HR1 alters most solar-related tax credit from the Inflation Discount Act, however residential photo voltaic cuts are essentially the most abrupt. The regulation ends the 30% homeowner-collected funding tax credit score (25D) for rooftop photo voltaic + storage installations on the finish of 2025.
Residential photo voltaic ITC adjustments in HR1
- Requires installations to be accomplished by December 31, 2025, to obtain 30% ITC
- Ends the residential photo voltaic and standalone storage ITC after Dec. 31 with no phase-down
- Initiatives could not essentially have to be interconnected to the grid by Dec. 31 to gather the credit score
- Unused residential ITC credit might be carried ahead into future tax years past 2025 if relevant
- Third-party-owned residential photo voltaic leasing firms can nonetheless gather 48E credit score for long run
The effective print adjustments the previous IRA textual content to finish the credit score for tasks “positioned in service after December 31, 2034,” to “any expenditures made after December 31, 2025.” Whereas at first look that change seems to concentrate on cost, Christopher McLoon, tax lawyer at Cozen O’Connor, says this really means the whole set up have to be accomplished by Dec. 31, 2025.
“IRS steerage on this query (in Notice 2013-47) states that ‘expenditures made’ means expenditures paid or incurred for property put in. Expenditures are handled as ‘made’ when the property is put in, not earlier than,” he stated.
Taxpayers can carry ahead any unused incentives into future tax years as wanted even after the credit score expires.
All the identical phrases apply to incentives for standalone residential storage tasks, which additionally finish on December 31, 2025.
One grey space may give residential photo voltaic and storage tasks barely extra runway. The regulation doesn’t specify that the undertaking have to be interconnected by 12 months’s finish, so tasks that may be absolutely put in by December 31 however can’t interconnect to the grid till after that date may nonetheless probably gather the ITC.
“The regulation states that the credit score is on the market for expenditures made for property that’s ‘positioned in service.’ The time period ‘placed-in-service’ means to be in a situation of readiness and availability for a particularly assigned operate. It appears cheap to say that, as a common rule, if a property is prepared for use for its supposed goal topic solely to a PTO (permission to function), that it has been positioned in service. This query can solely be answered primarily based on the information of a specific case,” McLoon stated.
The entire above applies to the ITC collected by owners who spend money on photo voltaic and storage tasks via money or loans. Third-party-owned residential photo voltaic firms that lease tasks to prospects can nonetheless gather the 48E ITC, and will then probably move that financial savings right down to prospects by way of cheaper installs. 48E tasks have an extended runway — they have to begin building by July 4, 2026, and have to be positioned in service earlier than December 31, 2027, to gather the credit.
The residential ITC has been on the point of expiring many occasions however has at all times been prolonged. Now, with a tough cease and three extra years of President Donald Trump’s presidency, federal house photo voltaic incentives could also be gone for some time.
“The one lasting change can be one made with robust help from Democrats and Republicans,” McLoon stated. “With out help from each of these events, any change by Democrats could possibly be undone, because it was in OBBB, via a price range reconciliation course of.”
