Updated September 22, 2026. Originally published June 4, 2025. Reviewed for tax accuracy by Andy Schell, Sr. Marketing Manager on September 14, 2026.
The One Big Beautiful Bill Act, signed July 4, 2025, ended the 30% residential solar tax credit for systems placed in service after December 31, 2025. The 30% commercial credit (Section 48E) still applies to systems placed in service by December 31, 2027, or by December 31, 2030 if safe harbored by the July 4, 2026 deadline.
What Did the One Big Beautiful Bill Act Change for Solar Tax Credits?
The act, passed as H.R. 1 and signed into law on July 4, 2025, rewrote the timelines for both federal solar credits. Section 25D, the residential credit, ended nine years earlier than scheduled. Section 48E, the credit that businesses, farms, and nonprofits use, kept its 30% rate and 10% adders, but gained a hard end date and new equipment-sourcing rules. Depreciation was improved rather than cut, and credit transfers and direct pay were left alone.
Here’s a breakdown of where the solar tax credits stand after the passing of the Big Beautiful Bill:
The Residential Solar Tax Credit (Section 25D) Ended on December 31, 2025
If you own your home and paid for your solar system with cash or a loan, the 30% federal credit is no longer available for systems placed in service on or after January 1, 2026. There was no phase-down and no start-of-construction exception. The system had to be fully installed and operating by December 31, 2025 to qualify, per the IRS Residential Clean Energy Credit page.
If your system was placed in service in 2025 or earlier, nothing changed for you. You claim the credit on that year’s return, and any portion you could not use carries forward to later tax years.
Leases and power purchase agreements work differently. The company that owns the system claims the commercial credit under Section 48E and may pass part of the savings through in your monthly rate. Whether that is a good deal depends on the contract, so compare the lifetime cost of the lease against a cash or loan purchase without the credit before you sign.
The Commercial Solar Tax Credit (Section 48E) Is Still 30% Through 2027
Businesses, farms, and nonprofits can still claim the 30% credit, but the clock is running. Under the IRS Clean Electricity Investment Credit rules, there are now two tracks:
- Construction began by July 4, 2026 (physical work started, or the 5% safe harbor was met). The project has up to four calendar years after the year construction began to be placed in service, which means as late as December 31, 2030 for projects that started in early 2026. IRS Notice 2025-42 sets the begin-construction standard and limits the 5% safe-harbor test to solar systems of 1.5 MW AC or less.
- Construction did not begin by July 4, 2026. The system must be placed in service, meaning installed, interconnected, and producing power, by December 31, 2027. This is the rule that applies to any commercial project starting today.
Systems under 1 MW AC qualify for the full 30% without prevailing-wage and apprenticeship requirements, which covers most rooftop and ground-mount systems for a single business or farm. The 10% adders for energy communities and domestic content survived the bill.
For how the credit is calculated, how the adders stack, the recapture rules, and what happens if you cannot use the full credit in one year, see our guide to how the solar tax credit works.
Three things the bill did not take away: depreciation, which businesses combine with the credit (the act restored 100% bonus depreciation for equipment acquired after January 19, 2025, instead of letting it phase down); the ability to sell the credit to another taxpayer under Section 6418; and direct pay for nonprofits, schools, and municipalities.
FEOC Rules: What the Foreign Sourcing Requirements Mean for Your Project
The bill added “foreign entity of concern” limits aimed at equipment from companies tied to China, Russia, Iran, and North Korea. They apply to commercial projects that began construction after December 31, 2025, which now means every new project.
- A minimum share of the project’s manufactured-product value must come from manufacturers that are not prohibited foreign entities: 40% for projects that begin construction in 2026, rising 5 points a year to 60% for projects that begin construction after December 31, 2029.
- IRS Notice 2026-15, issued February 12, 2026, set the cost-ratio calculations and interim safe harbors that let installers document compliance with manufacturer certifications.
- For a standard commercial system, this is an equipment-selection and paperwork requirement, not a disqualifier. Ask your installer which modules, inverters, and racking they are sourcing for your project and how they will document it.
What Happens to Your Investment Payback Without the Tax Credit?
Homeowners. For a purchased home system, this is no longer a hypothetical. Using a 15 kW system at $43,890:
- With the 30% credit (systems placed in service by December 31, 2025): net cost $30,723, payback about 11 years, 10.64% return on investment.
- Without the credit (systems placed in service in 2026 or later): full $43,890, payback about 16 years, 7.45% return.
Businesses. The credit is still on the table through 2027, and this is what it is worth. Using a 100 kW system at $223,900:
- With the 30% credit plus depreciation (placed in service by December 31, 2027): net cost $103,309, payback about 9 years, 13% return on investment.
- With depreciation only (placed in service after December 31, 2027): net cost $161,051, payback about 14 years, 8.3% return.
Electric rates keep rising, which shortens payback over time even without incentives. These figures are Paradise Energy estimates based on mid-2026 system pricing. To see the range we measure across real commercial projects, read our analysis of the average ROI for commercial solar panels, or run your own building through the solar ROI calculator.
Solar Tax Credit Deadlines at a Glance
- December 31, 2025: last day for a residential system to be placed in service and claim the Section 25D credit. Also the cutoff after which FEOC sourcing rules apply to new commercial construction.
- July 4, 2026: begin-construction or safe harbor cutoff for commercial projects to keep the four-year completion window. This date has passed.
- December 31, 2027: placed-in-service deadline for every commercial or agricultural project that did not begin construction by July 4, 2026.
- December 31, 2029: outside placed-in-service date for projects that were safe harbored in 2025.
- December 31, 2030: outside placed-in-service date for projects that were safe harbored by July 4,2026.
What You Can Do Right Now
- Business owners and farms: December 31, 2027 sounds far away. It is not, once you account for a site assessment, engineering, permitting, utility interconnection approval, and equipment lead times. Each step takes weeks to months. If you want the 30% credit on a project that has not started, the design and interconnection work needs to begin now, not in 2027. A custom quote with a full cost breakdown and 30-year cash flow shows exactly what the credit is worth on your building.
- Homeowners: There is no federal credit left to chase, which removes the deadline pressure and puts the decision back on fundamentals: your electric rate, your roof, and how long you plan to own the home. Net metering, state programs, and solar renewable energy credits vary by state. Our residential solar team can run the numbers without the credit so you see the real payback.
Frequently Asked Questions
Is the solar tax credit going away?
For homeowners who buy their system, it already has. The 30% residential credit (Section 25D) does not apply to systems placed in service after December 31, 2025. For businesses, farms, and nonprofits, no: the 30% commercial credit (Section 48E) remains available for systems placed in service by December 31, 2027, and through December 31, 2030 for projects that began construction by July 4, 2026.
When does the commercial solar tax credit end?
December 31, 2027 is the placed-in-service deadline for any commercial or agricultural solar project that did not begin construction by July 4, 2026. Projects that did begin construction by that date have up to four calendar years after the year construction began, which means as late as December 31, 2030 for a 2026 start.
Can I still safe harbor a commercial solar project?
The begin-construction window closed on July 4, 2026. Projects that started physical work or met the 5% safe-harbor test by that date keep their four-year completion window. A commercial project starting today does not need to safe harbor; it needs to be placed in service by December 31, 2027 to claim the 30% credit.
Did the One Big Beautiful Bill change solar depreciation?
It improved it. The act restored 100% bonus depreciation for equipment acquired after January 19, 2025, which had been phasing down. Depreciation also outlives the Section 48E credit: a business placing a system in service in 2028 or later can still depreciate it; it simply does not get the 30% credit on top.
Do the FEOC rules apply to my project?
If your commercial project began construction after December 31, 2025, yes. A minimum share of the manufactured-product value must come from manufacturers that are not prohibited foreign entities, starting at 40% for 2026 construction starts. IRS Notice 2026-15 sets the calculation and interim safe harbors. Most standard commercial systems can meet the requirement with qualifying equipment and manufacturer certifications; your installer should be able to show you how.
Final Thoughts
The One Big Beautiful Bill Act took the residential credit off the table and put a hard 2027 end date on the commercial credit. For a business or farm, the incentive is still worth 30% or more of the project cost, and the practical deadline for starting is much closer than the legal one. Our local solar consultants can tell you whether your project fits inside the window. Request your custom quote to get started.
