ITC Status Check

The federal solar tax credit landscape changed significantly with the One Big Beautiful Bill Act (OBBBA). Section 25D, which provided a 30% credit for owned residential systems, expired on December 31, 2025. However, Section 48E still provides a 30% Investment Tax Credit for qualifying projects — including leased systems, PPAs, commercial properties, rental properties, and projects that began construction before July 4, 2026. The credit you qualify for depends on your ownership structure, property type, and installation timeline.

It depends on which credit you're asking about. The Section 25D Residential Clean Energy Credit — the one most homeowners used to claim 30% back on owned systems — expired December 31, 2025. The Section 48E Clean Electricity Investment Credit remains active for leases, PPAs, commercial installations, and rental properties, provided construction began before July 4, 2026. Many websites still show outdated information claiming 30% is available for all residential purchases — that is no longer accurate for owned systems.

You may qualify for the 30% federal solar tax credit under Section 48E if: (1) you lease your system or use a Power Purchase Agreement (PPA), (2) the installation is on a commercial or rental property, (3) you are a tax-exempt entity using the direct pay election, or (4) your project began construction before the July 4, 2026 deadline. Owned residential systems on primary residences no longer qualify for any federal credit as of January 1, 2026.

For Section 48E eligibility, the IRS requires that physical construction of the solar facility began before July 4, 2026. This can be satisfied two ways: (1) the Physical Work Test — actual physical work of a significant nature began on the project, or (2) the 5% Safe Harbor — at least 5% of the total project cost was paid or incurred. For residential projects under 1.5 MW, the 5% Safe Harbor is typically easier to meet. Permitting, financing, and planning do NOT count as beginning construction.

Yes, rental properties may qualify for the Section 48E Investment Tax Credit at 30%, provided the project meets the construction-begin deadline of July 4, 2026. Since rental properties are considered business/investment property rather than personal residences, they fall under Section 48E rather than the expired Section 25D. The credit is claimed on IRS Form 3468 with your business tax return.

With a lease or PPA, the installation company owns the system and claims the 30% federal tax credit under Section 48E — not you. However, the installer typically passes some of this benefit to you through lower monthly payments. Your benefit is indirect: monthly payments that are often 10-20% below your current utility bill. You do not need to file any tax forms related to the credit.

FEOC stands for Foreign Entity of Concern. Under the OBBBA, solar projects using panels from prohibited foreign entities may be disqualified from claiming the Section 48E tax credit. The Treasury Department maintains a list of prohibited manufacturers. If your panels come from an FEOC-flagged manufacturer, your 48E credit could be denied. Always ask your installer for FEOC compliance documentation before signing a contract.

A solar system is considered 'placed in service' when it is fully installed, interconnected with the utility grid, and generating electricity. This typically corresponds to when you receive Permission to Operate (PTO) from your utility company. For the expired Section 25D, the credit was based on the placed-in-service date. For Section 48E, the system must be placed in service within 4 years of beginning construction.