If you have ever thought about installing solar panels on your home in Denver, there has never been a more urgent moment than now. With the federal solar tax credit set to expire for residential systems at the end of 2025, homeowners have a limited window to secure big savings. Waiting until 2026 means missing out on a massive opportunity to reduce your solar installation costs by 30 percent. As electricity rates continue to rise, going solar in Denver now can lock in lower monthly bills, increase your home value, and help you take advantage of both federal and Colorado specific incentives. This is your chance to act while the incentives are still strong.
Denver is uniquely positioned to benefit from solar, with more than 300 days of sunshine each year and some of the strongest state and local programs in the country. By combining the federal solar tax credit with Colorado rebates, net metering policies, and property tax exemptions, you can maximize your savings while making your home more energy efficient. Taking the first step in 2025 ensures you capture every available benefit before the federal incentive is gone for good.
What Is the Federal Solar Tax Credit and Why It Has Mattered
The federal solar tax credit, also known as the Investment Tax Credit (ITC) or the Residential Clean Energy Credit, is one of the most powerful incentives available for homeowners considering solar. This program allows you to claim 30 percent of the total cost of your solar installation on your federal taxes. That percentage applies not just to the panels but to the full system. Equipment such as inverters, racking, and wiring all qualify, as do labor costs, permitting, and required inspections. For many Denver homeowners, this credit has been the difference between delaying solar and moving forward with confidence.
To put this into perspective, imagine a solar installation priced at $20,000. Under the current 30 percent tax credit, you could reduce your federal tax bill by $6,000. This is a direct credit, not just a deduction, which means it reduces what you owe dollar for dollar. That kind of savings has made solar much more affordable and accessible, even in areas like Denver where upfront costs can feel intimidating. By lowering the financial barrier, the federal solar tax credit has encouraged thousands of households to make the switch to renewable energy.
Federal tax credits have been one of the biggest reasons solar energy has become so popular across the United States. These credits give homeowners money back on their taxes when they install solar, lowering the cost and making it easier for more families to make the switch.
The first solar tax credit appeared back in the late 1970s. At the time, it covered 10 percent of the cost of a solar or wind system. Over the years, Congress has adjusted and renewed the credit many times, sometimes increasing the value and other times threatening to let it expire. These changes often made it hard for people to know how long the incentive would last, but it has continued in one form or another for decades. The most important change came in 2005 with the Energy Policy Act. That law boosted the solar tax credit to 30 percent and opened it up for homeowners, not just businesses. From that point forward, the credit became the single most important driver of residential solar growth in places like Denver.
In 2022, the Inflation Reduction Act extended the credit again, keeping the 30 percent value and adding extra incentives for projects that use American-made equipment or are built in communities with high energy needs.
Recent changes, however, mean the credit will no longer be around indefinitely. While earlier versions of the program were expected to step down gradually over time, new rules now bring the residential credit to a full close at the end of 2025. For Colorado homeowners, this marks an important turning point. The incentive that has helped so many families save money, cut energy costs, and achieve greater independence will soon be gone, making 2025 a key year to act.
What Changes Are Coming to the Solar Tax Credit in 2026
Starting January 1, 2026, the federal solar tax credit for residential solar installations will be discontinued, with no phase-down period, as originally planned. That means that systems installed after December 31, 2025, will not qualify for the 30 percent federal solar tax credit. This change was confirmed in mid-2025 legislation. Homes that do not finish their solar installations in 2025 will miss out on one of the most significant solar incentives available.
Because many parts of the solar process take time such as site assessments, permitting, utility interconnection, inspections, it is especially important for Denver homeowners to begin sooner rather than later. If you wait until late in the year, delays could push your installation into 2026, meaning disqualification for the credit. The credit’s termination makes 2025 a pivotal year for solar in Denver.
While the residential solar tax credit is set to expire at the end of 2025, commercial projects follow a different timeline. Businesses in Colorado and across the country will still have access to the federal Investment Tax Credit (ITC), but several updates begin in 2026 that are important to understand.
Here are the key changes to the commercial solar tax credit:
- Commercial projects can still receive the full 30 percent tax credit through 2025.
- Beginning in 2026, the base credit percentage will start to decrease.
- Bonus credits may be available for projects that meet certain requirements, such as using American-made equipment or being located in areas with high energy needs.
- Meeting specific labor and wage standards will also affect eligibility for the higher credit levels.
- The credit is moving to a “technology neutral” structure in 2025, which means it applies to many types of clean energy systems, not just solar panels.
For Colorado businesses, these changes mean that federal support for solar will continue, but planning will be more important. Taking the time to understand the new requirements ensures that projects qualify for the maximum benefits available.
How to Use the Solar Tax Credit in 2025
If you want to take advantage of the federal solar tax credit, here are the steps to follow in 2025:
- Choose a trusted solar installer in Denver
Get multiple quotes, check reviews, and make sure the installer is familiar with the federal solar tax credit rules and local permits. - Design your solar system and plan for full installation
Ensure your system includes all qualifying components: solar panels, inverters, mounting hardware, labor, permits, and inspections. - Get your project permitted and installed
Permitting and utility interconnection can cause delays. Begin early so your system is operational before December 31, 2025. - Retain all receipts and documentation
Keep detailed records of all expenses related to your system, including equipment and installation. These will be needed when you file. - Claim the credit on your 2025 tax return
Use IRS Form 5695 when you file your federal taxes. If your tax liability is less than the credit, most of the remaining credit can roll over to future years in many cases.
By following those steps, you maximize your chances of securing the full benefit of the Denver solar tax credit in 2025, saving thousands.
Other Benefits and Solar Incentives Available in Colorado
Besides the federal solar tax credit, Denver and the state of Colorado provide several additional incentives that make going solar even more worthwhile. One of the most significant is the 100 percent exemption from state sales and use tax on solar and battery technologies. This incentive alone can save homeowners hundreds or even thousands of dollars on equipment. Colorado also offers a property tax exemption, which means that even though solar panels increase the value of your home, your property tax assessment will not go up as a result. These statewide programs remove financial barriers and make it easier for Denver families to invest in renewable energy.
On a local level, Denver has taken steps to encourage solar adoption through programs like the Climate Action Rebate. This initiative can provide homeowners with a rebate of up to $1 per watt, capped at $2,000, for qualifying solar and energy storage installations. Income-qualified households may be eligible for even higher amounts, making solar accessible to a wider range of residents. Combined with these rebates, Colorado’s strong net metering policy allows homeowners to receive credits on their utility bill for excess electricity generated and sent back to the grid. This helps improve long-term savings and ensures that homeowners get full value from their solar systems.
Financing options also make solar more accessible in Colorado. Programs such as the Residential Energy Upgrade (RENU) loan provide affordable, long-term financing for solar installations and home efficiency projects. This reduces the burden of upfront costs and allows more households to move forward with solar. When paired with the federal solar tax credit, these programs make 2025 one of the best years for Denver homeowners to install solar panels and maximize their return on investment.
Frequently Asked Questions About the Solar Tax Credit
Will projects built in 2025 qualify for the residential solar tax credit?
Yes, solar systems that are installed and operational in 2025 will qualify for the full 30 percent federal solar tax credit. It is important to begin early, since the process includes design, permitting, installation, and utility approval. Delays in any of these steps can extend timelines. Starting sooner ensures your project is completed before the deadline and helps you secure the maximum benefit without last-minute stress.
Do I need to owe taxes to use the credit?
Yes. To claim the federal solar tax credit, you must have federal income tax liability that the credit can be applied to. Because the credit is non-refundable, it cannot generate a refund check, but it will reduce the amount of taxes you owe. If your credit is larger than your tax bill, the remaining balance can be carried forward into future tax years until it is fully used.
Who is eligible for the tax credit?
The federal solar tax credit is widely available, but there are specific requirements to qualify. In general, homeowners are eligible if they meet the following conditions:
- You own your solar system rather than lease it.
- Your solar installation is completed and operational in 2025.
- The system is installed on a primary or secondary residence located in the United States.
- You have federal income tax liability that the credit can offset.
- Your system includes eligible equipment such as panels, inverters, wiring, mounting, and qualifying battery storage.
Meeting these criteria ensures that you can take full advantage of the Denver solar tax credit and capture the maximum savings available before the program ends.
How do solar tax credits vary by state?
The federal solar tax credit applies everywhere, but state-level incentives can differ widely. In Colorado, homeowners benefit from sales and use tax exemptions, property tax exemptions, and local rebates such as Denver’s Climate Action Rebate. These programs can significantly add to your overall savings.
Do leased solar panels qualify?
No. To claim the credit, you must own your solar system. With leased panels or a power purchase agreement, the company that owns the system receives the credit instead.
Key Takeaways and Action Steps
To sum up, 2025 is the last good year to take full advantage of the federal solar tax credit for residential solar installations. Once we hit 2026, that 30 percent tax credit disappears completely for homes. That means the savings that have been available for years will no longer be part of the equation.
If you are in Denver or anywhere in Colorado and considering solar, the path forward is clear. Start talking to installers now. Get your project designed. Permits submitted. Installation scheduled. Make sure everything is ready before the December 31, 2025 deadline.
Going solar in Denver in 2025 means locking in lower long-term energy costs, increasing the value of your home, reducing your carbon footprint, and maximizing the financial incentives from both federal and state sources. At Solar Side Up we are committed to helping you understand your options, navigate the process, and take full advantage of every credit and rebate available.
