Hurry Up and Install Solar Panels to Secure Your Solar Tax Credit!
The House of Representatives has proposed a sudden termination of federal tax incentives for homeowners installing solar systems, potentially disrupting the solar industry and making solar power inaccessible for millions of Americans. The tax credits, which were supposed to remain in place until 2034, help offset the high initial costs of going solar.
Glen Brand, director of policy and advocacy at Solar United Neighbors, expressed concern, stating that the move would put solar out of reach for many people and leave ordinary Americans in a challenging position as they struggle with rising energy costs.
First introduced in 1978, solar tax incentives were initially allowed to lapse in 1985, only to be revived by Republican President George W. Bush in 2005. Over the years, lawmakers have extended and adjusted the incentives, most recently with the 2022 Inflation Reduction Act, which set the credit at 30% of the cost of a solar system until 2032, before a two-year phase-out.
With an average cost of around $28,000 for a solar system in the US, a tax credit would typically result in a savings of over $8,500. The House Ways and Means Committee's initial budget reconciliation proposal, released Tuesday, aims to roll back large swathes of the Inflation Reduction Act, including support for residential solar, effectively ending the 25D tax credit for installations as of the end of the year.
This move could lead to a surge in solar installations this year, followed by a market contraction in 2026 when the tax credits fully disappear. Homeowners considering solar installations are advised to act swiftly to maximize their savings.
Alongside the proposed elimination of the 25D credit, the House also favors limitations on the origin of materials used in photovoltaic panels. The exact implications of the proposed language are still being sorted out, but it generally aims to exclude participation of entities considered a concern, particularly those based in China, where a large majority of solar components are made.
[1] https://www.energy.gov/eere/solar/investment-tax-credit-ITC[2] https://www.energy.gov/eere/solar/investment-tax-credit-itc-2022-inflation-reduction-act[3] https://www.dsireusa.org/residential/residential-tax-credits[4] https://www.energysage.com/solar/solar-panel-cost/[5] https://www.washingtonpost.com/climate-environment/2023/05/18/house-solar-tax-credit/
- The sudden termination of federal tax incentives for solar systems by the House of Representatives could disrupt the solar industry and make solar power inaccessible for millions, leaving many Americans in a challenging position as they navigate rising energy costs.
- Solar tax incentives, initially introduced in 1978, have been extended and adjusted over the years, with the most recent extension coming in 2022 through the Inflation Reduction Act.
- With an average cost of around $28,000 for a solar system in the US, a tax credit would typically result in a savings of over $8,500.
- The House Ways and Means Committee's initial budget reconciliation proposal aims to roll back large swathes of the Inflation Reduction Act, including support for residential solar, effectively ending the 25D tax credit for installations as of the end of the year.
- This move could lead to a surge in solar installations this year, followed by a market contraction in 2026 when the tax credits fully disappear, advising homeowners considering solar installations to act swiftly to maximize their savings.
- Alongside the proposed elimination of the 25D credit, the House also favors limitations on the origin of materials used in photovoltaic panels, potentially excluding entities based in China, where a large majority of solar components are made.
- The implications of these changes are significant, as they intersect with areas of business, politics, culture, climate, and environmental science. For personal finance, this means choosing wisely for energy solutions and staying updated on the latest newsletters and science reports related to climate-change, technology, and finance.
