How to Ask Your Solar Installer About 48E Tax Credit Passthrough
Solar lessors were never obligated to pass through the 30% Section 48E investment tax credit — and since 26 USC 48E(i) denied that credit for solar leased to a home, a residential lease signed today generally has no 30% behind it at all. Here's what that changes about the questions you ask before signing.
What Is the 48E Credit?
Section 48E (the Clean Electricity Investment Credit) offers a 30% federal tax credit on qualifying solar installations. It is the credit that survived the OBBBA changes that sunset the older residential Section 25D credit at the end of 2025.
Unlike Section 25D (which a homeowner claimed directly on their personal return), 48E is claimed by the system owner. For a leased or PPA system, the system owner is the installer or leasing company, not the homeowner. They own the equipment on your roof, so they capture the credit.
This creates a transparency gap. The lessor pockets the credit, and there is no legal requirement to pass any of it through to the homeowner. Whether you benefit at all depends entirely on the installer's pricing decisions, and on whether you know to ask.
One rule now overrides all of it for homes: 26 USC 48E(i) denies the 48E credit for solar property leased to a home (effective tax years beginning after July 4, 2025). A residential lease generally has no 30% credit to pass through on new contracts. Commercial and rental-property projects that began construction before July 4, 2026 can still claim 48E. Whether a PPA structured as a power sale (not an equipment lease) avoids 48E(i) is an open question — ask which code section and ownership structure supports any “we still get the 30%” pitch.
Why Passthrough Matters
On a $30,000 system, the 30% credit is worth $9,000 — which is why passthrough decided who captured the value on pre-2026 third-party-owned deals, and why it still decides pricing on commercial and rental projects grandfathered by a pre-July-4, 2026 construction start.
Historically, not all installers passed it through equally. Some competed aggressively on price and folded nearly the entire credit into your quote. Others kept most or all of it as margin, offering a “discount” far smaller than the credit they captured, or no discount at all.
Because the credit was embedded in financing terms rather than handed to you as a line item, you couldn't tell who was passing it through by looking at a monthly payment alone. For new residential leases the question has changed shape — 48E(i) means there is generally no credit behind the price at all — but for commercial and rental deals, and for anyone evaluating a contract signed before the denial took effect, the passthrough question is exactly the one to ask.
The 3 Passthrough Patterns
Installer pricing on credit-backed deals fell into three recognizable patterns. Read them as history for residential leases (pre-2026 contracts signed while the passthrough existed) and as a live framework for commercial and rental projects grandfathered by a pre-July-4, 2026 construction start. Each one describes how much of the 30% credit reached the system price.
Aggressive Passthrough
25–40% below retail- What it means:
- The installer passes through most or all of the 30% credit. You see a system price significantly below typical retail.
- Who does this:
- Competitive lessors and some regional installers using the credit to win market share.
- Verdict:
- Best deal for the homeowner. You capture nearly the full value of the credit.
Partial Passthrough
10–20% below retail- What it means:
- The installer passes through a portion of the credit and keeps the rest as margin.
- Who does this:
- Many national leasing companies. They advertise a "discount" that sounds good but is less than the full credit value.
- Verdict:
- Acceptable but not optimal. You're leaving money on the table. Negotiate.
No Passthrough
At or above retail- What it means:
- The installer keeps the ENTIRE 30% credit. Your lease/PPA price is the same as (or higher than) a cash purchase with no credit applied.
- Who does this:
- Installers banking on the fact that homeowners don't know to ask. Sometimes the "low monthly payment" obscures that you're paying full freight.
- Verdict:
- Red flag. Walk away or demand the credit be reflected in your price.
On a new residential lease, assume No Passthrough by default — 48E(i) means there is generally no credit behind the price, so that pattern is the statutory norm rather than an installer sin. The patterns still fully apply to commercial and rental grandfathered projects, and to residential contracts signed before the denial took effect.
The One Question to Ask
“Which code section and ownership structure supports the 30% — and does 48E(i) apply?”
How to read their answer:
- If they can't name the code section, suspect a stale script — the 30% passthrough pitch predates 48E(i).
- If they say “the installer claims 48E and passes it through” on a residential lease, cite 48E(i): that credit is denied for solar leased to a home on new contracts.
- For commercial and rental deals, ask for the pre-July-4, 2026 construction-start documentation in writing — a real grandfathered credit is documentable.
- For a PPA, note that whether a power-sale structure avoids 48E(i) is unsettled — get the claimed basis in the contract, not only verbally. If it isn't on paper, it isn't real.
Red Flags Checklist
Any of these should make you pause and dig deeper before signing:
- Installer won't put the credit value or passthrough in writing.
- Monthly payment comparison is the only number shown: no total system cost.
- "You don't qualify for the tax credit" used to steer you into a lease — owned residential systems have no 25D credit anymore, but 48E(i) means a residential lease generally doesn't carry one either.
- Any "we still get the 30%" pitch on a residential lease that can't name the code section and ownership structure behind it — 48E(i) denies the residential lease credit.
- Price is identical whether you buy or lease, which historically meant the lease wasn't passing through 48E.
- Salesperson can't explain the difference between Section 25D and Section 48E.
Section 25D vs 48E: Quick Comparison
| Section 25D (Residential) | Section 48E (Clean Electricity) | |
|---|---|---|
| Who claims it | The homeowner | The system owner (often the lessor) |
| Applies to | Cash & loan purchases | Commercial & rental projects — 48E(i) denial for residential leases; PPA treatment unsettled |
| Credit value | 30% | 30% |
| Homeowner guarantee | You got the full credit (through 2025) | Generally none on new residential leases (48E(i)); commercial/rental deals only if the owner passes it through |
The credit value is identical at 30%; the difference is entirely about who controls it. With 25D you held the credit; with 48E the system owner does — and on residential leases, 48E(i) removes the credit entirely, leaving nothing for the lessor to pass through. On commercial and rental deals, your access still depends on the owner's pricing.
Related Resources
PPA Contract Decoder
Decode the fine print in a Power Purchase Agreement: escalator clauses, buyout terms, and where the credit value is (or isn't) reflected.
OBBBA Tax Credit Deadline Tracker
Track the Section 25D sunset and 48E phase-out timelines so you know which credits are still alive when you sign.
Section 48E Pass-Through Mechanics
The technical deep dive on how the commercial Section 48E credit reaches homeowners through leases and PPAs.
Why trust this guide
EnergyTools is independent and takes no installer-paid placement. The 48E passthrough patterns here describe pre-2026 residential deals and commercial/rental structures. Since 26 USC 48E(i) denied the residential lease credit, a new residential lease generally has no 30% behind it — verify any “we still get the 30%” pitch against the code section and ownership structure. The purpose of this guide is to make that verification easy. Last updated: August 2026.