously. In states with high retail electricity rates — and rates hit record levels nationally this year, pushed up by data-center demand growth — the payback period on a system can still be manageable without the federal credit.
Several states operate their own credits or rebate programs, and some utilities offer incentives of their own. The federal termination changed the arithmetic; it did not settle it everywhere in the same direction.
What survives
The credit for electric vehicle charging equipment continues into the middle of this year, on a schedule of its own.
Taxpayers who completed qualifying projects before the deadline can still claim the credits on returns filed this spring, and unused amounts under the residential clean energy credit can be carried forward indefinitely — a detail that matters for households whose tax liability was too small to absorb the full credit in one year.
The policy pattern
Energy tax credits in the United States have been enacted, expired, retroactively reinstated and expired again for four decades. Investment decisions with twenty-year horizons are being made against subsidies with two-year certainty, which is a reliable way to produce booms, busts and higher costs than necessary in both directions.
