Section 48E vs 25D: What Changed for Solar Tax Credits in 2026
The 2025 budget law redrew the solar tax-credit map. The residential credit homeowners relied on — Section 25D — ended after 2025. The commercial credit — now Section 48E — did not. If you're trying to figure out whether you can still get a federal solar credit in 2026, the answer depends entirely on which side of that line you're on.
What 25D Was
Section 25D, the Residential Clean Energy Credit, gave homeowners 30% of the cost of a solar system back as a federal tax credit, with no income limit and no cap on system size. It was claimed on IRS Form 5695 and applied to systems the homeowner owned outright.
Under the 2025 law, that credit sunset at the end of 2025. Homeowners installing in 2026 and beyond can no longer claim it directly — a significant change from the decade of policy that came before, and the reason 'free solar' lease and PPA pitches are resurfacing (those let a third party, not you, capture the remaining commercial credit).
What 48E Is
Section 48E, the Clean Electricity Investment Credit, is the technology-neutral commercial credit that replaced the older Section 48 ITC for many projects placed in service in 2025 and later. It is aimed at businesses and other entities that own income-producing energy property. It is not the residential credit.
A 30% base for projects that meet prevailing-wage and apprenticeship requirements or come in under 1 MW, and two 10% adders sometimes described as reaching 50%, are commonly cited. Those figures are not a settled quote for a specific project. The credit is associated with IRS Form 3468. Reviewed Oct 2026, general information, not tax advice.
The Depreciation Difference
The credit is only half the commercial advantage. Businesses also depreciate the system under 5-year MACRS, and with 100% bonus depreciation they can deduct the full depreciable basis — system cost minus half the credit — in the first year. Homeowners never had access to this.
According to the U.S. Department of Energy, the combination of the investment credit and accelerated depreciation is what makes commercial solar economics work. At a combined ~26% tax rate, the depreciation shield is worth roughly 22% of system cost on top of the credit itself.
Who Can Still Claim a Federal Credit in 2026
Businesses, farms, nonprofits, and government entities installing commercial-scale solar can claim Section 48E. Tax-exempt entities can even receive it as a cash payment through elective pay, and businesses can transfer (sell) credits to third parties — flexibility 25D never offered.
Homeowners installing for their own residence cannot claim the residential credit on a system installed in 2026. State and utility incentives that still exist are what this site models. A lease or PPA is a different contract. Whether the system owner can use a commercial credit, and whether any of it shows up in the rate, is not settled here.
The Deadline That Applies to Both Stories
Commercial solar (§48E) is different — but the clock moved. Projects that missed the Jul 4, 2026 beginning-of-construction deadline generally must be placed in service by Dec 31, 2027. IRS Notice 2025-42 generally requires the Physical Work Test to establish beginning of construction before July 5, 2026. The Five Percent Safe Harbor is limited to low-output solar facilities of not more than 1.5 MW AC. Figures on this page are general information, reviewed Oct 2026, not tax advice.
The residential door closed for a 2026 install. The commercial credit is a separate question, and its percentages are not settled here.