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The residential solar ITC (Section 25D) expired December 31, 2025. New Jersey homeowners who buy solar with cash or a loan get $0 from the IRS. But there is a legal, congressionally-designed path to still access the 30% credit — through third-party ownership under Section 48/48E. Plus, NJ's ADI program stacks on top for even deeper savings.
30%
ITC Rate (Section 48)
$9,570
Example ITC (11 kW)
Jul 4, 2026
Construction Deadline
A 64-year-old tax code provision — not a loophole
Section 48 of the Internal Revenue Code has existed since 1962. It provides an Investment Tax Credit (ITC) to the owner of qualifying energy property — solar panels, wind turbines, battery storage, and other energy systems. The critical word in the statute is “owner.”
For decades, two parallel pathways existed for solar tax credits. Section 25D let individual homeowners claim the ITC on their personal tax return when they purchased solar with cash or a loan. Section 48 let businesses and financing companies claim the ITC when they owned solar systems — including systems installed on residential rooftops through leases and PPAs.
On July 4, 2025, the OBBBA (One Big Beautiful Bill Act) eliminated Section 25D. The homeowner pathway is dead. But Section 48 — the business/TPO pathway — remains active for projects beginning construction before July 4, 2026.
This is not a loophole. Congress designed it this way.
Section 48 was created to encourage capital deployment into energy infrastructure. Financing companies invest billions in solar systems, claim the ITC as intended by the tax code, and pass savings to homeowners through lower monthly payments. This mechanism has been reviewed and upheld by the IRS, Treasury, and Congress for over six decades.
Section 48E, created by the Inflation Reduction Act (August 2022), extended the investment tax credit with technology-neutral rules. Together, Sections 48 and 48E provide the legal framework that allows third-party solar financing to continue delivering federal tax benefits — even after Section 25D's expiration.
Two different tax code sections, two different claimants, two very different outcomes in 2026.
| Feature | Section 25D (DEAD) | Section 48/48E (ACTIVE) |
|---|---|---|
| Tax code section | Section 25D | Section 48 / 48E |
| Who claims the credit | Homeowner (on personal return) | System owner / TPO (financing company) |
| IRS form used | Form 5695 | Form 3468 |
| Credit rate | 30% (was) | 30% (still active) |
| Current status | EXPIRED Dec 31, 2025 | ACTIVE through July 4, 2026 |
| Applies to | Cash or loan purchases | Lease, PPA, TPO models |
| MACRS depreciation | Not available to homeowners | 5-year accelerated + 20% bonus (2026) |
| Domestic content bonus | N/A (credit is dead) | +10% with FEOC-compliant panels |
| Energy community bonus | N/A (credit is dead) | +10% if project in qualifying area |
| Net effect for homeowner | $0 federal benefit | Lower monthly payment via TPO savings |
Tax code section
25D
Section 25D
48/48E
Section 48 / 48E
Who claims the credit
25D
Homeowner (on personal return)
48/48E
System owner / TPO (financing company)
IRS form used
25D
Form 5695
48/48E
Form 3468
Credit rate
25D
30% (was)
48/48E
30% (still active)
Current status
25D
EXPIRED Dec 31, 2025
48/48E
ACTIVE through July 4, 2026
Applies to
25D
Cash or loan purchases
48/48E
Lease, PPA, TPO models
MACRS depreciation
25D
Not available to homeowners
48/48E
5-year accelerated + 20% bonus (2026)
Domestic content bonus
25D
N/A (credit is dead)
48/48E
+10% with FEOC-compliant panels
Energy community bonus
25D
N/A (credit is dead)
48/48E
+10% if project in qualifying area
Net effect for homeowner
25D
$0 federal benefit
48/48E
Lower monthly payment via TPO savings
A step-by-step breakdown of how Section 48 tax benefits translate into real savings on your monthly bill — including NJ's ADI incentive.
A third-party owner (financing company) purchases a solar system — for example, an 11 kW system at $2.90/W costs approximately $31,900. The TPO owns the panels, inverter, and racking. They contract with an installer (like NuWatt) to mount the system on your roof.
The TPO files IRS Form 3468 and claims the 30% Investment Tax Credit on the system cost. On a $31,900 system, that is $9,570 in federal tax credits. This goes directly to the financing company — not to you, and not to the installer. The critical word in the tax code is “owner.”
The TPO also claims Modified Accelerated Cost Recovery System (MACRS) depreciation on a 5-year schedule. In 2026, this includes a 20% first-year bonus. On our $31,900 example, MACRS provides roughly $5,050 in additional tax benefits over 5 years. This is a commercial tax benefit unavailable to individual homeowners.
The TPO receives approximately $14,620 in combined tax benefits ($9,570 ITC + ~$5,050 MACRS). These savings are baked into your lower monthly lease payment or per-kWh PPA rate. In New Jersey, the TPO can also enroll in the ADI (Administratively Determined Incentive) program and receive $85.90/MWh for 15 years — further reducing your cost. This is not a loophole — it is the intended mechanism Congress designed to encourage solar deployment at scale.
System Cost
$31,900
25 x Silfab 440W
Section 48 ITC
-$9,570
30% to TPO
MACRS (5-yr)
-$5,050
20% bonus in 2026
TPO Tax Benefits
~$14,620
Passed to you as savings
Three system sizes showing how Section 48 ITC and MACRS translate to real savings for New Jersey homeowners. Based on $2.90/W average NJ pricing.
Smaller homes, 600–800 sq ft roof
Average NJ home, covers full usage
Large homes, EV charging, heat pump
Not all financing captures the ITC. Here is which options benefit from Section 48 and which do not.
Fixed monthly payment for 20–25 years. The TPO owns the system and claims the 30% ITC + MACRS. You pay a predictable monthly amount that is lower than your current electric bill.
Advantages
Limitations
NJ Note: TPO can enroll in NJ ADI program — $85.90/MWh (EY2025-26) locked for 15 years, further reducing your cost.
You pay per kilowatt-hour at a rate lower than your utility rate. The TPO owns the system, claims Section 48 ITC + MACRS, and sells you the power at a discounted rate.
Advantages
Limitations
NJ Note: At $0.12–0.16/kWh vs PSE&G ~$0.26/kWh, you save 38–54% on solar electricity from day one.
A financing company owns the system, claims Section 48 ITC + MACRS + domestic content bonus. Uses FEOC-compliant panels for the full credit stack. NuWatt manages the installation.
Advantages
Limitations
NJ Note: NuWatt Propel is not yet available in NJ (coming soon). Other TPO financing partners can still capture Section 48 benefits.
You buy the system outright with cash or a solar loan. You own the system. Because you own it, there is NO Section 48 benefit — and Section 25D is dead. You get $0 in federal tax credits.
Advantages
Limitations
NJ Note: NJ sales and property tax exemptions still apply to homeowner-owned systems. But the $0 federal ITC makes the payback longer.
New Jersey is one of the strongest TPO markets because of the ADI program.
The Administratively Determined Incentive (ADI), formerly known as SREC-II, pays solar system owners a fixed rate per megawatt-hour of production for 15 years. In Energy Year 2025-26, the rate is $85.90/MWh, rising to $95.23/MWh in EY2026-27.
When a TPO owns your solar system, the TPO enrolls in the ADI program and receives these payments directly. This guaranteed 15-year revenue stream is a major reason why TPO providers can offer competitive lease and PPA rates in New Jersey. The TPO receives both the Section 48 ITC and ADI payments — and passes the combined savings to you through lower monthly costs.
One-time federal tax credit to TPO
20% bonus in 2026 + remaining over 5 years
$85.90/MWh × ~13.2 MWh/yr × 15 years
This is why New Jersey remains one of the best states for solar TPO arrangements. The combination of Section 48 federal tax benefits and the ADI state incentive creates a strong economic foundation that allows TPO providers to offer rates significantly below utility prices — even with Section 25D dead.
Not all panels qualify for the full ITC stack. Here is what you need to know.
FEOC stands for Foreign Entity of Concern. Under guidance from the Treasury Department and IRS, solar panels manufactured by or containing critical components from FEOC-designated entities (primarily Chinese-owned companies) face restrictions on certain ITC bonuses.
Standard Section 48/48E credit
FEOC-compliant panels required
Project in qualifying census tract
FEOC Compliance Deadline: July 4, 2026
After this date, projects using non-FEOC panels may face additional restrictions beyond losing the domestic content bonus. If you are considering a TPO arrangement, verify that the financing company plans to use FEOC-compliant panels before signing.
Misinformation about the solar tax credit is rampant. Here are the facts.
“Section 48 is a loophole for solar companies.”
Section 48 has been part of the IRS tax code since 1962 — 64 years. It was specifically designed to encourage investment in energy property by providing an ITC to the entity that owns the qualifying system. Congress intentionally structured it so that financing companies could deploy capital into solar at scale. There is nothing hidden, creative, or exploitative about it.
“I get the 30% tax credit directly on my tax return.”
No. With a lease, PPA, or TPO arrangement, the third-party owner claims the ITC on their corporate tax return using IRS Form 3468. You benefit indirectly through lower monthly payments or a reduced per-kWh rate. If you want to claim the credit directly, you would need to purchase the system outright — but Section 25D is dead, so you would receive $0.
“Solar leases are always a bad deal.”
This advice was accurate when Section 25D was alive. Homeowners could claim 30% themselves, making cash or loan purchases clearly superior. In 2026, the calculus has changed. With $0 in homeowner tax credits, leases and PPAs that leverage Section 48 can deliver better economics than a loan at 6.49–8.49% APR with no ITC. In New Jersey, where electric rates are ~$0.26/kWh, a PPA at $0.12–0.16/kWh provides significant day-one savings.
“The installer claims the tax credit.”
The installer (contractor) does not claim the ITC. The credit goes to the entity that owns the qualifying energy property — the financing company or TPO. The installer is paid for labor and materials. This is a common misunderstanding that leads homeowners to ask the wrong questions during the sales process.
“I should wait for Congress to bring back Section 25D.”
The OBBBA (One Big Beautiful Bill Act), signed July 4, 2025, eliminated Section 25D with no sunset clause and no scheduled return. There is no pending legislation to restore it. Meanwhile, Section 48/48E itself has a construction deadline of July 4, 2026. Waiting risks losing access to both the homeowner credit (already gone) and the TPO credit (expiring soon).
“The ADI (SREC-II) payment goes to me if I own the system.”
When you own the system, you can enroll in the ADI program and receive payments directly. But with a TPO arrangement, the TPO enrolls and receives the ADI payments. The good news: the TPO factors this guaranteed 15-year revenue stream ($85.90/MWh rising to $95.23/MWh) into your lower monthly rate. Either way, the ADI value benefits you — directly or indirectly.
The construction deadline for Section 48/48E is approaching. Here is the timeline every NJ homeowner needs to understand.
Section 48E created with technology-neutral ITC rules. 25D extended through 2032 (at the time).
Residential solar ITC killed immediately. Homeowners who buy with cash or loan receive $0. Section 48/48E given a 1-year grace period.
The first full calendar year with no residential solar ITC. Every cash or loan solar purchase in NJ gets $0 from the IRS.
You are here. TPO arrangements signed now have ample time to begin construction before the deadline. Permit and interconnection timelines in NJ run 4–10 weeks.
Projects must “begin construction” (physical work test or 5% safe harbor) before this date. After this, new TPO projects may lose the 30% ITC entirely.
Meaningful physical work begins at the project site or at a factory for components specifically designed for the project. Mounting hardware installation, foundation work, or panel manufacturing orders count. Preliminary activities (permits, surveys, engineering) do not.
The taxpayer (TPO) incurs at least 5% of the total project cost before the deadline. On a $31,900 system, that is approximately $1,595 in binding commitments. Equipment orders with non-refundable deposits typically satisfy this test. Continuous construction or continuous efforts must follow.
Practical impact: If you sign a TPO agreement and the financing company places equipment orders before July 4, 2026, the project qualifies. The system does not need to be installed by that date — it must be placed in service within 4 years of beginning construction.
10 questions we hear most from New Jersey homeowners about the solar ITC in 2026.
Section 48 is the Investment Tax Credit (ITC) provision that has existed in the IRS tax code since 1962. It provides a tax credit to the owner of qualifying energy property — such as solar panels. Section 25D was the residential energy credit that allowed individual homeowners to claim the ITC on their personal tax return. Section 25D expired on December 31, 2025 (eliminated by the OBBBA). Section 48/48E remains active for projects beginning construction before July 4, 2026. The key difference: 48 goes to the system owner (the financing company in a lease/PPA), while 25D went to the homeowner.
Not directly. Section 25D is dead — if you buy solar with cash or a loan, you receive $0 in federal tax credits. However, if you finance through a solar lease, PPA, or TPO program, the third-party financing company claims the 30% ITC under Section 48/48E. The savings are passed to you through lower monthly payments or a discounted per-kWh electricity rate.
The ADI (Administratively Determined Incentive, formerly SREC-II) pays $85.90/MWh (EY2025-26) for 15 years for qualifying solar systems. When a TPO owns the system, the TPO enrolls in the ADI program and receives these payments directly. The TPO uses this guaranteed revenue stream to offer you lower lease or PPA rates. The ADI stacks on top of Section 48 — the TPO gets both the 30% ITC and ADI payments, maximizing the savings passed to you.
The IRS defines “begin construction” through two safe harbors: (1) Physical Work Test — meaningful physical work begins at the site (foundation, mounting hardware installation), or (2) Five Percent Safe Harbor — at least 5% of the total project cost has been incurred. For residential TPO systems, this typically means signing a contract and having the TPO place equipment orders before July 4, 2026. Projects must be placed in service within 4 years of beginning construction.
No. The TPO retains a portion of the tax benefits as profit — this is how the financing model works. However, competition among TPO providers keeps lease and PPA rates low. In New Jersey, typical PPA rates are $0.11–0.17/kWh compared to utility rates of ~$0.26/kWh, so homeowners still see significant savings even after the TPO retains its share.
FEOC stands for Foreign Entity of Concern. Under the IRA and subsequent guidance, solar panels manufactured by or containing components from a Foreign Entity of Concern (primarily Chinese-owned companies) may lose eligibility for certain ITC adders, particularly the 10% domestic content bonus. FEOC-compliant panels like the Silfab 440W are manufactured without FEOC components, ensuring eligibility for the full ITC stack. The FEOC compliance deadline is July 4, 2026.
Yes. New Jersey’s state-level tax benefits are separate from the federal ITC. NJ provides: (1) 100% sales tax exemption on solar equipment and installation, and (2) 100% property tax exemption for the added home value from solar. These exemptions apply whether you own the system or use a TPO arrangement. They are state law and were not affected by the federal OBBBA.
NuWatt Propel is not yet available in New Jersey but is coming soon. In the meantime, NJ homeowners can access Section 48 benefits through standard solar lease and PPA financing from NuWatt’s TPO partners. The same Section 48 ITC + MACRS structure applies — a financing company owns the system and passes savings to you through lower payments.
Most lease and PPA agreements include a buyout option after a certain period (typically 5–7 years). The buyout price is usually based on fair market value at the time. By year 7–10, the fair market value of a depreciated solar system is significantly lower than the original cost. Some homeowners use this strategy: start with a TPO arrangement to capture Section 48 benefits, then buy out at a reduced price.
It depends on your financial situation. Cash purchase provides the highest 25-year savings but requires $23,000–$40,000+ upfront with no federal tax credit. TPO (lease/PPA) provides $0 down with immediate savings — a PPA at $0.13/kWh vs PSE&G ~$0.26/kWh saves you money from month one. NJ’s sales and property tax exemptions apply either way. If you have the capital and plan to stay 10+ years, cash may be better long-term. Otherwise, TPO is the stronger choice in the post-25D landscape.
Comprehensive guide to solar energy in New Jersey — costs, incentives, and timeline.
Deep dive into lease vs PPA structures, rates, and contract terms for NJ.
Side-by-side financing comparison with 25-year savings projections.
Honest analysis of whether solar still works in NJ without Section 25D.
City-by-city pricing, system sizes, and cost breakdowns across New Jersey.
How the ADI incentive works, enrollment, and how TPOs use it to lower your rate.
Track launch timing and join the New Jersey waitlist for NuWatt's upcoming ownership-focused offer.
Section 25D is gone. Section 48/48E is still here — but the clock is ticking. Find out how much you can save with a TPO arrangement that captures the 30% ITC plus NJ's ADI incentive before the July 4, 2026 construction deadline.
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