What The Trump Administration Means for Federal Solar Tax Credits & The IRA

During his campaign, President-elect Trump called for repealing the Inflation Reduction Act (IRA), President Biden’s signature budgetary law. The IRA, passed in August 2022, has many facets, including tax reform, lowering prescription drug prices, expanding the Affordable Care Act, as well as authorizing $783 Billion in government spending on efforts to reduce climate change through 2032. President-Elect Trump has yet to specify which portions of the IRA he intends to reform. Since 2022, Republicans have initiated over 50 votes to repeal the IRA, and none have been successful. A full or partial repeal would require an act of Congress that passes both the House and Senate.

The 30% Solar & Battery Tax Credit

The IRA includes $14 billion in funding for home energy efficiency upgrades, provided through household tax credits, encouraging Americans to adopt solar, battery, heat pumps, and other home electrification upgrades. The Investment Tax Credit (ITC) is the solar or battery storage tax credit, allowing home and business owners to claim a tax credit for installing solar and/or battery backup systems. Today, this tax credit is 30% of the project’s cost, making solar and batteries more accessible to many Americans. The credit is claimed in the tax year when the solar or battery system is installed and placed into service.

What Could Change With The IRA Tax Credits?

In short, we don’t know. The new administration will likely pursue a partial or full repeal of the IRA. A full repeal would be the elimination of the solar, battery, and heat pump tax credits currently available across the country. However, there are climate advocates among the cabinet appointments that have been made so far, and there are also many Republican Congresspeople who are benefiting from IRA-funded clean energy projects in their states. Any attempt to reduce or eliminate the IRA’s Clean Energy funding will face significant challenges from both political parties.

When Could a Change Happen?

Tax Code Changes Take Time – A tax bill is initiated in the House of Representatives and referred to the Ways and Means Committee. It is debated, revised, and approved in both houses before going to the President to be signed into law. After being signed into law, the IRS must write it into the tax code. For reference, the Tax Cuts and Jobs Act, which was the central piece of tax legislation passed by the first Trump administration, did not reach the Ways and Means Committee until November of 2017, a full year after President-Elect Trump was elected the first time. It was passed into law in December 2017 and became effective in January 2018. The Inflation Reduction Act took even longer for the Biden Administration to pass, becoming effective in 2023, two years after President Biden was inaugurated. Therefore, it is reasonable to assume that tax code changes made by the new administration would not go into effect until 2026.

Is Now The Time To Take Advantage Of Solar Tax Credits?

We Can Install Your Solar and Battery Project in 2025

Federal and State governments can remove programs for various reasons, so there’s never been a better time to start your project. Solar and Battery Projects typically take 3 months from the time of sale to installation due to design time and permitting. To complete a project in 2025 means that your project must be agreed to by early September. Contact us for a free quote to get a custom design. We’ll help you understand all of the benefits available to you.