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 projects placed in service in 2025 and later. It applies to businesses and other entities that own income-producing energy property — and it remains very much active.
The base credit is 30% for projects that meet prevailing-wage and apprenticeship requirements or come in under 1 MW, which covers most commercial rooftop systems. Two stackable 10% bonuses — domestic content and energy community — can lift it to 50%. It's claimed on IRS Form 3468.
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 generally cannot claim a federal credit on a purchased system in 2026. The practical options are state and utility incentives, which still exist in many states, or a lease/PPA where the installer monetizes the commercial credit and passes through a portion as lower rates.
The Deadline That Applies to Both Stories
For commercial projects, the most favorable 48E treatment hinges on beginning construction by July 4, 2026. 'Begin construction' has specific IRS safe harbors — physical work of a significant nature, or incurring at least 5% of project cost — so businesses weighing a 2026 project should scope timing early rather than assume the credit will be there indefinitely.
The bottom line: the federal door didn't close on solar in 2026 — it closed on the residential side and stayed open, with depreciation attached, on the commercial side.