Is the Residential Energy Tax Credit Available in 2026?

The Section 25D residential clean energy credit is not available for property placed in service in 2026. It expired after December 31, 2025. If you installed solar on your home in 2026 expecting to claim it, you cannot. The energy tax credit opportunity that remains open in 2026 is on the commercial side, and for business owners and real estate investors, it is still worth serious attention.

What Exactly Ended After 2025?

Two residential credits expired at the end of 2025:

• Section 25D (residential clean energy credit, 30% on solar and other qualifying property) applies only to property placed in service on or before December 31, 2025.
• Section 25C (energy efficient home improvement credit) also applies only to property placed in service before December 31, 2025.

Neither credit is available for 2026 purchases or installations. If you completed a residential solar installation before the end of 2025 and have not yet filed, you would claim the credit on IRS Form 5695 on your 2025 return. If the credit exceeded your 2025 liability, the unused portion carries forward and applies against your 2026 liability when you file.

What Commercial Energy Credits Apply in 2026?

Business owners who own commercial premises still have access to meaningful clean energy credits in 2026 through Sections 48E and 45Y. Section 48E is the technology-neutral clean electricity investment credit that replaced the older Section 48 for facilities placed in service after December 31, 2024. Section 45Y is the corresponding production credit.

The qualification window depends on when construction began:

• Facilities whose construction began by July 4, 2026 are not subject to early termination rules.
• Facilities where construction began after July 4, 2026 must be placed in service by December 31, 2027 to qualify.

For any new commercial project that has not yet broken ground, the placed-in-service deadline is December 31, 2027. That is a real but workable window for business owners who move quickly.

The base credit rate under Section 48E is 6%. It increases to 30% when Prevailing Wage and Apprenticeship requirements are satisfied. For a $500,000 commercial installation, that difference is $30,000 at the base rate versus $150,000 at the 30% rate. The Prevailing Wage requirement means workers must be paid wages determined under the Davis-Bacon Act, and a specified share of labor hours must be performed by registered apprentices. Meeting those requirements is not automatic, and the documentation burden is real, but the financial difference makes it worth serious attention before signing any installation contract.

For detailed qualification rules, the IRS guidance on the business energy investment tax credit is the authoritative starting point.

How Does Bonus Depreciation Interact with a Commercial Solar Credit?

Commercial solar property placed in service in 2026 qualifies for 100% bonus depreciation, which is now a permanent deduction for qualified property acquired after January 19, 2025. This means a business owner can combine a Section 48E energy tax credit with an accelerated depreciation deduction on the same commercial solar asset in the same tax year.

One technical rule applies: the depreciable basis of the property must be reduced by 50% of the credit claimed before calculating depreciation. A CPA must apply this correctly to avoid claiming a double benefit that creates audit exposure. When structured properly, the combined effect of the credit and accelerated depreciation can produce substantial first-year tax benefits on a commercial installation.

For more on how bonus depreciation timing works in 2026, see our post on bonus depreciation timing moves for 2026. For a closer look at how solar depreciation works specifically, see how solar depreciation works for high earners in 2026.

Can You Sell a Commercial Credit You Cannot Fully Use?

One of the more powerful tools available under current law is credit transferability. Section 48E commercial credits can be transferred, meaning sold, to an unrelated third party. The Section 25D residential credit was not transferable, but commercial credits are.

If your business generates a commercial energy tax credit that exceeds your 2026 tax liability, or if your entity structure makes direct utilization inefficient, you may be able to sell the credit to a third-party buyer at a negotiated discount, typically 90 to 95 cents on the dollar. This converts a non-cash credit into realized cash value.

The Treasury's IRA guidance hub covers the transferability and direct pay rules in detail and is worth reviewing before structuring a commercial installation.

For pass-through entity owners, the Section 48E credit flows through to individual owners based on their ownership percentage. That creates additional planning considerations around who ultimately absorbs the credit and at what effective rate.

What About State-Level Solar Incentives in 2026?

State incentive programs operate independently of the federal credit, and many remain active in 2026 regardless of what happened to the federal residential credit. States including California, New York, Massachusetts, New Jersey, and Texas have offered solar rebates, state tax credits, and property tax exemptions that can meaningfully reduce the net cost of an installation.

The key distinction for federal purposes is whether a state incentive is additive or basis-reducing. Utility rebates paid before installation generally reduce your federal credit basis. State tax credits typically do not. Getting this wrong in either direction creates problems, either leaving money on the table or creating audit exposure.

The DSIRE database is the authoritative source for state-level solar incentives and is updated regularly. Identify your state's programs before signing any installation contract.

What Should High Earners Focus on Now?

For high earners with business property, the commercial solar credit window in 2026 is real and worth evaluating. For those who completed residential installations in 2025 and have carryforward credits, those amounts apply against 2026 liability and should be factored into current-year projections.

A few practical steps worth taking:

• If you have a 2025 residential solar credit carryforward, confirm the amount on Form 5695 from your 2025 return and factor it into your 2026 estimated tax planning.
• If you own commercial property and construction has not yet begun, note that a new project must be placed in service by December 31, 2027 to qualify under current rules.
• If you are pursuing a commercial installation, confirm whether your contractor can satisfy Prevailing Wage and Apprenticeship requirements before signing. The difference between a 6% and 30% credit rate is not a minor detail.
• Review state incentive programs through DSIRE before finalizing any project budget.

Our team works with business owners and high-income earners to model how commercial energy credits interact with depreciation, pass-through income, and overall liability. The math on a well-structured commercial solar project can be compelling, but it depends entirely on your specific numbers and entity structure. For a broader look at how energy credits fit into a high-earner tax plan, see our commercial solar credit guide for high earners.