Commercial vs Residential Solar Tax Credits (2026)

If you're comparing commercial and residential solar tax credits in 2026, there's one critical difference: commercial properties had access to the 30% federal ITC for projects that began construction before July 4, 2026; residential owned systems do not. The OBBBA's expiration of Section 25D created a significant disparity between the two.

The Federal Credit Gap

Why Commercial Solar Still Has Strong Incentives

Commercial solar installations fall under Section 48E, which was not affected by the Section 25D expiration. Commercial projects that began construction before July 4, 2026 can still claim:

• 30% base ITC on total eligible project costs
• 10% domestic content bonus if US-made requirements are met
• 10% energy community bonus if located in a qualifying area
• MACRS/GDS depreciation — 20-year recovery period for construction begun after Dec 31, 2024 (5-year if begun on/before that date; per OBBBA §168) on the solar equipment
• Bonus depreciation — 100% first-year bonus depreciation in 2026 (OBBBA permanently restored it; see IRS Notice 2026-11)

The Depreciation Advantage

MACRS depreciation is a major advantage that residential systems never had. Here's how it works:

Under OBBBA §168, commercial solar systems whose construction began after Dec 31, 2024 are classified as 20-year property under GDS (systems with construction begun on or before Dec 31, 2024 retain the prior 5-year MACRS treatment). Combined with bonus depreciation (100% in 2026), a business can deduct the entire depreciable basis of the system cost from taxable income in the first year. The effective tax benefit of depreciation depends on the business's tax rate:

• At a 21% corporate tax rate, GDS + bonus depreciation is worth roughly 20-25% of the system cost in present value
• Combined with the 30% ITC, total federal tax benefits can reach 50-55% of the system cost

Residential Options After the Credit Expired

For homeowners, the options are more limited. They include:

1. Lease or PPA: The installer claims the 48E credit and passes savings through lower monthly payments. You don't own the system, but monthly costs are typically 10-20% below your utility bill.
2. State incentives: States like NY, MA, MD, RI, and CT offer their own credits and rebates that can partially fill the federal gap.
3. Pure economics: In high-rate states (CA, MA, NY, HI), solar can still pay for itself in 10-14 years without the federal credit.

Rental Properties: A Middle Ground

If you install solar on a rental property you own, it's treated as a business asset under Section 48E — meaning the 30% credit and depreciation benefits still apply. This makes rental property solar significantly more attractive than primary residence solar in the post-OBBBA era. See our Solar Tax Credits for Rentals & Landlords guide for details.

Comparing Total Tax Benefits

For a $50,000 solar installation in 2026:

• Residential (owned, primary home): $0 federal credit. May have state credits worth $500-$5,000 depending on state.
• Commercial: $15,000 ITC + ~$10,000-$12,500 depreciation benefit = $25,000-$27,500 in federal tax benefits (50-55% of cost).
• Rental property: $15,000 ITC + depreciation benefits. Similar to commercial.
• Residential (lease/PPA): Installer claims $15,000 ITC. Your benefit is indirect through lower monthly payments.