One of the main drivers of the economics behind onsite solar energy is the Federal Investment Tax Credit (ITC). These credits have been in place in some form since 1992 and were increased in 2005 to cover 30% of a project’s total cost.

Combined with the rising cost of electricity in the US, these tax credits have led to a rapid increase in the amount of solar energy being installed, especially onsite solar for commercial customers.

But the industry is at a crossroads.

So What Has Changed?

The Big Beautiful Bill that passed in 2025 significantly limited the ITC, but did not eliminate it entirely—at least not for commercial solar projects. Here’s what actually happened, and what it means for your business.

The Residential Side Is Gone

As of December 31, 2025, the residential solar investment tax credit (Section 25D) expired completely. Homeowners can no longer claim the ITC for customer-owned solar installations. This eliminates a major incentive that drove residential solar adoption for nearly two decades.

The Commercial Side: Two Critical Deadlines

For commercial, industrial, and municipal buyers, there is still hope. The commercial solar investment tax credit (Section 48) remains available, but it operates under two hard deadlines that will determine whether your projects qualify. Note that a project needs to meet only ONE of the following two deadlines:

Deadline #1: Construction Must Begin by July 4, 2026

To meet the first deadline, a project must begin construction on or before July 4, 2026. This is not a completion date—it is a start date. Projects that begin construction before the deadline qualify for the ITC under what the IRS calls “safe harbor” status, as long as they are completed within four years.

Deadline #2: Project Must Be In Service by December 31, 2027

Projects that begin construction after July 4, 2026, can still qualify for the ITC if they are placed in service by December 31, 2027. The definition of “in service” includes construction of the project, energizing of the system, and interconnection to the grid, which requires utility coordination and approval.

What Interested Buyers Should Do Right Now

If your organization is considering onsite solar, the window to capitalize on the ITC is closing. Here are the concrete steps to take to stay within it:

With electricity prices at historic highs and natural gas costs volatile, the economics for commercial solar are compelling—but only for a limited time. Solar contractors are busy, and they are about to get busier as the ITC deadlines approach. Don’t wait until your contractor is booked solid.

Nania Energy Advisors does not provide tax or legal advice. Organizations should consult their tax advisor regarding eligibility for federal tax credits.