The Impact of the Solar Tax Credit Repeal

The days of the Federal Solar Tax Credit may be numbered thanks to the US House of Representatives and now, the US Senate. Over the last few weeks, the House passed its version of the bill, and the Senate just released its updates yesterday. The Senate has yet to vote on the bill, but it just needs a simple majority to pass it.

In the above video, we explore the implications of the solar tax credit going away, which is included in the House’s “One Big Beautiful Bill.” We outline the proposed changes to the solar ITC and its potential impact on cash, financing, and leased solar systems. Plus, we were joined by one of our Account Managers, Mitch Fraker, who offers four valuable tips to help solar installers adapt to the shifting landscape.

Below, we’ll break down what the House and Senate both proposed and the impact the proposals could have on the solar industry.

The House’s Proposal for The Solar Tax Credit

The House’s version of the bill proposed some major changes to the tax credit in it’s various forms. To start, let’s define the two versions:

• Section 25D
  • This version of the solar tax credit is the one claimed by homeowners who purchase their system via cash or loan, meaning they fully own their system.
• Section 48E
  • This version of the solar tax credit is used by commercial systems and companies who finance solar leases and PPAs (Power Purchase Agreements). The 48E tax credit is used when a third party entity owns the equipment and leases or rents it to another person.

Both versions of the credit were at 30% thanks to the Inflation Reduction Act, and were set to stay at 30% until 2032. Starting in 2033, the credit would begin to phase down before going away entirely. Now, the House proposed the following changes:

• 25D
  • Would expire at the end of 2025 with no phase-down period. Any systems installed after December 31st, 2025, would receive no tax credit.
• 48E
  • Leased systems would be ineligible for this credit, but there would be a 60-day construction window, during which a project installed within 60 days of the bill enactment would still be able to claim the credit.

The Senate’s Version

In the evening hours of June 16th, the Senate’s version of the bill was released. Many in the industry were hopeful that the Senate would have a version of the bill that extended the availability for at least a few years. Unfortunately, the Senate’s version made further cuts:

• 25D
  • The Senate’s version proposed ending the residential solar tax credit 180 days (6 months) after the bill is fully enacted.
• 48E
  • Residential solar leases are immediately ineligible for the tax credit with no construction window
  • Commercial solar tax credits would phase down over three years. The credit would go from a 30% credit in 2025, to an 18% credit in 2026, then 6% in 2027, and completely gone in 2028.

The Impact on the Industry

These changes will have a major impact on solar, and likely cause the industry some jobs in many sectors. But will solar go away? The answer is no.

Solar is still a low-cost, reliable form of energy with a great value proposition. While losing the tax credits will hurt mass market adoptability, solar still has its place in the energy mixture. Companies need to adapt and diversify to weather the coming changes.

Diversification will be a key to continued success. Companies who diversify into HVAC, roofing general electrical work, EV charging, and existing system service work will be well positioned going forward.

Solar conversations in a world without a tax credit will also need to focus more on value. For a long time, solar sales reps have heavily leaned on low monthly payments. Companies who understand the value of ownership and how to represent that to customer will stand out.

We’re still learning what the Senate version has in store, and it very well may change before passing. Be sure to follow and check in on our social media channels for more updates on the solar tax credit. We’ll be continuing to break down the changes and updates as they come.

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