Posted on June 9th, 2025 

 

The Changing Landscape of Solar and EV Incentives

For years, federal tax credits have made solar energy systems and electric vehicles (EVs) far more accessible to American homeowners. These incentives have not only reduced the upfront costs of going solar or purchasing an EV, but have also driven significant growth in clean energy adoption nationwide. However, recent legislative developments threaten to change this landscape dramatically—and much sooner than most people expect.

With new legislation advancing through Congress, the future of both the federal solar tax credit and the EV tax credit is now uncertain. If you are considering installing solar panels or purchasing an electric vehicle, it is crucial to understand what’s at stake, how the proposed changes might affect your options, and why acting soon could protect your financial investment.

This guide will walk you through the current state of solar and EV tax credits, explain the legislative threats, and help you make an informed decision before these benefits potentially disappear.

Understanding Solar and EV Tax Credits: The Basics

What Are the Current Federal Incentives?

Solar Investment Tax Credit (ITC):

• What it is: The ITC allows homeowners to deduct 30% of the cost of a new solar energy system from their federal taxes.
• How it works: For example, if your solar installation costs $20,000, you could receive a $6,000 tax credit.
• Who qualifies: Homeowners who purchase and install new (not used or leased) solar systems for their primary or secondary residences.

EV Tax Credit:

• What it is: Federal tax credits of up to $7,500 for new electric vehicles and up to $4,000 for qualifying used EVs.
• Eligibility: Amounts depend on vehicle type, manufacturer, income limits, and other criteria.

These credits have been pivotal in expanding access to clean energy technologies. Since the passage of the Inflation Reduction Act (IRA), both credits were extended through 2032, fueling record growth in solar installations and EV sales. In 2024 alone, over 1.5 million EVs were sold in the U.S., a surge attributed largely to these incentives.

Why Are These Credits at Risk?

Despite their proven impact, both the solar and EV tax credits are now under threat due to shifting political priorities and budgetary pressures.

Legislative Pushback

• On May 22, 2025, the U.S. House of Representatives passed a bill proposing to end the 30% solar tax credit for systems installed after December 31, 2025. The same bill would also phase out the EV tax credit as of that date.
• The Senate is expected to review and vote on this bill by July 4, 2025. If passed, these changes could become law before the end of the year.

Budget and Policy Concerns

• Cost to Government: Critics argue that these credits cost billions of dollars annually, placing a strain on federal budgets.
• Market Impact: Some policymakers claim that the credits disproportionately benefit higher-income households and favor specific industries, distorting the market.

Political Shifts

• The current administration’s energy policy, including initiatives like “Unleashing American Energy,” has signaled a renewed focus on traditional energy sources, putting federal support for renewables under increased scrutiny.

Industry Response

• Clean energy advocates, industry groups, and environmental organizations are lobbying vigorously to preserve these credits, citing their role in job creation, emissions reductions, and economic growth. However, the outcome remains uncertain.

What Happens If the Credits Disappear?

The potential expiration of the solar and EV tax credits would have far-reaching consequences for homeowners, the clean energy industry, and the broader fight against climate change.

Financial Impact on Homeowners

• Higher Upfront Costs: Without the ITC, a typical $20,000 solar installation would cost homeowners $6,000 more out of pocket.
• EV Affordability: The loss of the EV tax credit could increase the net price of an electric vehicle by up to $7,500, potentially putting EVs out of reach for many buyers.

Environmental and Economic Consequences

• Climate Goals at Risk: Solar and EV adoption are central to achieving national carbon reduction targets. Eliminating these incentives could stall progress toward net-zero emissions by 2050.
• Job Losses: The solar industry alone supports over 250,000 American jobs. The Solar Energy Industries Association (SEIA) estimates that up to 292,000 jobs could be lost by 2028 if the credits are eliminated.
• Market Uncertainty: The sudden loss of federal incentives could disrupt the solar and EV markets, causing installation rates to drop and slowing innovation.

The Debate

• Supporters of the phase-out argue that the credits have outlived their usefulness and that market forces should determine adoption rates.
• Opponents stress that the credits level the playing field for clean energy and are essential for meeting both economic and environmental objectives.

What Should Homeowners Do Now?

If you are considering solar or an EV, the window of opportunity may be closing faster than anticipated. Here’s how you can take proactive steps:

1. Move Quickly

• Solar Installations: To qualify for the 30% federal solar tax credit, your system must be installed and operational by December 31, 2025. Delays could mean missing out on thousands of dollars in savings.
• EV Purchases: Similarly, new and used EV purchases must be completed before the deadline to secure the current tax credits.

2. Stay Informed

• Monitor Legislation: The situation is evolving rapidly. Check reliable sources such as the IRS website or EnergySage for updates.
• Consult Professionals: Speak with your solar provider, tax advisor, or local energy consultant to ensure you understand the latest requirements and timelines.

3. Explore State and Local Incentives

• State Programs: While federal credits may end, some states—like California, Maryland, and others—offer their own solar and EV incentives. These programs can help offset costs even if federal support is reduced or eliminated.
• Local Rebates: Check with your city or utility company for additional rebates, grants, or loan programs.

4. Prepare Documentation

• Solar Installations: Keep detailed records—installation invoices, payment receipts, warranty documents, and correspondence with your provider.
• EV Purchases: Save purchase agreements, proof of eligibility, and any manufacturer documentation.

How to Qualify for the Solar Tax Credit (While It Lasts)

Key Eligibility Criteria

To secure the federal solar tax credit before the deadline, you must meet the following requirements:

• Ownership: You must own (not lease) both the property and the solar energy system.
• New Installations: Only new, first-time installations qualify. Used, refurbished, or transferred systems are not eligible.
• Property Type: The system must be installed on your primary or secondary residence. Rental properties are generally not eligible.
• Operational Status: The system must be fully installed and operational by December 31, 2025, if the legislation passes as proposed.

Additional State Requirements

If you reside in Maryland, Virginia, or Washington, DC:

• Local Incentives: Each state may offer additional incentives, but requirements vary. For example, Maryland has performance standards for solar water heating systems, while Virginia and DC may have specific certification or output benchmarks.
• Compliance: Ensure your installation complies with all local codes and regulations to qualify for state and local incentives.

Types of Eligible Systems

• Solar Electric (PV) Systems: Standard rooftop solar panels that generate electricity.
• Solar Water Heating Systems: Must meet specific performance and installation standards.

How to Claim Your Solar Tax Credit

Step-by-Step Guide

1. Complete IRS Form 5695: This form, titled “Residential Energy Credits,” is submitted with your annual tax return (Form 1040).
2. Calculate Net Costs: Deduct any state or utility rebates from your system’s total cost before entering the amount on the form.
3. Transfer Credit: Enter the final credit amount on line 5 of Form 1040 to claim your savings.
4. Meet the Deadline: File your return by April 15 to avoid delays or lost credits. If you need more time, file Form 4868 for an extension—but remember, this only extends your filing deadline, not your payment deadline.

Best Practices

• Keep Records: Maintain all receipts, installation documents, and communication with your provider. The IRS may request proof of eligibility.
• Accuracy Matters: Double-check all numbers and ensure you include the installation address and accurate net costs.
• Professional Guidance: If you’re unsure about any part of the process, consult a tax professional experienced with solar incentives.

Maximizing Your Savings: The Case for Acting Now

Why Timing Is Critical

With the possibility that both the solar and EV tax credits could expire at the end of 2025, homeowners have a limited window to take advantage of these generous incentives. Acting now can help you:

• Lock in Substantial Savings: The 30% ITC can reduce your solar installation costs by thousands of dollars.
• Increase Home Value: Solar-equipped homes often sell faster and at higher prices, especially in regions prioritizing sustainability.
• Benefit from Energy Independence: Generating your own electricity protects against rising utility rates and grid disruptions.
• Support Clean Energy Goals: Your investment helps reduce carbon emissions and supports local clean energy jobs.

Real-World Impact

• Sticker Shock Avoidance: Delaying your decision could mean paying significantly more for the same solar system after 2025.
• Environmental Leadership: By acting now, you contribute to a cleaner, more sustainable future for your community.

Frequently Asked Questions

Q: What if the Senate does not pass the bill?
A: If the bill fails in the Senate, current credits may remain in place, but the political climate suggests that incentives could still be reduced or phased out in the near future. Acting now is the safest strategy.

Q: Can I still get state or local incentives if federal credits end?
A: Many states and municipalities offer their own incentives, which may continue even if federal credits are reduced or eliminated. Check with your local energy office or utility provider for details.

Q: Do I need to complete my solar installation by December 31, 2025, or just sign a contract?
A: To qualify for the federal tax credit, your system must be fully installed and operational by the deadline—contracts alone are not enough.

Don’t Miss Your Chance to Save: Take Action Today

The future of solar and EV tax credits is uncertain, but your opportunity to benefit from them is clear—act before December 31, 2025 to maximize your savings and secure your place in the clean energy movement.

At Interconnect Electric, we specialize in guiding homeowners through every step of the solar installation process, from initial consultation to paperwork and compliance. Our team stays up to date on the latest legislative developments to ensure you don’t miss out on valuable incentives.

Ready to explore solar for your home?
Contact Interconnect Electric today at (240) 751-5059 or email [email protected] for a free, no-obligation consultation. We’ll help you understand your options, navigate the evolving incentives landscape, and make a confident, informed decision.

Don’t wait—protect your savings, your home’s value, and your role in a sustainable future.
With the right team and the right timing, going solar isn’t just possible—it’s a powerful investment in your home, your wallet, and the planet.