HR1 alters most solar-related tax credits from the Inflation Reduction Act, but residential solar cuts are the most abrupt. The law ends the 30% homeowner-collected investment tax credit (25D) for rooftop solar + storage installations at the end of 2025.
Residential solar ITC changes in HR1
- Requires installations to be completed by December 31, 2025, to receive 30% ITC
- Ends the residential solar and standalone storage ITC after Dec. 31 with no phase-down
- Projects may not necessarily need to be interconnected to the grid by Dec. 31 to collect the credit
- Unused residential ITC credits can be carried forward into future tax years beyond 2025 if applicable
- Third-party-owned residential solar leasing companies can still collect 48E credit for longer term
The fine print changes the former IRA text to end the credit for projects “placed in service after December 31, 2034,” to “any expenditures made after December 31, 2025.” While at first glance that change appears to focus on payment, Christopher McLoon, tax lawyer at Cozen O’Connor, says this actually means the entire installation must be completed by Dec. 31, 2025.
“IRS guidance on this question (in Notice 2013-47) states that ‘expenditures made’ means expenditures paid or incurred for property installed. Expenditures are treated as ‘made’ when the property is installed, not before,” he said.
Taxpayers can carry forward any unused incentives into future tax years as needed even after the credit expires.
All the same terms apply to incentives for standalone residential storage projects, which also end on December 31, 2025.
One gray area could give residential solar and storage projects slightly more runway. The law does not specify that the project must be interconnected by year’s end, so projects that can be fully installed by December 31 but can’t interconnect to the grid until after that date could still potentially collect the ITC.
“The law states that the credit is available for expenditures made for property that is ‘placed in service.’ The term ‘placed-in-service’ means to be in a condition of readiness and availability for a specifically assigned function. It seems reasonable to say that, as a general rule, if a property is ready to be used for its intended purpose subject only to a PTO (permission to operate), that it has been placed in service. This question can only be answered based on the facts of a particular case,” McLoon said.
All of the above applies to the ITC collected by homeowners who invest in solar and storage projects through cash or loans. Third-party-owned residential solar companies that lease projects to customers can still collect the 48E ITC, and could then potentially pass that savings down to customers via cheaper installs. 48E projects have a longer runway — they must start construction by July 4, 2026, and must be placed in service before December 31, 2027, to collect the credits.
The residential ITC has been on the brink of expiring many times but has always been extended. Now, with a hard stop and three more years of President Donald Trump’s presidency, federal home solar incentives may be gone for a while.
“The only lasting change would be one made with strong support from Democrats and Republicans,” McLoon said. “Without support from both of those parties, any change by Democrats could be undone, as it was in OBBB, through a budget reconciliation process.”
