The Commercial Solar Credit Now Runs on a Placed-in-Service Deadline.
The One Big Beautiful Bill Act (signed July 4, 2025) accelerated the phase-out of clean energy tax credits. The construction-start date of July 4, 2026 has passed, so most new commercial and agricultural projects now qualify by being placed in service by December 31, 2027. The residential credit expired at the end of 2025.
The residential clean energy credit (Section 25D) expired December 31, 2025.
The information below applies to commercial, agricultural, and other business solar projects. Residential homeowners are no longer eligible for federal solar tax credits on new installations.
Federal Clean Electricity Credit (Section 48E)
The 30% investment tax credit remains available for commercial solar projects under the One Big Beautiful Bill Act. Most projects we build reach that 30% automatically: facilities with a maximum net output under 1 MW AC are exempt from the prevailing wage and apprenticeship requirements under the One Megawatt Exception. Larger facilities must meet those requirements to earn the enhanced rate, and drop to a 6% base rate without them.
Key deadline: the July 4, 2026 construction-start date has passed. Projects that did begin construction by then have a four-year window to be placed in service, provided they satisfy the continuity safe harbor, which is not automatic. Everything else must be placed in service by December 31, 2027. That is the deadline that applies to a project starting today, and it is what drives scheduling on new commercial and agricultural work.
Equipment sourcing now matters too. Projects that begin construction after December 31, 2025 must meet the new prohibited foreign entity rules to claim the credit. Only a limited share of the cost of a project's panels, inverters, racking, and other components can come from companies tied to certain countries, mainly China, including companies based there or owned or controlled from there. That share tightens each year, and a project that fails the test gets no credit at all (see IRS Notice 2026-15). We document supply chain sourcing in every commercial proposal so your tax advisor can confirm eligibility before you sign.
Tax-exempt and public entities, including churches, schools, local governments, and electric cooperatives, can still receive the credit as a direct payment through elective pay. Final eligibility should always be confirmed with current IRS guidance and your tax advisor.
- Systems under 1 MW AC earn the full 30% without prevailing wage or apprenticeship compliance
- Larger systems need prevailing wage and apprenticeship compliance, or the rate drops to 6%
- New projects must be placed in service by December 31, 2027
- Equipment must meet the prohibited foreign entity sourcing rules
- Bonus credits (Energy Community, Domestic Content) can stack on top
How MACRS Works (Example)
Based on 30% enhanced ITC, 100% bonus depreciation, and 21% corporate tax rate. Actual results depend on your tax situation.
MACRS Accelerated Depreciation
The Modified Accelerated Cost Recovery System (MACRS) allows businesses to depreciate the cost of solar property that qualifies for the clean electricity credit over 5 years. The tax value depends on the owner's tax posture and the current depreciation rules in effect when the project is placed in service.
100% bonus depreciation has been restored permanently under the One Big Beautiful Bill for qualifying property acquired after January 19, 2025. The test is when the property is acquired, not when it is placed in service, and the previous phase-down deadline has been removed. Qualifying businesses can deduct the full depreciable basis in the first year, which is a significant improvement on the reduced rates that applied in 2024 and 2025.
After claiming the ITC, 85% of the system cost remains as the depreciable basis. With 100% bonus depreciation, this full amount can be deducted in year one for qualifying taxable businesses.
Note: depreciation treatment should be confirmed against the latest tax guidance for the placed-in-service year. Consult your tax advisor.
Bonus ITC Credits
Some projects may stack bonus-credit pathways on top of the main federal credit treatment, but only when the underlying requirements are actually satisfied.
Energy Community Bonus (+10%)
Projects located in or near energy communities with closed coal mines, retired fossil fuel plants, or qualifying fossil fuel employment areas may qualify for an additional 10% ITC bonus. Subject to the same construction-start deadlines as the base credit.
Domestic Content Bonus (+10%)
Projects using American-manufactured components can qualify for an additional 10% ITC bonus. However, the premium for domestic equipment can sometimes exceed the credit value. We evaluate each project to determine whether domestic content sourcing is a net benefit or a net cost. Subject to the same construction-start deadlines as the base credit.
USDA REAP Grant Program
The USDA Rural Energy for America Program (REAP) provides grants, now up to $500,000 for a renewable energy system, to rural and agricultural businesses. REAP can be combined with federal credit treatment and MACRS depreciation to reduce your out-of-pocket investment in solar energy.
New rules as of October 16, 2026. USDA published a new REAP rule on October 1, 2026. A project must now be fully built and running before you apply, with 12 months of actual production or savings data and 12 months of data from before the installation. The owner must cover at least 75% of project cost, so a grant pays for a quarter of the cost at most, and the rule limits large ground mounts on cropland. USDA has not yet published the funding notice that will open applications. Guaranteed loans remain available for up-front costs, but since August 2025 ground-mount solar over 50 kW is not eligible for them, and a grant and loan together cannot exceed 75% of project cost. Because new projects must be placed in service by December 31, 2027 for the federal credit, the plan for many farms is to build first and apply for REAP after a year of operation. Talk to us before you assume a project does not pencil.
- Up to $500,000 per renewable energy system; the owner covers at least 75% of cost
- Available for rural and agricultural businesses
- Can be stacked with ITC and MACRS
- Apply only after a year of operation; USDA's first funding notice under the new rule is still pending
Combined Savings Example
A qualifying rural business can potentially combine REAP, ITC, and MACRS to offset the vast majority of their solar investment cost.
Note: REAP grants are generally taxable income (reported on Form 1099-G), and because they are taxed they do not reduce your depreciable basis or ITC-eligible basis. The ITC itself reduces your depreciable basis by half the credit amount. Consult your tax advisor for details specific to your situation.
See How Much You Can Save
Use our calculator to estimate your savings with ITC, MACRS, and bonus credits, or contact us for a detailed incentive analysis tailored to your project.