Buy Solar Panels Before The Big Beautiful Bill Ends The Tax Credit?

Summary

Podcast Summary: The Ramsey Show Highlights Episode Title: Buy Solar Panels Before The Big Beautiful Bill Ends The Tax Credit?
Host/Author: Ramsey Network
Release Date: August 5, 2025

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Introduction

In this episode of The Ramsey Show Highlights, the focus is on the timely decision of whether to invest in solar panels before the expiration of significant tax credits associated with the Big Beautiful Bill. Hosted by Dave Ramsey, the discussion delves into the financial viability, technological considerations, and economic implications of adopting solar energy solutions.

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Caller’s Inquiry: Timing the Solar Investment [00:06]

A 33-year-old caller, married with two children, reaches out with a pressing decision: whether to purchase solar panels before the impending end of the tax credits promised by the Big Beautiful Bill. The solar salesman had emphasized the urgency by stating, "the solar credits are going away after the big, beautiful bill," prompting the caller to seek financial guidance.

Caller:
"I was planning on putting that towards my mortgage." [00:18]

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Dave Ramsey’s Financial Assessment [00:31]

Dave Ramsey acknowledges the impending expiration of the tax credits for residential solar panels by the end of the year. He emphasizes that the decision to invest in solar panels heavily depends on two critical factors: the amount of sunshine in the area and the local cost of electricity.

Dave Ramsey:
"Solar panels are excellent in some areas of the country, and it depends on two things, obviously, sunshine and high cost of electricity." [00:31]

Ramsey proceeds to analyze the caller's financial situation, noting that while the caller is debt-free apart from the mortgage and has $35,000 in extra cash, the cost of solar panels before tax credit is $31,000, which reduces to $22,000 after applying the tax credit.

Dave Ramsey:
"Solar needs to have a break even of six years or less." [03:07]

Upon calculating the break-even period, Ramsey concludes that an 8-9 year return on investment is too lengthy, advising against the purchase under these circumstances.

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Technological Obsolescence and Economic Viability [03:03]

Ramsey draws parallels between solar technology and rapidly evolving technologies like computers and televisions. He argues that technologies requiring long periods to break even become obsolete quickly, making long-term investments risky.

Dave Ramsey:
"Solar is technology. I believe in solar. ... you need the break even, you need to get your money back faster on something that the technology is becoming obsolete at breakneck speed." [03:15]

He further elaborates on the historical advancements in solar technology, highlighting how the efficiency and cost-effectiveness of panels have improved dramatically over the past decades, and are expected to continue doing so.

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Co-host’s Perspective: Market Implications [04:56]

The co-host joins the conversation, expressing concerns about the financial sustainability of solar companies if the required break-even periods are not met. He speculates that without significant improvements in technology or cost reductions, many solar businesses might fail.

Co-host:
"So either the cost of solar panels are going to have to go down drastically. Or the business goes away." [07:12]

Dave Ramsey concurs, emphasizing that solar companies currently rely heavily on tax incentives and must pivot to solid economic foundations to survive future market challenges.

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Historical Parallel: Savings and Loans Crisis [07:20]

Ramsey draws a historical comparison to the Savings and Loans (S&L) crisis of the 1980s, where the reliance on favorable tax laws led to the downfall of numerous financial institutions when those laws changed. He warns that the solar industry's dependence on tax credits mirrors the flawed strategies that led to the S&L failures.

Dave Ramsey:
"Now they're going to have to base it on economics, meaning that the solar panels are actually going to have to pay back, not counting the government subsidizing it." [07:12]

He recounts how changes in tax laws, such as the elimination of double declining balance write-offs, devastated the S&L industry, underscoring the importance of building businesses on sustainable economic practices rather than temporary legal advantages.

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Conclusion and Final Recommendations [08:21]

In wrapping up the discussion, Ramsey reiterates the importance of thorough financial analysis and caution against making significant investments based solely on impending tax benefits. He advises listeners to prioritize investments that offer quicker returns and are grounded in solid economic principles.

Dave Ramsey:
"Don't do it." [03:07]
"Solar needs to have a break even of six years or less." [03:07]

Ramsey encourages listeners to explore alternative financial strategies, such as directing extra cash towards debt reduction or building an emergency fund, rather than committing to long-term investments with uncertain returns.

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Notable Quotes

• Dave Ramsey:
  "Solar needs to have a break even of six years or less." [03:07]

• Caller:
  "I was planning on putting that towards my mortgage." [00:18]

• Co-host:
  "So either the cost of solar panels are going to have to go down drastically. Or the business goes away." [07:12]

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Key Takeaways

• Financial Viability: Before investing in solar panels, assess whether the break-even period aligns with the lifespan and technological advancements of the panels.

• Technological Obsolescence: Rapid advancements in technology can render long-term investments less profitable, emphasizing the need for quicker returns on investment.

• Economic Foundations: Businesses relying heavily on tax incentives may face challenges if policies change, highlighting the importance of building sustainable economic models.

• Historical Lessons: Lessons from past financial crises, such as the Savings and Loans debacle, illustrate the risks of depending on favorable tax laws for business success.

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This episode provides a comprehensive evaluation of the financial and technological considerations involved in investing in solar panels, offering listeners valuable insights into making informed decisions aligned with sound economic principles.

Transcript

[Dave Ramsey]

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[Caller]

So I'm 33 years old, married with two kids. So recently the solar salesman came knocking on the door, said like, oh, the solar crates are going away after the big, beautiful bill. I'm kind of in a situation whether I should go solar before the tax rate goes away or just pass on the opportunity and then just let it go.

[Dave Ramsey]

Okay, yeah, you're right. The credits on solar panels on residential go away at the end of the year, and the tax credit for them. Solar panels are excellent in some areas of the country, and it depends on two things, obviously, sunshine and high cost of electricity. If you live in an area like Phoenix, has a lot of sun, and you have a high cost of electricity, you can break even on a solar panel purchase fairly quickly. And if you do, then solar makes sense. It never makes sense to buy solar on debt. Do you have the cash to do this?

[Caller]

Yes, sir. I don't have any other debt except my mortgage.

[Dave Ramsey]

Okay. And you have the extra cash to buy the solar panels?

[Caller]

Yes, I do have extra cash. I have cash sitting around. I was planning on putting that towards my mortgage.

[Dave Ramsey]

Yeah, that's fine. What was the. What was the bid on the solar panels? How much?

[Caller]

Before tax credit, it was $31,000.

[Dave Ramsey]

And what's your home worth?

[Caller]

My home is worth 610 and I have 400,000 left on it.

[Dave Ramsey]

Okay. All right. So you have an extra $31,000 laying around to do this.

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[Dave Ramsey]

So you have an extra $31,000 laying around to do this?

[Caller]

Yeah, I have 35,000 sitting around.

[Dave Ramsey]

I was not counting your emergency fund.

[Caller]

No, I have separate emergency phone.

[Dave Ramsey]

Okay. All right. I'm just making sure because sometimes I ask these questions and get different answers. Okay. Did they, did they run a break even analysis after the tax credit? Because after the tax credit is your real cost. Because you get a full tax credit.

[Caller]

Yeah. That would be $22,000.

[Dave Ramsey]

Yeah. And then how long does it take for you to get 22,000 back in energy savings?

[Caller]

I did a quick math. It's taken around eight to nine years.

[Dave Ramsey]

Don't do it.

[Caller]

Don't do it.

[Dave Ramsey]

Yeah. Solar needs to have a break even of six years or less.

[Caller]

Okay.

[Dave Ramsey]

And here's why. Here's why. Let me explain why. Here's why. Solar is technology. Eight years ago, solar technology was substantially different than it is right now. Eight years from now it will be substantially different than it is right now. It's like a computer. I mean, you know, unless you're, unless you're operating on an eight year old computer, which most people aren't if they use their computer. Okay. Because what's a computer that you've unpacked from the box? Already obsolete. Right. And so, I mean you don't, people don't use 8 year old technology for hardly anything. A few things. In our cars we do a few things here or there. We do. But by and large this thing you need eight or nine years is just too long on a technology based application. And solar is technology. I believe in solar. That's why I was asking all these questions. And there are places that do that. But you need to break even, you need to get your money back faster on something that the technology is becoming obsolete at breakneck speed. Because I promise you, I mean, look at 16 years ago, what solar looked like, the number of panels that it would have taken to do what your number of panels it takes to do now, drastically different. You'd had to fill up your whole yard and your neighbor's yard, maybe eight feet thick. Yeah. And you know, think about your television. You know, the one on your wall. You know, somebody said the other day, I saw a good meme this weekend, said in 1964, no one looted and carried off color televisions because you had to have a box truck to do it. It was, it was huge. And so it's a piece of furniture.

[Co-host]

But the other day I went in to grab one. They're, they're like 239 bucks.

[Dave Ramsey]

Yeah.

[Co-host]

Remember Plasma came out and they were $7,000, $8,000.

[Dave Ramsey]

Yeah.

[Co-host]

And they weighed two tons. Yeah, man.

[Dave Ramsey]

Yeah.

[Co-host]

It just goes quick.

[Dave Ramsey]

Yeah, I got one of those back in the Day, those nice plasmas, it's in the, on the wall three houses ago.

[Co-host]

It's probably still on that.

[Dave Ramsey]

We ain't moving that thing. Yeah. And that's, that's the same thing. Okay. So you know, you wouldn't buy a television, you know, and eight years later, you don't have to replace your television if it's 8 years old. I'm not saying that that must, you're doing something wrong. But technology just has a high rate of change and solar is in that camp. So you do want a quick break even regardless of the. And you know, here's the problem for the solar world. It's going to get 30% harder as of January 1st. Yeah. It's actually going to have to make sense. Not counting tax.

[Co-host]

I'm wondering how the margins are going to be on those solar companies. That'd be tough. Be tough, tough, tough.

[Dave Ramsey]

Going to be a bunch of them go bye bye probably. And I don't, I wouldn't want to, I'm sad for that business. And for those of you out there in business, I was in a business one time in the 80s that was based on the tax benefits and then the tax benefits went away and it bankrupt the business. It's called real estate. We used to could write off double declining balance for those of you in accounting in the early 80s. And so you could buy a piece of property, put it on a 15 year straight line and do double declining balance, which means you wrote it off in seven years. And then they, and they did a whole bunch of loans and this thing that they, they used to have these bank type things called savings and loans. They were everywhere. They were like credit unions, they were all over America. Savings and loans. And they all went broke because they had loaned money on investment real estate with double declining and the government with a stroke of the pen did away with double declining and the value of those properties went away simultaneously because we based our business on tax law rather than on economics, good economics. So now the solar people have based their business on tax law. Now they're going to have to base it on economics, meaning that the solar panels are actually going to have to pay back, not counting the government subsidizing it.

[Co-host]

So either the cost of solar panels are going to have to go down drastically. Go down. Or the business goes away.

[Dave Ramsey]

Yep. Or the, or the technology, the technology improves.

[Co-host]

Has to get better, right?

[Dave Ramsey]

Dramatically. Yeah.

[Co-host]

Okay, Dave.

[Dave Ramsey]

30% better by January 1st.

[Co-host]

Let me ask you a, this a cultural question then. So back when savings and loans went away with the Stroke of the pen. We didn't have social media back then but I can imagine there was mass hysteria that there is going to be. This particular business is going to go away, lending is going to crash, everything's going to go. What was it like seeing things pop up like local banks or credit unions, things that emerged and out of that, out of that ash. Because we're watching real businesses being upended by technology in wild ways or in stroke of a pen, government orders. And it's easy to say oh this is the end of everything without thinking out of that soil grows new, new things.

[Dave Ramsey]

Yeah, well all the stuff that those SNL's it was, they had, they didn't have the FDIC, they had the FSLIC. Okay. Insurance.

[Co-host]

So there was life before FDIC, which means there'll be life after FDIC, whatever that looks like.

[Dave Ramsey]

Like. Yeah. And it became something else. And the government basically took all the assets and dispersed them and you know, we went on with our lives.

[Co-host]

Right.

[Dave Ramsey]

It was just. But everybody in those businesses were gone. They had to start doing something else, do something else. And it, that was part of what contributed to my crash as well. But although I really wasn't doing as many tax based deals but had a lot of friends that were doing tax based deals and they went, they lost everything same time. Exactly. And that was Ronald Reagan by the way, that signed that. Yeah, he did away. He's the one who screwed that up. One of my favorite presidents but he screwed that up royally. Create your free every dollar budget today. The simplest way to budget for your life.