HR1 changes most solar-related tax credits of the inflation reduction law, but cuts on solar energy are the most abrupt. The Act terminates the 30% homeowner-collected investment tax credit (25d) for Solar + storage installations on the roof at the end of 2025.
Residential solar -itc changes in HR1
- Requires installations to be completed before December 31, 2025, to receive 30% ITC
- Will end the residential solar and independent storage ITC after 31 December without phase-down
- Projects do not necessarily have to be interconnected with the grid before December 31 to collect the credit
- Unused residential ITC credits can be transferred in future tax years after 2025 if applicable
- Residential leasing companies from third parties can still collect 48th credit for a longer term
The small print changes the former IRA text to terminate the credit for projects “in service after December 31, 2034”, in “any expenses made after December 31, 2025.” While at first glance that change seems to focus on payment, Christopher McLoon, tax lawyer at Czen O’Connor, says that this actually means that the entire installation must be completed on December 31, 2025.
“IRS guidance on this question (In notification 2013-47) states that ‘expenses’ means that the expenses are paid or are made for installed real estate. The expenses are treated as ‘made’ when the property is installed, not before, “he said.
Taxpayers can transfer any unused stimuli in future tax years if necessary, even after the credit expires.
All the same conditions apply to stimuli for independent storage projects for homes, which also end on December 31, 2025.
One gray area can give residential solar and storage projects a little more runway. The law does not indicate that the project must be connected by the end of the year, so projects that can be fully installed before December 31, but cannot connect to the grid until after that date can still collect the ITC.
“The law states that the credit is available for real estate expenses that ‘are employed’. The term ‘placed-in-service’ means in a condition of ready-made and availability for a specific assignment.
All the above applies to the ITC collected by homeowners who invest in solar and storage projects via cash or loans. Residential solar energy companies that have third-party projects that lease projects to customers can still collect the 48th ITC and may then possibly pass on those savings to customers through cheaper installations. 48th projects have a longer runway – they have to start construction before July 4, 2026 and must be put into use before December 31, 2027 to collect the credits.
The residential ITC is about to walk off many times, but is always extensive. Now, with a difficult stop and three years from President Donald Trump’s presidency, federal house incentives may have disappeared for a while.
“The only lasting change would be one that was brought with strong support from Democrats and Republicans,” said McLoon. “Without the support of both parties, every change could be undone by Democrats, such as in OBBB, through a budget -reducing process.”
