03/2026 UPDATE: Important Changes to Solar Tax Credits
Note: The landscape for solar incentives has shifted following the passage of the One Big Beautiful Bill (OBBB) Act. As of January 1, 2026, the Section 25D federal tax credit for customer-owned residential systems has officially expired. However, homeowners can still capture significant federal savings through third-party ownership models (Leases and PPAs), which remain eligible for the Section 48E credit through December 31, 2027.
Additionally, we have updated our project guidelines regarding Foreign Entity of Concern (FEOC) restrictions. While new federal sourcing rules have been introduced for some sectors, these regulations do not apply to the residential systems we are currently deploying. You can move forward with your solar transition without the need to navigate these specific complexities.
A recent Treasury ruling of the One Big Beautiful Bill Act (OBBBA) has created a short window of opportunity, specifically for commercial solar projects. While larger solar farms face a complex physical work deadline in 2026, typical commercial solar projects can secure eligibility of the ITC (Investment Tax Credit under 45Y/48E) by meeting a simpler financial threshold before July 4th, 2026. Failing to act before critical deadlines could mean losing the 30% credit entirely.
Here’s why this is the most important step you can take for your project’s financial investment.
Your Exclusive Advantage: The 5% Safe Harbor
For projects over 1.5 MW, the easier "5% Safe Harbor" option is gone as of September 2, 2025. They now must begin physical construction by July 2026. But for your "low-output" commercial solar project (nameplate capacity under 1.5 MW AC), the IRS allows you to use the 5% Safe Harbor rule to prove construction has begun.
This is a massive advantage. It means you can secure your place in line for the full Investment Tax Credit (ITC) through a financial commitment, not by rushing to start physical installation. To lock in your credit, you must incur and pay at least 5% of your total project cost on or before July 4th, 2026. Best practice is to pay for 8-10% of the total cost to avoid falling under 5% if your project’s scope changes.
What Counts Toward the 5%? It’s More Than Just Equipment
A common misconception is that you had needed to take delivery of all your panels by New Year's Eve. While this was the easiest route, it’s not the case. The rule focuses on costs you have incurred and paid.
Qualifying costs include:
- Deposits or payments for equipment (solar panels, inverters, racking).
- Design and engineering work (if properly documented and contracted).
- Other depreciable hard costs essential to the project.
Crucially, the "3.5-Month Rule" applies: If your developer has a binding contract to deliver materials within 3.5 months of your payment, the cost is considered incurred. You don’t need immediate delivery, you need a documented financial commitment.
Your Action Plan: Secure Your Incentives in 2025
The planning, design, and procurement cycle takes time. To ensure you can make a qualifying 5% payment by July 4th, 2026, you need to start the process now.
- Commit ASAP: Contact a solar developer now. The sooner you begin design and engineering, the sooner you can get equipment under contract.
- Execute a Binding Contract: Work with your developer to execute a binding purchase order. This contract is your proof of incurring the cost.
- Make a Qualifying Payment: Transfer funds for deposits or equipment purchases, ensuring the total meets or exceeds 5% of the total project cost. We recommend aiming for 8-10% to build a safe buffer.
- Document Meticulously: Keep all invoices, purchase orders, contracts, and proof of payment. This paper trail is your key to withstanding IRS scrutiny.
A Simpler, Faster Path to secure the ITC is Available, For Now
This isn't a generic call to action. This is a specific, limited-time opportunity exclusively for commercial projects. You have a simple, financial-based path to secure your tax credits and avoid future supply chain restrictions that will affect everyone else.
Don’t miss this opportunity to get the best financial benefit for your investment.
