The solar investment tax credit in 2026: what current law says after the 2025 tax act

By the Tax Field Guide editorial team. Published 2026-10-26. Facts checked 2026-10-26. Related strategies: Solar Investment Credits, Purchased Energy Credits.

Education only; not tax, legal or investment advice. Tax rules change, and how they apply depends on your facts. No outcome is guaranteed.

If someone is pitching you a solar tax credit in late 2026, the first question is not "how big is the credit?" It is "does this project still qualify under current law?" The 2025 budget reconciliation act (Public Law 119-21, which the IRS now calls the Working Families Tax Cuts legislation) changed the timeline for solar credits sharply.¹ This guide lays out what changed, in plain English, with the primary sources linked at the bottom.

Business solar: the §48E clean electricity investment credit

For solar placed in service after 2024, the business investment tax credit (ITC) is generally the technology-neutral clean electricity investment credit in §48E.² The base credit is 6% of the qualified investment, rising to 30% if the project meets the prevailing wage and apprenticeship requirements or is under 1 megawatt of net output, with possible bonus amounts for domestic content and energy communities.²

Public Law 119-21 added a cut-off for wind and solar. A wind or solar facility that begins construction after July 4, 2026 must be placed in service by December 31, 2027 to get the credit.¹³ Facilities that began construction on or before July 4, 2026 are not subject to that placed-in-service deadline.³

How "beginning of construction" is measured

In August 2025 the IRS issued Notice 2025-42, which removed the long-standing 5% safe harbor for most wind and solar projects and left only the "physical work" test.⁴ On June 6, 2026, the U.S. District Court for the District of Columbia vacated that notice in full and sent it back to the IRS (Oregon Environmental Council v. IRS).⁵ With the notice vacated, the earlier beginning-of-construction guidance (Notice 2013-29 and its successors), which recognizes both the physical work test and the 5% safe harbor, is the framework practitioners point to. We have not found replacement IRS guidance as of the date at the top of this page; check the strategy page for updates.

Foreign-entity rules

Public Law 119-21 also added "prohibited foreign entity" material-assistance rules for facilities that begin construction after December 31, 2025. The IRS issued initial guidance on them in February 2026.⁶

Homeowners: the §25D residential clean energy credit ended

The individual residential clean energy credit under §25D (the 30% credit many homeowners used for rooftop solar) does not apply to expenditures made after December 31, 2025.⁷ A homeowner installing rooftop panels in 2026 should not expect the federal residential credit. Some states still offer their own credits; see our state pages.

What this means if you are being pitched a deal

1. Ask when construction began, and what evidence supports it. A project that started after July 4, 2026 has to be operating by the end of 2027.
2. Ask who claims the credit. If you will own equipment yourself, the passive activity rules decide whether the credit can reduce tax on your wages (see solar credits and the passive activity rules). If you are buying a credit from a developer, see buying transferable solar credits.
3. Watch for the three red flags we list on the solar ITC strategy page: zero-down or no-money-out-of-pocket pitches; 0% or below-market seller financing; and equipment valued well above retail or market price.

Common questions

Is the solar investment tax credit still available in 2026?

For businesses, yes, under §48E, but a solar facility that begins construction after July 4, 2026 must be placed in service by December 31, 2027. The homeowner credit under §25D does not apply to expenditures after December 31, 2025.

Did the court ruling on Notice 2025-42 change the deadline?

No. The July 4, 2026 and December 31, 2027 dates are in the statute. The court ruling vacated the IRS notice about how to show that construction began; it did not change the dates Congress set.

Can I still get a federal credit for solar on my house?

Not under §25D for expenditures made after December 31, 2025. Check your state's rules separately.

Education only; not tax, legal or investment advice. Talk to a qualified professional before acting.

Sources

1. IRS, Working Families Tax Cuts provisions page, https://www.irs.gov/newsroom/working-families-tax-cuts
2. 26 U.S.C. §48E (clean electricity investment credit), https://www.law.cornell.edu/uscode/text/26/48E
3. White & Case, summary of the act's changes to §§45Y and 48E (July 2025), https://www.whitecase.com/insight-alert/amendments-to-ira-tax-credits-congressional-budget-bill-july-6
4. IRS Notice 2025-42, https://www.irs.gov/pub/irs-drop/n-25-42.pdf
5. Oregon Environmental Council v. IRS, No. 25-4400 (CKK) (D.D.C. June 6, 2026), docket, https://www.courtlistener.com/docket/72054098/oregon-environmental-council-v-internal-revenue-service/
6. IRS IR-2026-23, material assistance from prohibited foreign entities (Feb. 12, 2026), https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-certain-energy-tax-credits-regarding-material-assistance-provided-by-prohibited-foreign-entities-under-the-one-big-beautiful-bill
7. IRS FAQs on the modification of §§25C, 25D and other credits under Public Law 119-21, https://www.irs.gov/newsroom/faqs-for-modification-of-sections-25c-25d-25e-30c-30d-45l-45w-and-179d-under-public-law-119-21-139-stat-72-july-4-2025-commonly-known-as-the-one-big-beautiful-bill-obbb