How to Take Advantage of the IRA Tax Credits Before Trump’s GOP Kills Them

You may recall the amount of sweat, anguish, and resolve it took to pass the Inflation Reduction Act. There were the amazing young people of the Sunrise Movement, who channeled the energy of Greta’s worldwide outburst into the offices of Nancy Pelosi, energizing the 2020 primary race and then—in a remarkable display of political maturity—turning that energy into legislative sausage making. There was the steady morphing of the Build Back Better bill into ever-more compromised climate legislation, and then the widespread conviction that even that would not pass. Until at the last minute Joe Manchin agreed, as long as it was larded with yet more gifts for the fossil fuel industry. And with that Congress took its first real action on climate in the 35 years it’s been an issue.

It was supposed to be a steady source of funding that would last a decade, giving this energy transition time to find its feet, and giving the U.S. a foothold in the fight with China to determine the future. But in the course of a few months the White House and the fossil-funded GOP Congress have overturned all that except the extra gifts to the fossil fuel industry. (Antonia Juhasz provides the best account yet of all the excruciating details in Rolling Stone.)

The IRA won’t last a decade. Its funding starts running out at the end of September—if you’re in the market for an electric vehicle, that has to be done now. (And there may be some excellent lease deals). And if you’re even considering getting solar on your home, that needs to happen by the end of the year if you want the tax credit.

Normally we talk about these things as political questions—but today I asked a few experts to share their take on what individual Americans might want to do over the 165 days.

This summer and this fall are the right times to work with a trusted local provider to get your project up. If nothing else, it’s a good way to disappoint the GOP and their fossil fuel friend group.

Here’s Cindy del Rosario-Tapan, from the very experienced Solar United Neighbors (who are sponsoring a webinar later this week to go over the same ground and more)

• The impacts of this new law will be severe. We expect the solar market to shrink significantly and will readjust over time. It’s likely many companies will have layoffs or go out of business in the near-term.
• Our advice to homeowners is to act now:
• If you are a homeowner and planning to pay cash or finance your system through a loan, we highly recommend you go solar in 2025 to benefit from the tax credit and that you do so soon. Homeowners should proceed with caution and consult a tax adviser to determine the extent to which their project is eligible.
• The safest way to ensure your project will qualify for the tax credit is to have it “placed in service” before the end of 2025. “Placed in service” is a gray area, but a conservative interpretation would be when your system is ready to be connected to the grid.

My old 350.org colleague Phil Aroneanu has been hard at work at Climate United trying to protect what they can of the IRA funding. He breaks it down a little further:

If you're hoping to put solar on the roof of your home, and you want to own the system (not lease it), the 30% residential clean energy tax credit (25D) will sunset at the end of 2025, 10 years sooner than what was written into the Inflation Reduction Act.

If you own a business or nonprofit, or work at a school or city government agency and want to install solar OR you want to lease a solar array for your home rather than own it outright, you'll need to get started as soon as possible to qualify for the up to 60% investment tax credit (48E) and bonuses available. Onerous restrictions will kick in by the end of 2025 making it more difficult to claim the tax credits for projects that aren't yet under construction—and the Trump administration just released an Executive Order that will add even more red tape to these tax credits.

If you're hoping to buy and electric vehicle, the tax credits expire on September 30, and if you're planning to install heat pumps, windows, or take other energy efficiency measures, most of those tax credits expire at the end of the year.

And here’s Andrea Karelas from RE-Volv, a group that helps nonprofits go solar. (He’s also the author of the excellent Climate Courage), who analyzes it from the point of view of an average homeowner or project sponsor

So basically, before the big terrible bill, thanks to the IRA, if you went solar in the U.S., you got an Investment Tax Credit for your system worth 30% of the value (for storage as well) as a base amount and that credit would have been in place through 2032. So if your solar system cost $10K, you'll have $3K less taxes to pay next April, so essentially your system is only $7K. Then there are bonus adders that stack based on certain criteria. If your project is in an "energy community" (which basically is a place that has been historically impacted by fossil fuel production, or has many people working in energy production), you get an extra 10%. If you are in a low to moderate income community you are eligible for a 10-20% adder (but those are first come first serve). And if your equipment is made using majority domestic content (which is basically impossible) you'd get another 10%. So the solar ITC for residences (25d) or non-residential (48e) start at a minimum of 30% savings. If someone qualified for all the bonus adders, it would be 70% covered by the ITC. Many of our projects, for example, get 40 or 50% because they are in an energy community and serve an LMI population.

Now, thanks to the big terrible bill, the residential credit (25d) will expire Dec 31 2025. So basically your system price goes up by a minimum of 30% if you don't have it fully installed before January 1 2026. (And you could be missing out on up to 70% of the system cost covered if you qualify for the bonus adders.)

Now, the nonresidential credit (48e) on paper looks like it gets a better deal because you can theoretically get project construction started a year from when the bill was signed (so July 4 2026) or get it completed by the end of 2027. BUT they also added requirements regarding Foreign Entities of Concern to limit the use of Chinese parts or equipment that are so unworkable that it makes the ITC unusable, even with these extended timelines. The FEOC requirements kick in January 1 2026. So in essence, nonresidential projects now also have a December 31 2025 deadline.

All of this would be easier to navigate with devoted help from blue state officials: Here, for instance, is some good advice from NYSFocus on how New York Gov. Kathy Hochul could help, and some excellent analysis along the same lines from Noah Ginsburg. But I think the bottom line is clear—this summer and this fall are the right times to work with a trusted local provider to get your project up. If nothing else, it’s a good way to disappoint the GOP and their fossil fuel friend group.

While you’re doing that, of course, we also need to be standing up for clean energy in general. That’s why we’re hard at work on SunDay.

Part of that work involves the solar industry reinventing itself for the world past subsidies—which is not impossible. Its old model won’t work without federal support, but that’s not necessarily the end: Solar flourishes without much in the way of subsidy elsewhere, in places like Australia, because they’ve evolved a lower-cost business plan. Permitting reform is key (and a key focus of SunDay), as Ryan Kennedy makes clear in this piece from PV Magazine just yesterday:

Permit applications can cause delays of two to six weeks or more, causing a poor customer experience and higher project cancellation rates. Permitting also drives up costs. In New Jersey, for example, permit approvals and related barriers add an estimated $3,800 to $4,500 to average project costs. The Solar Energy Industries Association (SEIA) said the cost could be in excess of $6,000 to $7,000 for an average project.

New Jersey regulators, among other states, recently passed legislation to require automated permitting for residential solar, cutting timelines and costs. Tools like the Department of Energy’s (DOE) SolarApp+ can facilitate permitting in your jurisdiction, and DOE provides technical assistance for implementing the tool.

Birch estimates an average U.S. installation could shed $0.98 per W from automated permitting fixes alone.

Since that hasn’t happened yet, it doesn’t make the immediate blow any easier. As Aroneanu says:

Multiple recent analyses of the budget bill estimated that cutting clean energy and manufacturing tax credits will scale back solar and other renewable generation capacity by up to 72% in the next decade, raise household electricity prices up to $290, trigger the closure or cancellation of 331 solar and storage factories, and erase $286 billion in local investment in American communities, killing 760,000 jobs in the process.

Make no mistake: The Trump administration is doing everything in its power to try to kill clean energy.

Still, it seems impossible that American ingenuity won’t start to figure out some ways, especially since the rest of the world is surging confidently ahead. (Here, somewhat randomly, are updates from Turkey, Africa, and of course China). As Karelas says:

We know solar is the cheapest form of electrons ever created. Last year 90% of new generation built in the U.S. was clean energy, 78% of it solar. (No wonder they're coming after it this hard.) There are some in the residential space who are trying to make the most of the situation by saying, “Look, the industry had a nice cushion with these tax credits for many years.” Tax credits also made project financing more complicated—there's a world where the solar industry bounces back from this after cutting costs, streamlining various processes, and will be stronger than ever… So, light at the end of the tunnel, but definitely a terrible blow.

Our job is to magnify that (sun)light, shorten that tunnel, and not fall any further behind the rest of the world than we have to. So, to work on all fronts!