Solar ITC Anxiety: Will the Solar ITC still be around by the end of the year?

In recent weeks as part of my work with Spark AI, I've had numerous conversations with solar developers across the spectrum—community solar, utility scale, and distributed behind-the-meter—from various regions throughout the US. One theme in almost every meeting: questions about the future of Investment Tax Credit (ITC).

This post walks through the history of the ITC, explains how it works, examines the Trump Administration's stance on it, and analyzes what we might expect moving forward.

The ITC Through Time: A Brief History

The ITC began modestly in 2005 under Bush with a 30% tax credit for solar systems, but with a limiting $2,000 cap. Obama removed this cap in 2008, transforming the ITC into a serious financial incentive. Since then, it’s been extended multiple times, most significantly through the Inflation Reduction Act of 2022 (IRA), which extended the 30% credit through 2032 and expanded eligible technologies to include standalone energy storage.

Credit: Solar Energy Industries Association (https://seia.org/solar-investment-tax-credit/)

Mechanics of the ITC

The ITC functions as a direct reduction in tax liability equal to 30% of qualified solar expenditures. For residential installations, homeowners can claim this credit against their personal income taxes. For commercial projects, developers can use it against their tax liability or monetize it through tax equity partners if they lack sufficient tax liability themselves. In recent years, several companies specializing in transferable tax credits (TTCs) such as Reunion and Crux have made it easier use tax credits.

Since I started in solar in 2009 — including developing and financing projects at both SunEdison and the Department of Energy Loan Programs Office — I've witnessed firsthand how the ITC serves as a linchpin for project financing across all types of solar developments. It's not merely a helpful incentive—it's often the factor that makes projects viable.

The credit's structure has created a sophisticated ecosystem of financial engineering around solar projects, with developers and investors crafting intricate structures to optimize these benefits within the constraints of tax law. While these are now commonly used and understood, this was not the case 12-15 years ago.

The Trump Administration Factor

Following President Trump's return to office in January 2025, there's been understandable concern about clean energy incentives. His "Unleashing American Energy" executive order paused certain IRA funding programs and called for reviews of clean energy initiatives.

However, statutory tax credits like the ITC remain in place. Executive orders cannot unilaterally repeal tax credits established by legislation. While the administration has imposed a 90-day hold on distributing some IRA funds, the 30% credit continues unchanged for residential and commercial solar installations.

The Trump Administration has explicitly mentioned lowering energy costs as a goal of this term. Most industry experts believe that a repeal of the ITC and PTC would increase energy costs for Americans.

Looking Forward: Realistic Expectations

Despite policy headwinds, the ITC remains structurally sound through at least 2032. Dismantling it would require Congressional action—a significantly higher hurdle than executive orders. Rep. Sean Casten, D-Ill. mentioned at last month’s ACORE conference that the IRA was made to be “politically durable".

More likely scenarios include stricter interpretations of qualifying expenses, slower processing, or increased bureaucratic friction in implementation rules.

For developers, the core message is clear: While the elements that are needed to make a project pencil still remain, the ITC will continue to add to financial viability. It might be prudent to build additional contingency into financial models, but abandoning projects based on fears of ITC elimination would be premature.

After nearly two decades in various forms, the ITC has survived multiple administrations from both parties. It has become an integral component of America's energy infrastructure financing—not merely a political football, but a durable element of our national energy strategy.

Update 3/6: Most recent intel out of Washington suggests that there isn’t political will to repeal ITC/PTC, citing that these credits benefit many districts that are also right-leaning.