The residential solar industry has experienced rapid growth in part thanks to the federal Investment Tax Credit (ITC), which currently allows homeowners to deduct 30% of their solar installation costs from their federal taxes (Solar Energy Industries Association [SEIA], 2025). However, as 2025 approaches, proposals in both the House and Senate would scale back, or even eliminate, this credit, creating significant uncertainty for installers and their customers.
Why The Investment Tax Credit is a Growth Driver
Why The Investment Tax Credit is a Growth DriverThe ITC was established by the Energy Policy Act of 2005 to stimulate adoption of clean energy technologies (SEIA, 2025). By reducing the upfront cost of solar systems, credit has been a primary driver of residential solar installations; surveys indicate that many homeowners cite the ITC as the deciding factor in going solar (SEIA, 2025). Over the past decade, the credit has played a central role in expanding the U.S. residential solar market.
- Current Situation: Proposed Rollbacks in 2025: Although the ITC remains at 30% for systems placed in service through December 31, 2025, legislative action threatens its future:
House Proposal: The House-passed “One Big Beautiful Bill” would eliminate the 30% residential ITC on December 31, 2025, and accelerate phase out of the commercial credit, requiring projects to begin construction within 60 days and be in service by 2028 (turn0search2) sidley.com. - Senate Proposal: The Senate version would phase the residential credit down to 60% in 2026 and 30% in 2027 before ending it by mid 2028, while retaining the full commercial credit through 2028 and then phasing it out by 2031 (turn0news11) reuters.com.
- Political Dynamics: Some Senate Republicans have signaled willingness to soften proposed cuts—potentially extending or even enhancing credits—in response to industry and state level pressure (turn0news9; turn0news10) investopedia.comaxios.com.
These developments have injected urgency into the market, as both installers and homeowners seek clarity on the timeline and ultimate scope of the credit.
What’s at Risk for Solar Installers?
Without the 30% ITC, the upfront cost of a typical rooftop system would climb by thousands of dollars, likely deterring price‑sensitive homeowners and shrinking the pipeline of new projects (SEIA, 2025). Absent this key financial incentive, the industry’s previously torrid growth rate is also poised to slow dramatically. SEIA estimates that repealing the credit after 2025 could eliminate nearly 300,000 clean‑energy jobs and derail some $220 billion in planned solar and storage investments by 2030, a shift that would markedly temper what has been a robust year‑over‑year expansion.
As demand contracts, competition among installers will intensify, companies may find themselves bidding ever more aggressively for a shrinking pool of projects. To win work, installers will likely need to bundle additional services: battery storage, EV charging, or smart energy management to stand out. At the same time, those who have built their sales pitches around the ITC risk sudden revenue and cash‑flow pressures. Declining project margins could force difficult decisions on staffing, reinvestment capacity, and overall business operations.
How Installers Can Prepare for Potential Tax Credit Rollbacks
1. Monitor Policy Developments
Stay engaged with federal, state, and local policy by working with industry groups (e.g., SEIA) and subscribing to legislative trackers. Early awareness of vote schedules and amendment proposals can inform business planning and customer communications.
2. Accelerate Installations Before Deadlines
Encourage homeowners to finalize contracts and complete installations before December 31, 2025 – the last date current law guarantees the 30% credit. Time limited promotions or expedited permitting can help secure projects under existing rules.
3. Leverage State and Local Incentives
3. Leverage State and Local IncentivesHighlight robust state programs (e.g., California’s net metering enhancements or Massachusetts rebates) that may offset any federal reduction. Tailoring proposals to include combined federal, state, and utility incentives can preserve attractive payback timelines for customers.
4. Diversify Service Offerings
Explore energy storage, EV charging, and demand response solutions. Bundling these into comprehensive system packages can create new revenue streams and demonstrate added customer value beyond panel installation.
5. Educate Customers on Long Term Benefits
Emphasize lifetime bill savings, increased property value, and energy independence that persist regardless of tax credits. Clear, data driven comparisons (e.g., 20 year ROI models) can shift focus away from short term incentives.
6. Offer Flexible Financing
Expand partnerships for solar leases, power purchase agreements, or low down payment loans. Flexible financing can make projects viable even if tax credits diminish, smoothing adoption curves during policy transitions.
Potential rollbacks to the 2025 ITC represent a pivotal moment for the residential solar industry. Installers who proactively track legislative shifts, complete projects under current law, and broaden their service portfolios will be best positioned to maintain momentum. While the credit may change, the underlying demand for clean, cost effective energy solutions remains strong. Success in this evolving landscape will hinge on adaptability, strategic planning, and clear communication of solar’s enduring benefits.
References
Investopedia. (2025, June 27). Enphase energy leads S&P 500 gainers on solar tax credit news. investopedia.com
Novogradac. (2025, June 25). Senate finance committee reconciliation bill proposes modest changes to house repeal of IRA energy tax incentives. novoco.com
Reuters. (2025, June 24). U.S. Senate adjusting rooftop solar language in budget bill, senator says. reuters.com
Sidley Austin LLP. (2025, May 22). U.S. House’s “Big Beautiful Bill” accelerates repeal of renewable energy tax credits. sidley.com
Solar Energy Industries Association. (2025). Solar investment tax credit (ITC). Retrieved from https://seia.org/blog/cutting-energy-credits-doesnt-save-money-it-steals-it-from-ratepayers-and-local-governments/
GreenLancer. (2025, June). Solar tax credit going away under budget bill? greenlancer.com