The Solar Investment Tax Credit in 2025: What’s Locked In, What’s at Risk, and What It Means for You
The Solar Investment Tax Credit (ITC) remains one of the most powerful tools driving clean energy growth in the U.S.—and as of mid-2025, it’s still going strong. But with new political pressures and proposed legislation targeting solar and wind subsidies, its future is being debated more than ever. Here's what homeowners, businesses, and developers need to know about the current state of the ITC, recent expansions, and what the road ahead could look like.
May 5th, 2025 | 5-minute read | ITC, Solar Investment Tax Credit
The 30% Credit: Still Intact in 2025
Thanks to the 2022 Inflation Reduction Act (IRA), the ITC currently offers a 30% federal tax credit for both residential and commercial solar projects. That rate applies to systems installed between 2022 and 2032. In short: if you go solar in 2025, you're eligible for the full 30%—and that includes battery storage systems with a capacity of at least 3 kilowatt-hours (kWh), whether installed with solar panels or on their own.
Homeowners: You get 30% of your system and storage costs back via your federal taxes. The only catch is you must own the system—leases and PPAs don’t qualify. The credit remains at 30% through 2032, then steps down: 26% in 2033, 22% in 2034, and scheduled to expire in 2035 unless extended.
Businesses and Developers: You can also claim 30%, but only if you meet labor standards (Prevailing Wage and Apprenticeship requirements) for projects over 1 MW. Projects that don’t meet these rules drop to a 6% base rate. Small commercial systems under 1 MW automatically qualify for 30%.
Bonus Credits That Can Push the ITC to 40% or More
Commercial projects may qualify for additional ITC bonuses:
- +10% for Domestic Content – If a project uses a defined share of U.S.-made materials like panels and inverters
- +10% for Energy Communities – For projects in areas hit hard by fossil fuel industry declines (e.g. former coal towns)
- +10–20% for Low-Income Communities – For small projects benefiting qualifying low-income areas or housing
These bonuses stack—meaning a project that meets multiple criteria could secure a total credit of up to 50%.
Nonprofits and Public Entities: Now Eligible via Direct Pay
One major change from the IRA is the Direct Pay (a.k.a. Elective Pay) option. Tax-exempt organizations—schools, churches, local governments—can now receive the ITC as a cash payment from the IRS. So instead of losing out on tax-based incentives, a nonprofit installing $500,000 worth of solar in 2025 can get a $150,000 check from the Treasury.
Storage Now Fully Covered
Before 2023, battery storage had to be charged by solar to qualify for the ITC. Now, standalone batteries count—residential or commercial—as long as they meet the 3 kWh threshold. This shift not only supports grid reliability, but also makes it easier to add storage to existing systems.
Political Risks on the Horizon
While the ITC is firmly in place through 2032, political efforts to scale it back are gaining traction. In April 2025, four House Republicans introduced the Ending Intermittent Energy Subsidies Act, which proposes phasing out the ITC and wind Production Tax Credit (PTC) by 20% each year over five years—bringing them to zero by 2030.
This proposal targets solar and wind, but leaves credits for nuclear, hydro, and geothermal untouched. Supporters claim solar is mature enough to stand without subsidies. Critics argue repeal would slow clean energy adoption, raise consumer energy bills, and reverse progress on climate goals. One analysis cited in the debate suggests eliminating the credits could raise residential power bills by an average of 7% by 2026.
At the same time, broader concerns about the IRA’s cost—now estimated at $870 billion through 2035—are fueling discussion about repealing or scaling back parts of the law to reduce the deficit or fund other tax priorities.
So, Is the 30% Credit Safe in 2025?
Yes—for now. Despite political posturing, no changes have passed, and any repeal would require a full act of Congress. With a split government or narrow majorities, that’s a steep hill to climb. Even if a phase-out were passed, it would likely apply only to future projects, not ones already installed.
That means:
- If you install solar in 2025, you get the full 30% credit
- If changes happen, they’ll likely be prospective, not retroactive
- If you’re on the fence, 2025 is a solid time to move forward
Bottom Line
As of mid-2025, the federal solar ITC remains a powerful and intact incentive. It covers 30% of system and storage costs, includes options for nonprofits via Direct Pay, and adds bonus credits for qualifying commercial projects. While Congress is debating potential rollbacks, no cuts have been enacted yet. For anyone considering solar, the current policy environment offers rare clarity—and a compelling financial opportunity.
Have a question about ITC or your solar plan?
Boden Energy Solutions
A dedicated community member known for his extensive volunteer work throughout the town, Tyler founded Boden Energy Solutions with a clear mission: to empower homeowners with personalized solar solutions. Leveraging a decade of specialized experience in photovoltaic solar and energy storage, Tyler's approach goes beyond simple sales, prioritizing a consultative process that ensures clients understand and benefit from their investment.