One of the most confusing aspects of the OBBB involves Section 25D, the 30% homeowner tax credit for solar.
The language in the actual bill says that a system needs to be “paid for” by December 31, 2025. But what does that actually mean? Do you just need to pay for the system by that date to get the credit? Do you need to start construction? Does it need to be completely up and running?
Well, we (finally) have definitive language from the IRS on exactly what “paid for” means. Taken directly from the IRS website:
For purposes of the residential clean energy credit under section 25D, can a credit be claimed for property installed after December 31, 2025, or constructed after that date, if a taxpayer pays for the property on or before December 31, 2025?
No. Section 25D(e)(8)(A) provides that an expenditure with respect to an item is treated as made when the original installation of the item is completed. If installation is completed after December 31, 2025, the expenditure will be treated as made after December 31, 2025, which will prevent the taxpayer from claiming the section 25D credit. In the case of an expenditure made in connection with the construction or reconstruction of a structure, section 25D(e)(8)(B) provides that such expenditure will be treated as made when the original use of the constructed or reconstructed structure by the taxpayer begins. If such construction or reconstruction is completed and taxpayer’s original use of the structure begins after December 31, 2025, the expenditure will be treated as made after December 31, 2025, which will prevent the taxpayer from claiming the section 25D credit.
There you have it. The expenditure needs to be made before December 31, 2025… but they also redefined the “expenditure” as not counting as being “made” until the system is fully completed. So: The install must be complete by December 31, 2025. If it’s not, the homeowner can’t claim the 30% tax credit.
We have a great (free) webinar covering all the details of the OBBB, the Executive Order, and the recent guidance issued (watch on-demand at any time) — From Policy to Practice: Interpreting the Executive Order’s Impact on Solar.
Want to learn more about all things OBBB? Go to our Solar Advocacy page.
