Congress Cannot Ignore Residential Solar Tax Credit Inequities

This policy brief by RMI argues that the current design of the residential solar investment tax credit (ITC 25D) creates inequities by benefiting high-income and White residents while excluding low-and moderate-income (LMI) households who lack sufficient federal tax liability. RMI advocates for Congress to transition ITC 25D to a 'direct pay' model, similar to proposed provisions for business- and utility-scale renewables, to lower upfront costs, reduce energy burdens, and stimulate job growth in LMI communities.

• Residential solar adoption in the US is disproportionately skewed toward high-income and White residents. In 2019, only 21 percent of residential solar installations benefited low-and moderate-income (LMI) communities, despite these residents comprising 43 percent of the US population. Furthermore, nearly half of communities with a majority of Black residents had no solar systems installed.
• The current tax-credit structure of the Investment Tax Credit (ITC 25D) is inaccessible to a large portion of the population because it requires federal income tax liability. Based on 2018 IRS data, 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 a 'direct pay' option for ITC 25D would significantly expand the number of states where LMI households could use solar loans to reduce their energy burden. RMI analysis indicates that direct pay would increase the number of states where families below the federal income tax threshold could save money with no money down from 19 states to 38 states, while decreasing utility bills by approximately 20 percent.
• Transitioning to direct pay could drive substantial economic growth and employment in LMI communities. If LMI communities reached the installation levels of high-income neighborhoods, it would result in an additional 1.2 GW of residential solar activity annually, generating over 26,400 jobs and nearly $4 billion in economic activity per year, based on an assumed cost of $3.30 per watt installed.

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} }