Solar incentives in Trump’s second term are in danger. There’s still time to act.

Solar made up 81% of new US energy in 2024. Exact Solar explains the history of solar tax credits, current threats and what you can do.

Exact Solar has received many questions about solar-specific tax credits since Trump took office. Those who are ready to invest in solar energy systems are understandably concerned about what will happen to them during Donald Trump’s second term.

If you’re unfamiliar with these credits, we’ve written two in-depth guides that break them down:

• Residential Solar: A Guide for Homeowners: The 30% Investment Tax Credit (ITC)
• Commercial Solar: The IRA’s Tax Benefits for Commercial Solar

As the House and Senate Republicans hash out details of their reconciliation bill, Republican leaders are facing pressure and losing support for axing some of these energy-related credits.

These tax credits have spurred billions in renewable energy investments, particularly in solar, wind, and battery storage. Primarily due to these incentives and falling component costs, the U.S. installed more solar than any other power source in 2025. Solar energy accounted for 81.5% of the new electricity sources added to the grid in 2024.

Clean energy tax incentives have existed for over fifty years and have often enjoyed bipartisan support. These credits face an uncertain future under Trump’s administration, which is committed to reducing federal spending on “green subsidies” and boosting fossil fuel production.

Here’s the Bottom Line

The decisions Congress makes in the coming months will determine whether solar energy remains an accessible and financially viable option for homeowners and businesses. If the Investment Tax Credit (ITC) is repealed, it could slow down solar adoption, increase costs for consumers, and hinder the U.S.’s transition to clean energy.

To ensure that the United States continues investing in solar energy adoption, it is imperative that you call your local Congressional Representative’s office and set up a meeting. Ask them to say the following to Jason Smith, the chairman of the Ways and Means Committee:

“I will not vote for a reconciliation package that eliminates the Investment Tax Credit (ITC) for solar energy projects.”

If you don’t know who your representative is, you can find them using this tool.

Why Solar Incentives Are Important

Solar energy incentives lower the financial barriers that often prevent individuals and businesses from investing in solar energy systems. This makes it easier for people to choose green energy over fossil fuels. By reducing upfront costs through tax credits, rebates, and other financial benefits, these incentives encourage more widespread installation of renewable energy systems like solar panels and wind turbines.

Solar energy incentives also help democratize energy production. Instead of relying solely on large utilities to control and distribute energy, individuals and communities are empowered to invest in, produce, and sell their own energy.

When consumers add renewable energy sources to the electric grid, the entire grid stabilizes. When large utility companies and interconnection providers refuse to add renewables to their portfolios, energy costs rise for everyone, and the grid’s overall reliability decreases.

The Inflation Reduction Act’s Current Clean Energy Incentives

The Inflation Reduction Act, passed in 2022, was the most significant piece of clean energy legislation in U.S. history. It funneled nearly $400 billion into initiatives to accelerate the transition to renewable energy. This legislation extended several existing clean energy incentives and created several new incentives to boost clean energy adoption.

These credits from the IRA (often referred to as the American Clean Energy Tax Credits) include:

• Investment Tax Credit (ITC) – IRC Section 48:
  The Inflation Reduction Act boosted the ITC to 30% (up from 26%) for solar, wind, and other clean energy projects through 2032. This credit significantly reduces the upfront cost for residential and commercial installations, and it can be further enhanced with bonus credits for meeting prevailing wage and domestic content requirements.
  The ITC also introduced a new concept called Elective Pay, which allows non-taxable entities like churches and non-profits to receive tax credits as direct payments.
• Production Tax Credit (PTC) – IRC Section 45:
  Primarily designed for wind energy, the PTC offers a per?kilowatt-hour incentive that helps secure long-term revenue stability for renewable power projects by offsetting production costs through a tax credit.
• Bonus Credits – Supplemental Provisions in IRC Sections 45 & 48:
  Additional 10% tax credits are available for projects that meet specific criteria, such as prevailing wage requirements, domestic content mandates, and location-based adders for investments in energy communities. These bonus credits can further increase the overall benefit provided by the ITC and PTC.
• Manufacturing Tax Credit – IRC Section 45X:
  The IRA introduced a tax credit to promote domestic manufacturing of clean energy components (such as solar panels, wind turbines, and battery systems) aimed at boosting domestic production, creating jobs, and further strengthening the renewable energy supply chain.

These incentives have driven investment, created jobs, and lowered energy costs nationwide. Solar installations have surged over recent years, and domestic renewable energy manufacturing has expanded substantially, partly because of the stability provided by these tax credits.

Contrary to popular belief, clean energy tax credits weren’t invented by the Inflation Reduction Act. They’ve been around for over 50 years and have even enjoyed bipartisan support.

A History of Solar Tax Credits

A widely unknown and misunderstood concept is how much energy production is subsidized. The electric grid is complex, and for modern society to function, energy needs to be both affordable and reliable. That’s why governments worldwide provide billions of dollars in tax breaks and incentives to energy companies every year to help maintain grid stability. Fossil fuel companies have benefited from subsidies for over a century.

Solar companies have received support for just over 50 years, but it wasn’t until the Investment Tax Credit (ITC) was set between 20% and 30% in the last two decades that it truly helped drive the industry forward.

• 1978 – The Energy Tax Act of 1978 set the first federal solar ITC at 10% of project costs. ? Congress extended and modified this credit through the early 1980s (at one point increasing it to 15% and later phasing it back down to 10%), eventually making a 10% solar ITC permanent in 1992?.
• 1992 – The Energy Policy Act of 1992 established the PTC for renewable electricity. Originally aimed mainly at wind power, it provided 1.5¢ per kWh for the first 10 years of a project’s operation. Solar was not initially eligible for the PTC, but this law reaffirmed the permanent 10% ITC for solar.
• 2005 – President George W. Bush signed the Energy Policy Act of 2005, a landmark energy bill establishing a 30% ITC for solar investments?. This included a new 30% residential solar credit (capped at $2,000 at that time) in addition to the uncapped commercial credit. The 30% rate was initially temporary but was later extended by the Obama administration. Since the Energy Policy Act was signed into law, the solar industry has grown by 200X.
• 2008 – The Emergency Economic Stabilization Act of 2008 (enacted under President Bush and continued by President Obama) extended the 30% ITC for eight more years and removed the $2,000 cap on the residential credit?.
• 2009 – In response to the financial crisis, the American Recovery and Reinvestment Act of 2009 (Obama administration) introduced a cash grant option (the Section 1603 Treasury Grant Program) in lieu of the ITC?. Solar developers could receive a direct grant equal to the credit value, addressing the lack of “tax equity” financing during the recession?. This kept solar projects moving forward when many potential tax-credit investors had no profits to offset.
• 2015 – The Consolidated Appropriations Act of 2016 (enacted Dec 2015 under President Obama) provided a long-term extension with a phase-down for the solar ITC?. It maintained the 30% ITC for projects commencing through 2019, then scheduled step-downs: 26% for 2020, 22% for 2021, and thereafter dropping to 10% for commercial and 0% for residential in 2022?. Congress chose this approach as part of a bipartisan deal (which also lifted the ban on crude oil exports).
• 2020 – In late 2020, under President Trump, Congress extended the phase-out schedule for solar credits by two years?. COVID-19 relief legislation (Dec 2020) kept the ITC at 26% for projects begun in 2021 and 2022 (instead of dropping further), with 22% for those begun in 2023?. There was speculation that President Trump might veto this extension, but he ultimately signed it into law?.
• 2022 – The Inflation Reduction Act (IRA) of 2022, passed under President Biden, not only renewed and increased these clean energy tax credits but also redesigned them. It restored the ITC to 30% and guaranteed it for at least a decade, revived the PTC for solar and other renewables, and introduced bonus credits and elective pay.

Trump’s Vision: A Shift Toward Fossil Fuels

President Trump has repeatedly criticized the clean energy tax credits embedded in the IRA, calling them a “green new scam” and vowing to cut them and redirect funds toward fossil fuel extraction with his slogan “drill, baby, drill.” His administration is seeking to reduce federal spending on renewable energy incentives and targeting both the ITC and PTC for reform.

Shortly into his first term, Trump paused all unspent Inflation Reduction Act disbursements. This action was part of two larger executive orders, “Declaring an Energy Emergency” and “Unleashing American Energy,” which excluded solar and wind energy from the administration’s definition of energy.

From the executive order:

“(a) The term “energy” or “energy resources” means crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals, as defined by 30 U.S.C. 1606 (a)(3).”

This directive ordered agencies to halt funding (including for projects already under contract) to allow for a “review of disbursement processes.”

The funding freeze has left many large-scale projects in limbo, causing delays and cancellations. Contractors, nonprofits, local governments, and even Native American tribes have reported halted funding, and some have had to lay off employees and halt operations.

The Office of Management and Budget has directed agencies to pause grants and loans in several areas, including climate, energy, and infrastructure projects.

With funding on hold, many federally obligated projects face cancellation or significant delays, which can have broader economic repercussions, disrupting local economies and undermining long-term planning for energy and infrastructure improvements.

Thankfully, some of the frozen federal funding has recently started flowing again. Pennsylvania Governor Josh Shapiro managed to unfreeze $2 Billion in funding earmarked for his state with a lawsuit against the administration. He reiterated in a recent statement that the freezing of federal funds appropriated by Congress is illegal, saying, “You don’t need to be a former attorney general or even a lawyer to understand this.”

What You Can Do to Protect the Tax Credits

Efforts to protect clean energy tax credits are happening nationwide, and your voice matters.

At Exact Solar, we’ve been working closely with the Solar Energy Industries Association (SEIA) to advocate for these credits and ensure they remain in place. Our team joined thousands of other solar companies in signing a letter to local representatives, and we’ve met with our local representative’s office to emphasize their importance.

We can’t stop there. Protecting these tax credits requires community action.

If you support clean energy and want to see continued investment in solar technology, it is critical that you contact your Congressional Representative and urge them to keep clean energy tax credits intact. Use this tool to find your local representative’s contact information to call or email their office to set up a meeting, and ask them to commit to supporting clean energy tax credits.

Cover Photo: Beyfilmz Media LLC.