Solar Investment Tax Credit (Solar ITC), Explained

The Solar Investment Tax Credit (ITC) is a crucial federal policy mechanism that supports the growth of solar energy in the United States. Introduced in 2006, this tax credit has significantly contributed to the exponential increase in solar installations across the country. But how can solar developers make the most out of this program? This post will delve into the specifics of the Solar ITC, 2025 updates to the program, and how LandGate helps developers streamline the solar development process.

Understanding the Solar Investment Tax Credit (ITC)

The Solar Investment Tax Credit (ITC) is a dollar-for-dollar reduction in federal income tax for anyone who purchases solar energy systems for residential or commercial use and was established by the Energy Policy Act of 2005 in response to the growing demand for renewable energy sources.

Originally, the policy was set to expire in 2007, but it has been extended several times due to its success in promoting solar energy development. The ITC initially provided a tax credit of 30% for residential and commercial solar energy systems, effectively reducing the cost of solar installations. This federal policy mechanism has played a vital role in making the United States one of the largest solar markets globally, with an average annual growth rate of 50% over the last decade.

Solar ITC Updates in 2025

Following the July 4 enactment of the “One, Big Beautiful Bill” (OBBB), many solar projects are expected to move quickly into construction to meet new deadlines, as the legislation ends certain solar tax credits early and imposes restrictions on content sourced from China. The early expiration of tax credits could have long-term impacts on the industry.

To qualify for federal solar tax credits- including the 30% Investment Tax Credit (ITC) and the Production Tax Credit (PTC)- projects must begin construction this year or by July 2026. Previously, the 48E and 45Y credits were available until the U.S. achieved a 75% reduction in greenhouse gas emissions from 2022 levels. Under the OBBB, projects starting more than 12 months after enactment must be “placed in service” (reach commercial operations) by Dec. 31, 2027.

Projects that begin construction within 12 months of enactment can still qualify for tax credits under “safe harbor” rules if a substantial portion of the project is built, allowing placement in service by mid-2030. Following a Trump-era executive order, the Treasury is expected to interpret safe harbor rules more strictly. Unlike solar and wind, grid-scale energy storage remains fully eligible for ITC and PTC under its original schedule. The 48E and 45Y credits will begin phasing out by 25% per year starting in 2032 and will expire completely on Dec. 31, 2035.

This legislation fundamentally changes how, where, and whether new solar projects are developed, altering many rules previously established by the Inflation Reduction Act. However, it doesn’t signal the end of solar. Rather, it reshapes the landscape for renewable energy, U.S. electrical infrastructure, and commercial real estate. States with strong solar resources- high-quality sites, availability, supportive regulations- and robust local incentives are likely to lead, while states that depended heavily on the ITC or PTC to bridge financial gaps may see decreased activity.

Solar Project Planning is Simplified with LandGate

LandGate is a leading provider of valuation and analytics solutions for the land industry, and offers a suite of tools that can help solar developers streamline their due diligence and project development timelines with a unique competitive advantage.

Land Valuation

LandGate's proprietary model offers accurate, real-time market valuations of land via the Solar PowerVal tool. This helps developers make informed decisions when purchasing land for solar installations, which is a crucial factor in determining the overall cost of a project and the potential amount of the ITC solar credit.

Lease Comparables

Developers can assess the fair market value of land leases for solar projects. Understanding the cost of leasing land can help ensure the project remains financially viable after accounting for these costs, thereby optimizing the benefits of the ITC.

Solar Potential Analysis

This PowerData tool uses data from various sources, including local climate, topography, and solar irradiance, to estimate the solar energy production potential of a specific piece of land. By identifying the most profitable locations for solar installations, developers can maximize their return on investment.

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