2025 IRS Updates for Solar Tax Credits

The Inflation Reduction Act (IRA) transformed the solar Investment Tax Credit (ITC) in 2022, and the Internal Revenue Service spent the next two years writing the fine print. 2025 is the first calendar year in which most of the rules take effect. Contractors, EPCs, and module suppliers that understand the new solar tax credit framework can capture as much as 50% of project cost in federal incentives, while missteps could leave money on the table. 

Surety Bond Professionals is a family-owned and operated bonding agency with over 75 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your construction bond needs. 

Goodbye Section 48, Hello “Techneutral” Section 48E 

Projects placed in service after Dec. 31, 2024, can no longer claim the familiar solar ITC set forth in §48. Instead, they fall under the Clean Electricity Investment Credit (§48E), a technology-neutral incentive that keeps the baseline rate at 30% but ties eligibility to lifecycle‐emissions thresholds issued in final regulations on Jan 15, 2025. The same rule package covers the companion production credit in §45Y and confirms that projects for which construction began before 2025 may still elect the legacy §48 ITC. 

Domestic Content Bonus 

The IRA adds an ITC boost of 10 percentage points if steel, iron, and manufactured products meet “Made in America” minimums. Notice 20258, released February 18, 2025, updates the elective safeharbor tables for crystalline silicon PV, batteries, and wind components, and lets projects started before April 16, 2025, rely on 2024 guidance. Contractors must track supplier certificates and cost breakdowns to document compliance. 

Prevailing Wage and Apprenticeship

Failing to meet IRA labor standards cuts the credit rate from 30% to 6% (and eliminates most bonus additions). Final regulations issued June 18, 2024, outlining certified payroll, apprenticeship ratios, and cure payment procedures take full effect this year. The IRS will enforce the rules through its new prefiling registration and record retention requirements, so project owners should embed payroll platforms and apprentice agreements in subcontracts. 

Low-Income Communities Bonus Credit

For distributed projects under 5 MW (AC), the §48(e) Low-Income Communities Bonus can stack another 10% or 20% on top of the ITC. Treasury will allocate 1.8 GW of bonus capacity for the 2025 program year. The application portal opened on January 16, 2025, and closes on August 1, 2025. Developers will need to submit site control, interconnection, and community benefit paperwork. 

Elective Pay and Transfer Mechanics 

Tax-exempt entities (including tribes and municipal utilities) may elect direct payment of the credit, while taxable owners can transfer part or all of the credit to investors. Both options require a prefiling registration number before filing Form 3468 or 8835. The IRS warns that incomplete documentation will delay refunds. 

2025 Action Checklist for Contractors 

For guidance on how construction timelines and site selection affect tax eligibility, see our post on Solar Farm Development from a Construction Perspective. Otherwise, follow this action checklist below.

Design	Validate that equipment meets §48E emissions thresholds.  Model projects under both §48 and §48E if construction began in late 2024.
Supply chain	Source domestically manufactured modules, racking, and batteries when the updated safe harbor tables show the costs are favorable.
Labor	Incorporate certified payroll reporting and apprentice ratios in subcontractor and vendor agreements.  Budget cure payments as a backstop.
Paperwork	Register every facility in the IRS portal before the first invoice.  Archive domestic content certificates, payroll records, and engineering specs for 5 years.
Bonus hunts	Identify sites in low-income census tracts or on tribal land and file within the 30-day priority window.

Staying ahead of the IRS learning curve in 2025 will require tighter coordination between estimators, procurement teams, and tax advisors. But the payoff is a richer capital stack and a sharper bid on every solar job. 

The Bonds Behind the Build

As the solar industry scales up under the IRA, many projects like those tied to public land, low-income bonuses, or tribal programs will require bonding from day one. When paired with proper documentation and federal registrations, surety bonds strengthen your compliance position, help you win larger solar contracts, and build confidence with both investors and public-sector partners. Here’s how the three primary bond types support solar contractors in 2025:

• Bid Bonds protect project owners by ensuring only qualified contractors submit proposals. If a contractor backs out after winning a bid, the bond covers the owner’s financial risk.
• Performance Bonds guarantee that the work will be completed according to the IRS-qualified scope, especially important for timeline-sensitive credits and interconnection deadlines.
• Payment Bonds ensure that all subcontractors, suppliers, and laborers are paid, which is especially important when apprenticeship ratios and certified payroll are under IRS scrutiny.

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