Congress Cannot Ignore Residential Solar Tax Credit Inequities

The policy brief highlights how the current design of the residential solar investment tax credit (ITC 25D) disproportionately benefits high-income and White residents, as it requires federal income tax liability to be useful. RMI argues that transitioning to a 'direct pay' model—similar to proposed provisions for business-scale renewables—would enable over 100 million American households without sufficient tax liability to access incentives. Such a change would double the number of states where LMI families could use solar loans to reduce energy bills (from 19 to 38 states) and potentially generate an additional 1.2 GW of annual residential solar activity, creating over 26,400 jobs and $4 billion in economic activity within LMI communities.

• Residential solar adoption in the US is inequitably distributed; while low-and moderate-income (LMI) residents comprise 43 percent of the population, they only benefited from 21 percent of residential solar installations in 2019, and nearly half of majority-Black communities had no solar systems installed.
• The current ITC 25D structure is inaccessible to a majority of taxpayers; approximately 70 percent of American tax filers lack the annual tax liability to receive the full benefit, and over 40 percent have no federal income tax liability at all, resulting in zero benefit.
• Implementing direct pay for ITC 25D would double the number of US states where LMI households without federal tax liability could use a solar loan to lower their energy bills, increasing the count from 19 to 38 states and reducing utility bills by approximately 20 percent.
• If LMI communities achieved the same installation levels as high-income neighborhoods, it would result in 1.2 GW of additional annual residential solar activity, generating over 26,400 jobs and nearly $4 billion in economic activity each year.

APA

RMI (2021). Congress Cannot Ignore Residential Solar Tax Credit Inequities. https://rmi.org/resources/congress-cannot-ignore-residential-solar-tax-credit-inequities/

Chicago

RMI. Congress Cannot Ignore Residential Solar Tax Credit Inequities. 2021. https://rmi.org/resources/congress-cannot-ignore-residential-solar-tax-credit-inequities/.

Wikipedia

{{cite report |author=RMI |title=Congress Cannot Ignore Residential Solar Tax Credit Inequities |date=14 October 2021 |url=https://rmi.org/resources/congress-cannot-ignore-residential-solar-tax-credit-inequities/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2021congress, author = {{RMI}}, title = {{Congress Cannot Ignore Residential Solar Tax Credit Inequities}}, institution = {RMI}, year = {2021}, month = oct, url = {https://rmi.org/resources/congress-cannot-ignore-residential-solar-tax-credit-inequities/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }