Are there any upcoming changes to solar incentives

There are important upcoming developments and uncertainties regarding solar incentives in 2025 and beyond, particularly concerning the federal Investment Tax Credit (ITC), also known as the solar tax credit.

Current Federal Solar Incentives and Their Timeline

• The federal solar tax credit currently offers a 30% credit for residential and commercial solar installations completed through 2032. After that, the credit is scheduled to step down to 26% in 2033, 22% in 2034, and then expire in 2035.
• The Inflation Reduction Act (IRA) of 2022 extended this 30% ITC through 2034 and added extra credits for solar projects in energy communities or low-income areas and for projects using American-made components.
• The Modified Accelerated Cost Recovery System (MACRS) and Rural Energy for America Program (REAP) grants also provide additional financial benefits for solar projects, though REAP funding is expected to reduce in coming years, potentially making 2025 the last good year for such grants.

Policy and Political Uncertainty in 2025

• The return of President Trump and a Republican-controlled Congress in 2025 have introduced significant uncertainty about the future of these solar incentives. Early executive actions include a 90-day freeze on IRA funding for renewable projects, pending review, which may delay or disrupt some solar funding and grants.
• President Trump’s administration has expressed a skeptical stance on renewable energy incentives, with executive orders pausing climate-related funding under the IRA, though the solar tax credit itself remains law as of early 2025.
• There are active discussions about potential legislative changes that could:
  • Phase out or reduce the ITC earlier than planned (possible starting in 2026 or 2027).
  • Link the credit eligibility to domestic content requirements to promote American manufacturing, though implementation challenges exist.
  • Potentially repeal the IRA or significantly modify it, though a full repeal is considered unlikely due to bipartisan support and the economic impact.
• Until legislative changes occur, solar projects completed in 2025 are expected to remain eligible for the full 30% credit, but waiting too long risks missing out if changes come mid-year or late in 2025.

State-Level and Other Incentives

• In states like Illinois, incentives such as the Illinois Adjustable Block Program and rebates for smart inverters and battery storage will continue in 2025, potentially combining to cover up to 65% of system costs together with federal incentives.
• Lower interest rates for solar loans may improve financing affordability in 2025.

Recommendations for Solar Adoption in 2025

• Given the political and policy uncertainties, the current high level of federal tax credits, and rising utility rates, acting now—specifically signing contracts and installing solar systems within 2025—is the best way to lock in maximum benefits.
• Delay risks include possible reductions or eliminations of the solar tax credit, delays in grant programs, and increasing solar equipment prices or tariffs.
• Homeowners and businesses should monitor legislative developments closely but plan to move forward with solar installation promptly to secure existing incentives.

Summary Table of Key Points

In conclusion, while the 30% federal solar tax credit and related incentives remain available in 2025, there is significant uncertainty due to political changes and executive actions that could modify or reduce these incentives in the near future. To maximize savings and avoid the risk of losing these benefits, it is highly advisable for homeowners, businesses, and farmers considering solar installations to proceed with contracts and installations in 2025 without delay.