Over the past few months, there’s been growing anxiety around the future of the federal solar tax credit — especially as political winds shift in Washington. If you’re a homeowner or business considering solar or battery storage in 2025, you might be wondering: Will the 30% tax credit stick around? Could it be taken away retroactively? Should I act now or wait?
Let’s dig into what’s actually happening, what could change, and why this year might be a key moment for anyone thinking about going solar.
First, the Facts: The Tax Credit Still Exists
The federal solar tax credit — officially known as the Residential Clean Energy Credit — is still in place as of early 2025. This credit allows homeowners to claim 30% of the total cost of a solar or battery storage system on their federal income taxes.
The credit was extended under the Inflation Reduction Act of 2022, locking in the 30% rate through 2032. It’s currently scheduled to step down to 26% in 2033 and 22% in 2034 unless Congress modifies that schedule.
So Why Are People Worried?
In January 2025, President Trump returned to the White House, and Republicans gained control of both chambers of Congress. Several lawmakers have called for repealing or rewriting the Inflation Reduction Act, particularly its clean energy provisions.
President Trump also signed an executive order during his first week in office aimed at pausing spending tied to the IRA — a move that, while largely symbolic, signaled a shift in federal energy priorities.
Can the Tax Credit Be Repealed Retroactively?
Technically, yes — Congress has the power to pass legislation that retroactively eliminates or alters a tax credit. However, retroactive tax law changes are rare, especially when they would negatively affect taxpayers who made decisions based on existing policy.
Historically, modifications to the solar Investment Tax Credit (ITC) have included "safe harbor" provisions to protect projects already in progress or completed. For instance, the IRS has provided guidance that lets developers secure tax credits by either beginning significant construction or spending a specific percentage of the total project cost.
A Look at the Bigger Picture
The solar tax credit has a long, bipartisan history. It was first established in 1978 as part of the Energy Tax Act and later expanded significantly in 2005 under the Energy Policy Act. It has been extended multiple times since, including by President Trump in 2020 during COVID-19 relief legislation.
Over the last decade, the industry has experienced an average annual growth rate of 28%, driven by federal policies, declining installation costs, and increased demand for clean energy. However, recent integration into broader climate laws, like the Inflation Reduction Act, has heightened political polarization.
Why 2025 Might Be the Smartest Time to Go Solar
The 30% federal solar tax credit remains fully available, offering significant savings for homeowners and businesses. While the credit is in place through 2032, current market conditions make 2025 an especially appealing time to explore solar and battery storage options.
Full 30% federal tax credit still available through 2032
Battery systems qualify independently for the credit
Equipment prices are stable, and supply chains are healthy
Utility rates continue to rise across much of the country
Financing options allow for future refinancing if interest rates drop
Final Thoughts
The Residential Clean Energy Credit has been supported by bipartisan groups for decades and has remained stable over many years. While there is always some uncertainty about future policy changes, Congress has historically respected commitments made under existing tax incentives, making major or retroactive modifications unlikely.
That said, homeowners considering solar or battery storage should always monitor policy developments and make decisions based on their individual needs and goals. Utilizing the current 30% tax credit can offer significant financial advantages, safeguard against rising utility rates, and support a cleaner, more dependable energy future—making solar a compelling option for many homeowners today.
Disclaimer:
This blog is for informational purposes only and does not constitute tax, legal, or financial advice. Please consult a qualified professional to understand how the solar tax credit may apply to your situation.