There May Never Be a Better Time to Go Solar than Right Now

Table of Contents

June 4, 2025

By: Caleb Quaid, President of Regenerative Shift

Executive Summary

Current Solar Tax Incentives: The federal solar tax credits (Section 48E and Section 25D) offer 30% of project costs for both commercial and residential solar installations, with potential bonus credits for commercial projects.
Potential Repeal of Tax Credits: The House-passed “One Big, Beautiful Bill” proposes to eliminate these incentives much sooner than originally anticipated, with an immediate repeal for residential projects and a 2028 deadline for commercial projects.
Critical Deadlines: Projects must meet specific timelines to qualify for the full tax credit. For residential solar, projects must be placed in service by 12/31/2025. For commercial projects, they must begin construction within 60 days of the bill’s enactment to secure the tax credits.
Five Percent Safe Harbor Rule: Commercial projects can qualify for the tax credit even if they aren’t completed by the 2025 deadline, by meeting the Five Percent Safe Harbor—spending at least 5% of the total project cost upfront.
Importance of Compliance: Proper documentation of project progress is essential for maintaining eligibility for the tax credits. This includes contracts, invoices, receipts, and construction logs.
Call to Action: Solar projects should be started now to avoid losing out on tax incentives. For guidance on navigating these complex regulations and ensuring compliance, consult a professional advisor or solar consultant.

Federal incentives have spurred such installations nationwide by reducing costs. However, proposed legislation could shorten the availability of these solar tax credits. If you’ve been considering solar panels for your home or business, recent developments in Washington, D.C. suggest you might want to act sooner rather than later. Generous federal solar tax credits have made going solar more affordable than ever – but a new bill known as the “One Big, Beautiful Bill” (OBBB) threatens to scale back or even repeal these incentives much sooner than expected. This means the window of opportunity to maximize savings on solar may quickly be closing. In this article, we’ll break down what the current solar tax credits are (for both commercial and residential projects), how the proposed legislation could impact them, and what actions you can take right now to ensure you don’t miss out on these benefits.

Understanding Today’s Solar Tax Credits (Commercial & Residential)

Federal Solar Investment Tax Credit (ITC) – Section 48E: Businesses and commercial project developers can currently claim a 30% federal tax credit on the cost of a solar energy project. This credit, codified in Section 48 of the tax code (with new provisions under Section 48E for clean electricity), directly reduces the income taxes a business owes, based on 30% of their solar investment. For example, a company spending $100,000 on a solar installation could reduce its federal taxes by $30,000, thanks to the ITC. The Inflation Reduction Act (IRA) of 2022 not only extended this 30% ITC for years into the future, but also expanded it with bonus credits for certain projects. Solar and other clean energy projects can qualify for bonus credit adders – an additional 10% credit for using enough U.S.-made equipment (“domestic content”) and another **10% for projects located in designated “energy communities” (areas with significant fossil fuel industry or high unemployment). Stacking these bonuses, a commercial solar farm could potentially get 40% or even 50% of its costs back as a tax credit under current law. These incentives, coupled with the ability to sell/transfer credits or get IRS Direct Payments for tax exempt organizations, have supercharged the economics of commercial solar investments.

Residential Clean Energy Credit – Section 25D: Homeowners haven’t been left out. Under Section 25D of the tax code, individuals installing solar panels on their residences can claim a 30% tax credit on their personal income taxes for the cost of the system (sometimes called the Residential Clean Energy Credit). This credit was also boosted by the IRA – it had been scheduled to drop and expire by 2024, but the IRA restored it to 30% and extended it for a decade. Now, a homeowner who spends $20,000 on a rooftop solar system can get $6,000 off their federal tax bill. This has made rooftop solar far more accessible nationwide. Unlike the business ITC, the homeowner’s credit does not have bonus percentage adders (it’s a flat 30%), but it does cover related equipment like home battery storage. Solar leases and PPAs (third-party ownership): Many homeowners go solar through a lease or power-purchase agreement where a company owns the panels and the homeowner pays monthly. In these cases, the solar company has been able to claim the commercial ITC (Section 48E) for the system, since they are the owner of the equipment, and this helps lower the cost for the homeowner (usually passed through as lower payments).

In summary, current federal policy has been very supportive of solar: both businesses and homeowners can shave off roughly one-third of the cost of a solar project via tax credits. These credits were expected to remain in place well into the 2030s under the IRA’s provisions, giving a long runway for solar adoption. However, political shifts in 2025 have put these incentives in jeopardy much sooner than anticipated.

The ‘One Big, Beautiful Bill’ and Its Impact on Solar Incentives

In May 2025, the U.S. House of Representatives passed a budget reconciliation package nicknamed the “One Big, Beautiful Bill Act” (OBBB). Tucked inside this legislation are provisions that would dramatically roll back federal clean energy tax credits, including those for solar. In fact, the House’s version of OBBB would effectively repeal or cut short the solar tax credits almost immediately. Here are the key changes proposed in the bill:

Commercial/Utility Solar (Section 48E ITC & Section 45Y PTC): The bill terminates the new tech-neutral Investment Tax Credit (48E) and Production Tax Credit (45Y) for clean electricity much earlier than under current law. Specifically, any solar, wind, battery or other clean power project would not qualify for these credits if it begins construction more than 60 days after the bill’s enactment. In other words, roughly two months after OBBB becomes law, no new projects would get the 30% ITC or PTC. Even projects that do start before that cutoff must also be **placed in service (finished and operational) by December 31, 2028 to receive any credit at all. This is a hard deadline – the House bill eliminates the gradual phase-down that was originally planned through 2031. Miss the 2028 deadline, and a project would get 0% credit. (One exception: nuclear power projects are given until 2028 to start, recognizing their longer lead times.) For solar developers, this House proposal is basically a fast-forward end to the ITC/PTC: no new solar projects after late-2025 would be incentivized, and even those started now must be finished by 2028. This is a massive shift from the IRA’s promise of stable credits into the 2030s.
Residential Solar (Section 25D) and Leased Systems: The House bill similarly targets the homeowner solar credit. Section 25D (the 30% residential credit) would be repealed for any home solar systems placed in service after December 31, 2025. That means 2025 would effectively be the last year to install solar and still get the federal credit (instead of having it available at 30% through 2032 as under current law). In addition, the bill kills the incentive for third-party owned residential solar: it eliminates the tax credit for leased residential solar installations.

These proposed changes amount to a drastic pullback of support for solar energy. They come as a shock to an industry that has been booming thanks to the IRA’s incentives. It’s important to note that OBBB is not law at this point. The House passed it by a very narrow margin, and the Senate is expected to significantly revise it (Senators from both parties have expressed concern about undoing clean energy incentives so abruptly). However, the mere possibility of these provisions becoming law introduces major uncertainty and urgency. The final bill (as part of broader budget/debt ceiling negotiations) could land anywhere from milder phase-downs to potentially these strict cuts, depending on political deal-making. Given this uncertainty, anyone planning a solar project should be aware of the worst-case scenario timelines being signaled by the House: essentially have your project underway soon and finished by 2025 (for residential) or 2028 (for commercial) to be safe.

Why Time Is Running Out for Solar Projects

The old saying “make hay while the sun shines” has never been more fitting – except now it’s about making solar power while the tax credit sun still shines. Under current law (thanks to the IRA), we thought we had a long sunny period for solar incentives. But the OBBB proposal is like a sudden forecast of clouds on the horizon. Here’s why there may never be a better time than now to go solar:

Potential Early Credit Cutoffs: If the House’s plan (or anything close to it) becomes law, the deadline to qualify for solar credits could be imminent. For commercial projects, missing that “begin construction within 60 days of enactment” window would mean missing out on the 30% ITC/PTC entirely. No one knows if or when OBBB will pass, but some believe that July 4^th as a potential enactment date. Sixty days is a blink of an eye in project development – by the time a bill is signed, that window might only give developers until ~late summer or fall 2025 to break ground. For residential systems, the drop-dead date would be December 31, 2025 (after that, no credit). That may sound a bit far off, but consider that…
Solar Project Timelines: Installing solar isn’t an overnight process. Home solar installations can take several months from the time you sign a contract to the day the system is up and running (permits, utility interconnection, and scheduling all add time). If you wait until late 2025 to start the process, you may run out of time and lose the credit. Commercial and community solar projects often take even longer – sometimes a year or more to develop, especially if they are larger and require significant engineering or grid upgrades. The message is clear: to safely have your system “placed in service by 12/31/2025” for residential or by 2028 for larger projects, you really need to be starting right now. Every month of delay increases the risk of missing the window if these repeal provisions take effect.
Supply and Demand Squeeze: The mere threat of a deadline can create a rush. If it looks likely that credits will expire or shrink, the solar industry could see a surge of demand as everyone races to install panels in time. This happened in the past when credits faced expiration – companies get slammed with orders. That rush can lead to equipment shortages or long waitlists for qualified installers. Starting sooner means you’re ahead of any last-minute scramble. (Already, developers are warning that there could be a “run” on certain components like transformers and other equipment needed to meet begin-construction safe harbor requirements.)
Financial Impact of Missing Out: The federal credit can cover 30% or more of a project’s cost. Losing that can make a project far less attractive financially. For a homeowner, the difference could be thousands of dollars. For a business or solar farm developer, it could be millions on a large project. While solar technology keeps getting cheaper and other incentives (like state rebates or energy savings) still help, the federal tax credit is often the linchpin that makes the economics work. Many projects currently in planning assumed these credits would be available. If you delay and the credits get yanked, your return on investment could drop dramatically. As Tim McMurray, CFO of Manatee School for the Arts put it regarding the solar project they are developing, “This project would not have been possible without these clean energy tax credits.” In other words, the credits can make or break a project’s viability.

In short, the clock might be “ticking” for solar incentives. We’re not trying to cry wolf – policy changes aren’t final yet – but being prepared is simply wise. Acting during this period of uncertainty is better than regretting a missed chance. So, what can you do to make sure you lock in the solar tax credits while they last? Let’s look at some recommended actions.

How to Secure Your Solar Tax Credit Now

Even with some unknowns in play, there are concrete steps you can take to maximize your chance of benefiting from the solar credits before any changes hit. Whether you’re a solar developer, an EPC contractor, or a homeowner considering solar, the following actions can help ensure you get grandfathered under the current incentives:

Get Started As Soon As Possible: The best way to guarantee today’s incentives is to install your solar project sooner rather than later. If you’re a homeowner, that means don’t wait – start reaching out to solar providers now, get your site assessment and financing in order, and aim to have your system up and running well before the end of 2025. If you’re a commercial solar developer or business owner planning a project, accelerate your timeline for development. The House bill’s language implies projects need to be substantially underway within roughly two months of enactment to qualify. It’s a good idea to treat August 2025 as an informal deadline to start construction on any project you want credited. In practical terms: secure permits, order equipment, and sign contracts now, rather than waiting until 2026 or later.
Use the “Five Percent Safe Harbor” for Commercial Projects: What if you have a larger commercial project that realistically can’t be finished by 2025? There is a provision in tax law that can protect projects in progress – often referred to as the 5% Safe Harbor rule. Essentially, the IRS has two tests to determine if a project has “begun construction” for tax purposes: (1) starting physical work of a significant nature, or (2) incurring at least 5% of the project’s cost upfront. If you satisfy either of these tests, your project is considered started (even if it’s not finished), and it can qualify for the credit under the rules in effect when you started. The easier route for many is the 5% Safe Harbor – meaning if you spend at least 5% of the total project cost (with a binding contract in place) on materials or construction in 2024 or 2025, the IRS will treat your project as having begun in that year. For example, on a $1 million solar farm, spending $50,000 on racking, inverters, or panels (with proper documentation) could Safe Harbor the project. This would preserve your eligibility for the 30% ITC even if the project actually finishes closer to 2026 or 2027. Important: if you go the Safe Harbor route, be mindful of the detailed requirements – the expenses must be under a binding written contract, and equipment usually should be delivered within 3½ months if you’re counting it as incurred under accrual accounting rules.. It’s wise to consult a tax professional to do this correctly (and see next bullet on paperwork!).
Maintain Continuous Progress: Starting a project is only half the battle – the IRS also requires that once you’ve begun, you continue making steady progress toward completion. This is known as the continuous construction or the Continuity Requirement. In practical terms, you can’t just buy some solar panels to meet the 5% Safe Harbor and then shelve the project for years. Keep documentation of ongoing work – progress reports, construction logs, expenditures each year – to show you didn’t pause indefinitely. The takeaway is: don’t delay once you’ve started a project, especially if legislative changes impose hard deadlines like 2028 for completion. Continuous effort is key to claiming your credit later without issues.
Keep Accurate Records: Paperwork is critical when it comes to securing tax credits. This will be even more true if the rules tighten. You should document everything related to your project’s start and progress. If you sign a contract and put down 5% of the costs in 2025, keep a copy of that binding contract, invoices and receipts for equipment purchases, proof of payment dates, and delivery records for any equipment ordered (to show the 3.5-month delivery safe harbor if applicable). Also log the dates of any on-site work commencement (e.g. “Started trenching for electrical conduits on Sept 1, 2025”). For homeowners, save your contract and installation completion certificate or electric company interconnection letter – anything that proves when your system was placed in service. If your credit will expire after 2025, you want to be able to show it was operational before that deadline. Good record-keeping will be essential if you need to defend your tax credit claim later on. In short, treat this like a compliance exercise – align all your paperwork and dates with the requirements. Many solar companies are ramping up their documentation processes now, just in case these new rules pass.
Consult the Experts and Stay Informed: Lastly, navigating the changing landscape of incentives can be complex. It’s wise to work with professionals who specialize in solar projects and tax incentives. A knowledgeable consultant can help ensure your project meets the Safe Harbor tests, is on track to finish by the necessary deadline, and that you’re capturing any bonus credits available. My firm, Regenerative Shift, is advising clients on key compliance practices to satisfy the prevailing wage or domestic content rules to get the extra 10% bonuses and how to assemble the proper documentation for Safe Harbor. With potential legislative changes looming, expert guidance can make the difference between fully realizing a 30–50% credit versus missing out. Don’t hesitate to reach out to a professional who can help you map out a strategy – whether it’s breaking ground on a commercial project in the next few months or speeding up your residential solar installation. Also, keep an eye on the news regarding the OBBB bill’s progress. If the Senate negotiates a different timeline or if a final bill is signed, you’ll want to immediately understand the implications for your project pipeline.

Seize the Solar Moment

To wrap up, the situation is this: today’s federal incentives for solar are incredibly favorable, but they may not last. The phrase “there may never be a better time to get solar” isn’t just sales talk – given the uncertainty in Congress, it’s a realistic appraisal that the generous 30%+ tax credits could diminish or disappear in the near future. Right now, the credits are still in place nationwide, and if you act quickly, you can lock in your eligibility. Many in the solar industry – from rooftop installers to large-scale developers – are urging customers and partners to move fast while the policy environment is still friendly. By understanding the proposed changes and taking proactive steps (like leveraging the 5% Safe Harbor and documenting your project’s start), you can position yourself to capture the full benefits of going solar under current law. Solar energy has always been a smart long-term investment in cleaner power and lower utility bills. With the added boost of federal tax credits, the financial returns are extremely compelling. Don’t let a narrow political window shut you out from those benefits. Whether you’re a homeowner who’s been on the fence or a business leader eyeing solar to cut operating costs, consider this a friendly nudge. The sun hasn’t set on these incentives yet – but it might soon. There may never be a better time to go solar than right now, so take advantage of the opportunity while it’s here.