Big Changes Coming to the Solar Tax Credit

Last Updated: June 4, 2025

There’s never a dull moment on the solar coaster, and the latest twists coming out of Washington feel like an upside-down loop with a steep drop ahead.

In late May, the U.S. House of Representatives passed what is being called the “Big Beautiful Bill,” a legislative move to severely gut the Inflation Reduction Act (IRA) and bring all solar-related tax credits to an abrupt end. 

This blog breaks down what we know so far, and we’ll keep it updated as new developments emerge.

One thing is certain: if you’re considering solar, now’s the time to act. Delaying could mean missing out on thousands in tax credits and sending that money to Uncle Sam instead.

What's in the House Version of the Bill?

Here's a breakdown of the key changes currently included in the House-passed version of the Big Beautiful Bill.

Residential Solar Tax Credit (Section 25D)

• This credit will end December 31, 2025 - You must have your solar system placed into service by the end of 2025 to claim the 30% federal tax credit.
• There's no start of construction clause like there is for commercial projects. This means your system must be finished by December 31. 

Commercial Solar Tax Credit (Section 48E)

• All projects must start construction within 60 days of the bill becoming law (calendar days, not business days). The only way to meet this is by "safe harboring," which means investing at least 5% of the project cost in hardware. 
• If you are safe-harboring a project, your system must be installed by December 31, 2028, to qualify for the tax credit.
• There is a 100% FEOC requirement. This means the materials for your system can not come from or be manufactured by a company with ownership in a foreign country of concern. Violating this requirement would eliminate your eligibility for the tax credits.

While the proposed bill cuts the solar tax credits, it reinstates 100% bonus depreciation, which will allow businesses to depreciate the entire cost of their solar investment in the first year. 

Why This Bill Is Concerning For The Solar Industry

These changes will significantly alter the solar investment landscape for both residential and commercial solar projects. Here's how:

• The 60-day start of construction window is very challenging to meet with the long timeline of commercial projects.
• The 100% FEOC requirement could severely disrupt the equipment supply chain, limiting access to essential materials. The full details of this are not yet understood even by manufacturers.
• The loss of the tax credits will eliminate the ability for a lot of homeowners and businesses to invest in solar.
• The construction completed by residential deadline will cause installer backlogs to fill up and make it difficult for many to take advantage of the tax credit before it's too late.
• The solar industry is going from being over-incentivized with commercial tax credits, often as high as 50%, and numerous grant opportunities, to essentially falling off a cliff to virtually no incentives. This is a significant challenge for any industry to overcome.

What's Next? Where the Bill Currently Stands

The timeline is somewhat uncertain, but here's what we know as of June 4th:

• The House has passed the bill.
• The Senate is expected to begin debate in June, with pressure to decide by July 4th or at the latest, the August deadline for the debt ceiling.
• The Senate could approve, revise, or reject the bill. If revisions are made, the bill would go back to the House for another vote. 

How Will This Impact Your Solar Investment? 

Currently, if a homeowner purchases a 15 kW solar system, which is enough to cover an average monthly electric bill of roughly $180, the upfront installation cost would be around $43,890. The 30% tax credit reduces the net cost to $30,723 with an 11-year payback and 10.64% ROI. 

Remove the tax credit, and the net cost remains at $43,890; the payback period moves from 11 years to 16 years with an ROI of 7.45%.

A business that installs a 100 kW solar system to cover a monthly electric bill of roughly $1,200 can expect to pay around $223,900. The 30% tax credit and depreciation reduce the net cost to $103,309, with a 9-year payback and a 13% ROI.

Eliminating the tax credit increases the net cost to $161,051 (this accounts for depreciation), and the payback moves from 9 years to 14 years with an 8.3% ROI. 

These are ballpark numbers, but they paint the picture of how valuable these tax credits are and highlight why you should move forward with solar now while these tax savings are still available. 

What You Can Do Right Now

1. Act Fast If You're Considering A Solar Investment

It's crucial for you to request a quote and get started on an installation or safe harbor as soon as possible. Solar projects are not developed overnight. It takes time to design, obtain permits, procure the necessary products, and ultimately install a system. Plus, installers' backlogs are quickly filling up. Now is the time to move forward - incentives will likely never be better. 

2. Contact Your Elected Officials

Contact your senators and representatives. Encourage them to preserve the solar tax credits or phase them out responsibly.

Personal stories from constituents are among the most effective tools for influencing lawmakers. Use your voice and urge your Senators to protect these vital tools for energy independence, economic growth, and sustainability. The future of solar depends on it.

Final Thoughts

Whether you’re a business owner, farmer, or homeowner, the time to invest in solar is right now. With incentives as good as they’ll ever be and real uncertainty ahead, the smartest move you can make is to lock in your savings before it’s too late.