Nov 24, 2025
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As the sun sets on the 30% federal tax credit for residential solar panels at the end of 2025, many homeowners are determining whether the cost eclipses the return on investment. One caller, Sid from Phoenix, Arizona, asked The Ramsey Show exactly that, prompting Dave Ramsey to issue a clear verdict: "Don’t do it."
The question is timely. Under the current Residential Clean Energy Credit, homeowners can deduct 30% of the cost of solar systems installed by December 31, 2025. But does that automatically make it a smart financial move?
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According to Ramsey, not unless you can break even in six years or less.
With the tax credit set to expire, the six-year rule of thumb becomes even more important. For many homeowners, the incentive has been the reason that made solar power seem affordable, trimming thousands off the upfront costs. Once it’s gone, it will leave some homeowners paying more out of pocket and waiting longer for the returns.
What determines if solar is worth it?
“Solar panels are excellent in some areas of the country,” Ramsey said. “It depends on two things: obviously sunshine, and high cost of electricity.”
Solar tends to make the most financial sense in places like California, Arizona and Hawaii, where both the cost of electricity and average sun exposure are high.
The U.S. Energy Information Administration (EIA) says the national average electricity rate is 17.47 cents per kilowatt-hour as of May 2025. In California, rates are more than 35 cents per kilowatt-hour, making the payback period much shorter.
In contrast, homeowners in states with lower electricity prices, such as Washington, Oklahoma or Idaho, may not see a strong return.
The break-even math
The caller was quoted $31,000 for a solar installation. After the 30% tax credit, his cost would be about $22,000. Based on his local utility rates, he estimated eight to nine years to recoup the cost through energy savings.
“Solar needs to have a break-even of six years or less,” Ramsey said.
Why the urgency? Because he says solar technology becomes obsolete quickly.
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“Solar is technology. Eight years from now, it will be substantially different than it is right now.”
He compared it to buying a top-of-the-line plasma TV years ago for $8,000, only to see far better models now for under $300. With advances in panel efficiency and battery storage accelerating each year, he warned that committing now for nearly a decade may leave homeowners with outdated tech just as they break even.
Don’t go into debt for solar
Another Ramsey rule: Never go into debt to buy solar. Fortunately, this caller had $35,000 in cash beyond his emergency fund, a home worth $610,000 and no debt other than a $400,000 mortgage.
Still, Ramsey urged caution.
“You need to get your money back faster on something where the technology is becoming obsolete at breakneck speed,” he said.
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What should homeowners do instead?
If you live in a high-sun, high-cost electricity region like Arizona, solar might still make sense — but only if the numbers work without debt. Otherwise, there are other ways to cut energy bills.
Sealing and insulating ducts can improve heating and cooling efficiency by as much as 20%. ENERGY STAR-certified smart thermostats can deliver cost savings, with typical households cutting $100 a year from heating and cooling costs.
The American Council for an Energy‑Efficient Economy reports that smart thermostats reduce HVAC energy consumption by about 8% for heating and 10% for cooling.
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With a writing and editing career spanning over 15 years, Emma creates and refines content across a broad spectrum of industries, including personal finance, lifestyle, travel, health & wellness, real estate, beauty & fitness and B2B/SaaS/tech.
