Two years after the Inflation Reduction Act was signed, few topics generate more attention in the solar industry than domestic content. By 2025, the bonus credit tied to U.S. manufacturing is fully embedded in project finance models, shaping procurement strategies and guiding supplier conversations. It is not an add-on—it is part of the baseline.
How the Bonus Works in 2025
At its simplest, the domestic content bonus boosts the value of federal clean energy tax credits when projects can prove enough of their equipment is manufactured in the United States.
For projects using the Investment Tax Credit (ITC), the bonus can raise the credit rate by 10 percentage points. A 30 percent ITC becomes 40 percent when domestic content requirements are met and the project is either under 1 MW, began construction before January 29, 2023, or complies with prevailing wage and apprenticeship standards. If none of those apply, the increase is only two percentage points.
For projects using the Production Tax Credit (PTC), the rules are simpler. Any project that meets domestic content requirements receives a 10 percent increase in the per-kilowatt-hour credit amount, regardless of size or labor compliance.
The math looks straightforward, but eligibility depends on detailed IRS definitions of what counts as “manufactured in the U.S.”
Shifting Guidance and Rising Expectations
The IRS has been rolling out domestic content guidance gradually, and each round has reshaped how developers model projects.
The first framework in 2023 (Notice 2023-38) explained how steel and iron must be 100 percent U.S. melted and poured, and set the stage for calculating manufactured product percentages.
In 2024, the elective safe harbor (Notice 2024-41) provided preset cost percentages for modules, racking, inverters, and storage equipment. That simplified compliance modeling and gave investors more confidence.
The 2025 update (Notice 2025-08) refined those tables, separating rooftop and ground-mount PV and assigning extra value to modules built with U.S. wafers and cells.
Each notice has reduced uncertainty, but it has also raised the bar. Developers now need supplier attestations that match IRS definitions, and investors expect domestic content assumptions to be spelled out in project documentation.
Why It Matters for Developers and EPCs
The bonus is now a standard line item in project models. Investors and lenders want to know whether a project qualifies before they commit. Developers are weighing the premium for U.S.-made equipment against the value of the extra credit, often finding the bonus outweighs the cost.
Procurement teams are adjusting strategies to prioritize components with the greatest impact on compliance—modules, racking, inverters, and piles. Balance-of-system equipment that was once secondary, like combiner boxes or AC panels, can now determine whether a project clears the threshold.
For EPCs, the stakes are high. The ability to prove domestic content compliance can be the difference between a project moving forward or being passed over in a competitive bid.
Supply Chain Ripple Effects
Manufacturers are responding to this demand. Module producers are expanding U.S. assembly lines, while racking suppliers emphasize their use of domestic steel. Inverter and BOS equipment makers are preparing documentation packages so developers can demonstrate compliance with less friction.
This shift is not only about securing sales. It is about providing confidence. A clear supplier letter verifying where a product was manufactured can carry as much weight in financing discussions as the product spec sheet.
A Project Example
Take a 20 MW ground-mount project in Texas. Without domestic content, the project would earn a 30 percent ITC worth around $15 million. With domestic steel piles, U.S. racking, domestic inverters, and modules that qualify under the safe harbor, the ITC rises to 40 percent. That additional 10 percentage points adds roughly $5 million in tax credit value.
For the developer, that difference covers the premium for domestic equipment and still improves returns. For investors, it strengthens the project’s financial profile and reduces risk. For suppliers, it represents a concrete incentive to scale U.S. production.
Challenges Ahead
Not every project can claim the bonus. Developers face three persistent challenges.
Evolving thresholds: The percentage of manufactured products that must be U.S.-made rises over time—45 percent in 2025, 50 percent in 2026, 55 percent in 2027.
Supplier documentation: Without formal attestations that align with IRS definitions, projects cannot prove compliance. Not all vendors are prepared to provide them.
Supply constraints: Domestic capacity is expanding, but demand for qualifying modules and upstream materials still exceeds available supply. Developers may have to balance compliance with construction schedules.
Common Questions
What percentage of solar components must be U.S.-made in 2025?
Projects beginning construction in 2025 must show that 45 percent of manufactured product costs are domestic, plus 100 percent of structural steel and iron.
Which solar components count toward domestic content?
Modules, racking, piles, inverters, MLPE, and other BOS equipment count. Interconnection gear like substations is generally excluded under the safe harbor.
How does the safe harbor option work?
Instead of gathering cost data from every manufacturer, developers can use IRS tables that assign preset percentages to each component. If enough of those components are domestic to meet the threshold, the project qualifies.
Looking Ahead
The domestic content bonus has become one of the defining provisions of the IRA. It influences procurement, financing, and supply chain investment all at once. For projects that can qualify, the financial impact is significant. For manufacturers, the rules have created a durable demand signal for U.S.-made products.
Next in the series: We will compare how the bonus applies under the ITC versus the PTC, and why some projects see the full 10 percent increase while others qualify for only two.
Disclaimer: This article is for informational purposes only. Mission Solar Energy does not provide tax or legal advice. For guidance on qualifying for federal credits, consult with a tax professional or legal advisor.