- Buying solar (cash or loan)? The federal homeowner credit (Section 25D) ended for expenditures after December 31, 2025. A proposal showing "30 percent off" is wrong.
- Leasing or signing a PPA? The solar company, not you, may claim a business credit (Section 48E). You do not get a tax credit.
- The company's deadline: solar that begins construction after July 4, 2026 must be placed in service by December 31, 2027 to qualify. Projects that began construction earlier have longer windows.
- What to compare: the total of every payment over the full term, the escalator, and what happens when you sell the house.
Two different tax credits
| Credit | Who claims it | Applies to | Status |
|---|---|---|---|
| Section 25D | The homeowner | Solar you buy with cash or a loan | Ended for expenditures made after 2025-12-31 |
| Section 48E | The business that owns the system | Systems a company owns and leases to you, or sells you power from under a PPA | Still available, with construction and placed-in-service deadlines |
Both changes came from the 2025 federal budget law (Public Law 119-21). The law also removed the business credit for solar water heating and small wind leased to individuals for use at their homes, but, according to Grant Thornton's summary of the law, it did not limit the credit for leased solar electric panels.
The dates that matter
| Date | What happens |
|---|---|
| 2025-09-02 | New IRS rules on when construction "begins" (Notice 2025-42). Solar facilities of 1.5 MW or less, which includes home systems, can still use the 5 percent cost safe harbor. |
| 2025-12-31 | Homeowner credit (25D) ends for expenditures after this date. |
| 2026-01-01 | Facilities beginning construction after 2025 lose the business credit if they include "material assistance" from a prohibited foreign entity, defined by a cost-ratio test. |
| 2026-07-04 | Last day to begin construction without the placed-in-service deadline below. |
| 2027-12-31 | Solar facilities that began construction after 2026-07-04 must be placed in service by this date to qualify for the business credit. |
Projects that began construction earlier get more time under the IRS continuity safe harbor: according to The Tax Adviser, construction begun before December 31, 2025 has until December 31, 2029, and construction begun January 1 through July 4, 2026 has until December 31, 2030. How a leasing company applies these rules to its own systems is its business; what matters for you is that the company's tax timeline can shape its sales timeline.
Why the pitch moved to leases and PPAs
When the homeowner credit ended, the 30 percent discount that sold a lot of loan-financed systems disappeared for buyers. It did not disappear for companies that own systems on your roof. So the economics now favor the company owning the panels and selling you either the use of the system (a lease) or the power it makes (a PPA). Expect a lease or PPA to be the first offer at the door, and expect "act before 2027 ends" to become a pitch as the December 31, 2027 placed-in-service date approaches.
A lease or PPA can be a reasonable choice, especially for a household that could never have used a tax credit. It is also a 20- to 25-year contract with a company you do not choose, often with a yearly price escalator, and it has to be transferred or bought out when you sell the house. How solar leases work at closing.
Lease or PPA vs. buying: what to compare
- Total of all payments over the full term, including the escalator. In Texas, the new state disclosure form requires this number; elsewhere, ask for it.
- The escalator. A 2.9 percent yearly increase roughly doubles the payment over 25 years.
- Your utility's export rules. Net metering, net billing and export rates decide how much the system is worth to you. 2026 changes by state.
- Who maintains it, who pays to remove and reinstall the panels for a roof job, and what happens at the end of the term.
- What happens when you sell: transfer approval, credit check for the buyer, buyout price. What buyers check.
- The cash price for the same system, so you can see what the lease is really costing.
Tax credit claims that should stop you
- "You get 30 percent back" on a system you are buying in 2026. That credit ended.
- "You get the tax credit" on a lease or PPA. The company claims it, not you.
- A loan payment that assumes you will pay a tax-credit amount into the loan around month 18. With no credit coming, the payment can jump.
Misrepresented tax credits are among the most common allegations in the 2026 state attorney general solar lawsuits, often aimed at retirees who had little or no tax liability. The six cases.
FAQ
Not as a homeowner buying a system. The Section 25D credit ended for expenditures made after December 31, 2025. On a lease or PPA, the company that owns the system may claim a business credit; you do not.
For the business credit (Section 48E), solar facilities that begin construction after July 4, 2026 must be placed in service by December 31, 2027. Facilities that began construction earlier have longer windows under the IRS continuity safe harbor.
The company that owns a leased solar electric system can still claim Section 48E, subject to the construction and placed-in-service deadlines and foreign-entity rules. The 2025 law removed the credit for leased solar water heating and small wind at homes, not for solar panels.
Because the homeowner credit ended but the business credit for company-owned systems did not. The company keeps the credit and charges you a monthly lease or power price.
Not always. Compare the total of all payments including the escalator against the cash price of the same system, and check maintenance, roof work and what happens when you sell the house.
Sources
- Solar Power World, How H.R. 1 changes the residential solar ITC, July 2025
- The Tax Adviser, Navigating safe-harbor rules for solar and wind Sec. 48E facilities, February 2026
- Grant Thornton, Energy incentives under OBBBA: what you need to know
General information, not tax or legal advice. Talk to a tax professional about your own situation.