In a significant move with major implications for the U.S. solar industry, the House of Representatives passed a sweeping Republican-backed bill that would eliminate the 30% residential solar tax credit (§25D of the U.S. Tax Code) by the end of 2025. The legislation, which also includes major tax, budget, and immigration reforms, faces an uncertain future as it heads to the Senate, where bipartisan support for clean energy incentives could complicate its path forward.

Key Changes to Solar Incentives

The bill’s most controversial provision is the abrupt termination of the residential solar tax credit, known as the Investment Tax Credit (ITC), nearly a decade ahead of its scheduled phase-out. Under current law, homeowners can claim 30% of the cost of installing a solar energy system as a credit on their federal taxes through 2032, with a gradual reduction beginning in 2033 and full expiration by the end of 2034. The proposed legislation would end this benefit on December 31, 2025, with no transition period, threatening to disrupt an industry already grappling with tariffs and funding pauses.

Additionally, the bill introduces a retroactive ban for 2025 on commercial solar tax credits (§48E) for third-party-owned systems on residential properties. This means that solar installations financed through leases or power purchase agreements this year would not qualify for the tax credit, although cash or loan purchases would remain eligible under §25D for 2025. The phase-out for commercial solar credits is also accelerated, requiring projects to begin construction within 60 days of the bill’s enactment and be operational by January 1, 2029, years earlier than the original schedule.

Political Tensions and Next Steps

The path to House passage was marked by internal Republican disagreements, particularly over the depth of proposed spending cuts. Last week, five Republicans joined Democrats in initially blocking the bill, with four specifically demanding deeper reductions to Medicaid and clean energy tax credits. A compromise was reached over the weekend, allowing the bill to advance after the holdouts voted “present,” citing satisfactory changes to the legislation.

Despite clearing the House, the bill’s future is far from certain. Several Republican senators have previously voiced support for clean energy tax credits, suggesting that the Senate may seek to amend or block the proposed cuts. According to the New York Times, Senate Republicans have indicated a desire to make major changes if the bill reaches their chamber, and bipartisan backing for solar incentives could pose a significant obstacle to the elimination of §25D.

A History of Bipartisan Support

The ITC has a long bipartisan legacy. First enacted under President George W. Bush in 2005, it was extended by Presidents Obama and Trump, and most recently expanded by President Biden’s Inflation Reduction Act in 2022. The credit has been credited with spurring rapid growth in residential solar installations across the country.

What Happens Next

The bill now moves to the Senate, where lawmakers can amend, reject, or approve it as is. If both chambers pass the legislation, it will go to President Trump for signature. While a presidential veto is unlikely given the bill’s alignment with GOP priorities, the Senate’s stance on clean energy tax credits remains a critical hurdle. With the Fourth of July as the GOP’s target date for final passage, the coming weeks will be pivotal for the future of solar incentives in the U.S.

What You Can Do to Help

Contact your Senate representatives to save the clean energy investment tax credit: https://www.senate.gov/senators/senators-contact.htm