Trump and the Fate of the 30% Solar Tax Credit

With President Trump returning to the White House and the GOP controlling both the House and the Senate a lot of people are wondering what might happen to the 30% federal solar tax credit. As of February 2025, this tax credit is still law and taxpayers can claim this credit for their investments in solar and/or battery storage projects.

*This article is for informational purposes only and does not constitute legal or tax advice.

Why Are People Concerned about the Solar Tax Credit Going Away?

 During the campaign, President Trump and Republican elected officials called for the “repeal of the Green New Deal” — a name Trump uses to refer to the Inflation Reduction Act (IRA). The IRA was the Biden administration’s cornerstone policy and was a broad bill that included several pieces of favorable policy for the solar industry and, most importantly, extended the solar tax credit through 2034.

During Trump’s first week in office he published an Executive Order that directed the Federal Government to suspend spending funds under the “Green New Deal.” This Executive Order was broadly worded and ultimately legally unenforceable, and it was rescinded a week later. However, it caused many people to question whether the IRA, and the solar tax credit, would be dealt an untimely fate.

Even as President, Trump himself can not cancel an existing law. He can, however, work with his legislative bodies in the House and Senate to repeal the law or pass a superseding law that alters the IRA.

What is the 30% tax credit for solar?

Officially named the “Residential Clean Energy Credit,” allows solar system owners to receive a tax credit worth up to 30% of the eligible cost basis of a solar installation. A project with an eligible cost basis of $30,000 would entitle the owner to receive a $9,000 tax credit in the year the project was placed in service.

This incentive actually originated during the oil crisis in 1978. It was then brought back in 2005 and with some tweaks and changes has persisted ever since. It’s often referred to as the “Solar Investment Tax Credit” or ITC for short.

The Inflation Reduction Act of 2022 extended the tax credit at the 30% rate through 2032, at which point the tax credit declines 4% per year through 2034. The solar tax credit has been a relatively durable piece of policy and has survived both Republican and Democratic administrations, recessions, wars, and other policy uncertainty. Trump himself extended the solar tax credit at the end of his first term (the COVID year).

Is the Inflation Reduction Act (IRA) at Risk?

Yes. It’s broadly assumed that Republicans will be making changes to the IRA as a way to pay for the Tax Cuts and Jobs Act (TCJA) extension. What those changes will be and how they will impact the solar industry and the 30% solar tax credit are not known as of February 2025.

There are a few scenarios at play. The first would be an early phase-out of the solar tax credit starting in 2026 or 2027, most likely with the 4% reduction in tax credit value glide path.

Another scenario is tying the tax credit eligibility to a certain domestic content threshold. Although this would likely be sound policy as a way to encourage US investment and reward buyers for purchasing US-made equipment, there would be significant challenges in the implementation, especially for residential projects claimed by individual taxpayers, and would cause massive disruption if not implemented at some point in the future (2+ years out).

Finally, there is a scenario where Trump and the GOP terminate the IRA at the end of 2025 through a repeal.

Will projects built in 2025 qualify for the solar tax credit?

Most likely. It would be politically very difficult and would cause substantial economic havoc for the Trump Administration to retroactively rescind a tax credit that’s part of established law. Any attempt to do this would undoubtedly face substantial legal challenges. The tax credit industry is much larger than a homeowner tax credit and it’s been sized at hundreds of billions of dollars under the IRA helping support hundreds of thousands of jobs directly and indirectly. A retroactive repeal would shake the foundation of investor confidence not just in solar but just about everything that’s tied to policy.

As of February, the tax equity market is still buying tax credits, signaling faith in the 2025 tax credit market.

Risks of Waiting for Policy Certainty

Homeowners understandably might want to take a “wait and see” approach to what happens to the solar tax credit. However, this is a risky proposition. Changes to the IRA will either happen as part of Reconciliation (likely in Q2) or as part of a budget bill in December. Waiting until December would absolutely put your project at risk as, on average it takes 10 weeks after a contract is signed for it to be built (and, depending on where you live you might have to wait longer for it to be placed in service). Any change to the tax credit would cause a rush in the market extending timelines at putting projects’ eligibility to claim the tax credit at risk.

Is 2025 a Good Time to Go Solar?

If you’ve been considering going solar but not yet signed a contract right now is absolutely the best time. Material to build projects is mostly sitting in warehouses on a pre-tariff basis and there’s a high probability the project will qualify for the full 30% solar tax credit. Although interest rates are stubbornly high, they likely won’t be substantially lowered in 2025. If they’re lowered in the future solar loans can easily be refinanced. And, your utility won’t be slowing down their rate increases any time soon.

Let a solar.com Energy Advisor develop a proposal for you and work with local contractors to competitively price your project. Get started today with no obligation so you’re ready to claim your tax credit.