Congress is considering changes to the 30% Residential Clean Energy Credit (Section 25D) as part of a new budget bill. The House has voted to end the credit by the close of 2025, several years ahead of its previously planned gradual phase-out through 2034 under the Inflation Reduction Act.
What Is Section 25D?
What Is Section 25D?The Residential Clean Energy Credit allows homeowners to deduct 30% of the total cost of a residential solar energy system, including batteries and home hybrid inverters, on their federal tax return. This incentive has been widely credited with supporting the adoption of solar and energy storage systems across the United States. For example, a typical $25,000 solar installation results in about $7,500 in tax savings for homeowners.
What Are the Possible Effects of Ending the Credit?
If the credit is phased out at the end of 2025, several industry groups, such as the Solar Energy Industries Association (SEIA), project that:
- Out-of-pocket costs for homeowners may increase, potentially making solar energy less accessible.
- Market growth could slow as installation costs rise and return on investment periods lengthen.
- SEIA estimates that up to 400,000 jobs in the clean energy sector could be affected.
- Some U.S. manufacturers that expanded production to meet increased demand for solar may reevaluate their investments.
What Homeowners Should Know
To qualify for the 30% tax credit, homeowners must have their systems operational by December 31, 2025. This includes time for planning, permitting, and installation. Industry experts recommend that homeowners begin the process early (90 to 120 days in advance) to avoid potential delays as the deadline approaches.
Industry Perspectives
Companies such as Sol-Ark, which manufactures U.S.-engineered hybrid inverters and battery systems, have emphasized the importance of federal incentives in supporting clean energy adoption. Sol-Ark has stated that maintaining the tax credit can help homeowners achieve greater energy independence and resilience.
Next Steps
Homeowners considering solar installation are encouraged to speak with a qualified installer and stay informed about legislative developments that may affect incentives. For the most current information, contacting tax professionals or elected representatives may be helpful.
References
Internal Revenue Service. (2024). Residential clean energy credit (Section 25D). https://www.irs.gov/credits-deductions/residential-clean-energy-credit
U.S. Department of Energy. (2024). Federal solar tax credit. https://www.energy.gov/eere/solar/articles/federal-solar-tax-credit-resources