Commercial Solar Tax Credit 2026–2027: 48E Deadlines, Bonus Depreciation & How Businesses Still Qualify
Businesses can still claim the 30% commercial solar tax credit (Section 48E) if the system is placed in service by December 31, 2027, plus 100% bonus depreciation. Deadlines, rules, and a worked example.
Last reviewed by Lenny Whiting, attorney (NV, UT) and CPA (NV)
Short answer: yes, a business can still claim the federal solar tax credit in 2026 and 2027. The One Big Beautiful Bill Act (OBBBA, July 2025) put an end date on the credit rather than repealing it. A solar project that did not begin construction by July 4, 2026 now has to be placed in service by December 31, 2027. Combined with 100% bonus depreciation, the first-year federal benefit can be more than half of the system's cost for a profitable business.
What is the commercial solar tax credit (Section 48E)?
Section 48E, the Clean Electricity Investment Credit, is the federal investment tax credit (ITC) for business-owned clean electricity facilities placed in service after 2024. It replaced the older Section 48 energy credit for new solar projects. The credit equals a percentage of the project's eligible cost basis: panels, inverters, racking, wiring, and related installation. It is claimed in the year the system is placed in service, on Form 3468.
How much is the credit?
| Component | Rate | When it applies |
|---|---|---|
| Base credit | 6% | Any qualifying project |
| Full credit | 30% | Maximum net output under 1 MW (AC), or prevailing wage and apprenticeship requirements met |
| Domestic content bonus | up to +10 points | Steel, iron, and manufactured-product thresholds met |
| Energy community bonus | up to +10 points | Project located in a qualifying energy community |
Most small and mid-size business systems (rooftops, carports, and ground mounts for a single facility) are under 1 MW. They qualify for the 30% rate without tracking wages and apprenticeships.
What are the 2026–2027 deadlines?
- Began construction by July 4, 2026: the project generally keeps the credit if it is finished within the four-year continuity safe harbor. Treasury's tighter begin-construction rules (Notice 2025-42) were vacated by a federal court in June 2026, and the guidance may still change. Document physical work carefully.
- Did not begin construction by July 4, 2026: the system must be placed in service by December 31, 2027. Commercial projects often take 6 to 18 months from contract to permission to operate, so the practical decision window is the next few quarters.
- Foreign-entity (FEOC) rules: projects that begin construction after December 31, 2025 must also meet the "material assistance" limits on components from prohibited foreign entities. Ask your installer for supply-chain documentation in writing.
How does bonus depreciation stack with the credit?
OBBBA permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025. Solar property qualifies, so the business can deduct the depreciable basis in the first year instead of over the MACRS schedule. When you claim the credit, the depreciable basis is reduced by 50% of the credit, so a 30% credit reduces basis by 15%.
Worked example: a $1,000,000 commercial solar system
| Line | Amount |
|---|---|
| System cost (under 1 MW AC) | $1,000,000 |
| Section 48E credit at 30% | $300,000 |
| Basis reduction (50% × credit) | −$150,000 |
| Depreciable basis | $850,000 |
| Tax saved by 100% bonus depreciation at 37% | $314,500 |
| Total first-year federal benefit | ≈ $614,500 (61% of cost) |
This illustration ignores state taxes, financing, utility savings, and the limits below. It assumes the owner has enough active (non-passive) income and tax liability to use the full credit and deduction in year one. Try your own numbers in the solar tax calculator.
Who can actually use the benefit?
Passive activity rules
If you invest in a solar project but don't materially participate in it, the credit and depreciation are generally passive under Section 469. They offset only tax on passive income, and the excess is suspended. An operating business that installs solar to power its own facility is usually treated differently from a passive investor, so the structure matters.
At-risk and general business credit limits
The credit is limited to the amount you are economically at risk for. As a general business credit, it generally cannot reduce your tax below the greater of your tentative minimum tax or 25% of your regular tax above $25,000. Unused credits carry to other tax years.
Recapture
The credit vests over five years. If you sell the system or take it out of business use early, the unvested portion is recaptured, at 20% for each remaining year.
No tax appetite? Sell the credit
A business that can't use the credit can sell it for cash to an unrelated buyer under Section 6418. See our guide to transferable solar tax credits. Homeowners should read what happened to the residential solar credit, which ended for systems completed after 2025.
Commercial solar tax planning checklist
- Model your federal tax liability for 2026–2028 to confirm you can absorb the credit and depreciation.
- Choose the ownership entity (operating company, real estate LLC, or separate project entity) with the passive rules in mind.
- Confirm the system size (AC) and whether prevailing wage and apprenticeship rules apply.
- Get FEOC/material-assistance documentation and a realistic placed-in-service date from the installer.
- Build in contract protections in case the system misses December 31, 2027.
- Coordinate state incentives, utility programs, and any USDA REAP grant (for eligible rural businesses and farms).
Frequently asked questions
Can businesses still get the solar tax credit in 2026?
Yes. The commercial solar credit under Section 48E still applies to business-owned systems. The July 4, 2026 begin-construction deadline has passed, so a project that had not started construction by then must be placed in service by December 31, 2027 to qualify.
How much is the commercial solar tax credit?
The base credit is 6% of eligible cost. It rises to 30% if the project's maximum net output is under 1 megawatt (AC) or it meets prevailing wage and apprenticeship requirements. Domestic content and energy community bonuses can each add up to 10 percentage points.
Can I take bonus depreciation and the solar tax credit together?
Yes. Solar property can qualify for 100% bonus depreciation, which is permanent for property acquired after January 19, 2025. The depreciable basis is reduced by half of the credit, so a 30% credit reduces basis by 15%.
What does placed in service mean for solar?
A solar system is generally placed in service when it is installed, tested, and ready and available to produce electricity for its intended use. That usually means interconnection and permission to operate are in place. Signing a contract or paying for equipment is not enough.
Is the commercial solar tax credit refundable?
Not for most for-profit businesses. Taxable businesses use the credit against their own federal income tax, or sell it for cash under Section 6418. Direct (elective) payment of the 48E credit is mainly available to tax-exempt and government entities.
Can solar tax credits be carried forward?
Yes. An unused commercial solar credit is part of the general business credit, so it can be carried to other tax years, subject to the general business credit limitation. Ask us how the carryback and carryforward periods apply to your situation.
Can a passive investor use the solar tax credit?
In most cases, only against passive income. If you invest in a solar project you do not materially participate in, the credit and depreciation are generally passive and can offset only tax on passive income. Business owners who install solar for their own active business usually avoid this limit.
Sources
Get a solar tax plan before you sign
Our tax attorney and CPA confirm whether the credit and depreciation will actually reduce your tax, and structure the project around the December 31, 2027 deadline.
General information about U.S. federal tax law as of the review date above. It is not legal or tax advice and does not create an attorney-client relationship.