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Get a Free QuoteThe One Big Beautiful Bill Act eliminated the residential solar tax credit. But solar is not dead. This guide explains what actually happened, what still works, the July 4 deadline for TPO, what state incentives remain, and exactly what homeowners should do right now.
$0
Section 25D Credit (Expired)
30-50%
Section 48E (TPO Still Active)
Jul 4
48E Construction Deadline
-30%
Panel Price Drop Since 2020
Quick Answer
The One Big Beautiful Bill Act (OBBBA) eliminated the Section 25D residential solar tax credit effective December 31, 2025. Homeowners who buy solar with cash or a loan in 2026 receive zero federal tax credit. However, the Section 48E commercial ITC (30-50%) remains active for third-party ownership (TPO) structures like Propel, solar leases, and PPAs. Construction must begin by July 4, 2026. Solar is not dead -- prices have dropped 30% since 2020, state incentives (SMART, net metering, tax exemptions) remain active, and TPO structures effectively maintain the tax credit benefit for homeowners through lower payments.
Gone
Section 25D residential ITC (expired 12/31/2025). Homeowners buying solar get $0 federal credit.
Still Active
Section 48E commercial ITC (30-50%). Available via TPO structures. Construction deadline: July 4, 2026.
The One Big Beautiful Bill Act (OBBBA) was signed into law in late 2025 as a comprehensive tax and spending package. Among its many provisions, the OBBBA accelerated the expiration of the Section 25D residential clean energy tax credit from its original Inflation Reduction Act timeline (30% through 2032, then phasing down) to an immediate expiration on December 31, 2025.
Section 25D was the provision that allowed individual homeowners to claim a 30% federal tax credit on solar panel installations. A homeowner who purchased a $30,000 solar system in 2025 could claim a $9,000 credit on their federal tax return. A homeowner who purchases the same system in 2026 receives nothing.
Section 48E, the commercial clean energy investment tax credit, survived the OBBBA with modifications. It remains available to businesses and investors who own clean energy assets. The key change: a construction-start deadline of July 4, 2026, after which the terms may change. This is why third-party ownership (TPO) structures remain valuable -- they allow businesses to capture the 48E credit and pass benefits to homeowners.
The practical impact is a major shift in how homeowners access federal solar incentives. Before the OBBBA, both cash/loan buyers (25D) and TPO users (48E) could access federal credits. After the OBBBA, only TPO structures retain access. This is why TPO market share jumped from approximately 45% in 2025 to a projected 69% in 2026.
2006: Section 25D enacted
Residential solar tax credit at 30%. Homeowner-purchased solar boom begins.
2017: Tax Cuts and Jobs Act (TCJA)
Section 25D preserved but scheduled to phase down starting 2020.
2020-2021: Section 25D drops to 26%
Credit phases down per TCJA schedule. Solar installations accelerate before decrease.
Aug 2022: Inflation Reduction Act (IRA)
Section 25D restored to 30% through 2032. Section 48E created for commercial clean energy. Manufacturing incentives launched.
2023-2025: Peak solar incentive period
Both 25D (residential) and 48E (commercial) active at 30%+. Highest combined incentive environment ever.
Dec 2025: OBBBA signed into law
One Big Beautiful Bill Act accelerates 25D expiration to Dec 31, 2025. Section 48E preserved with construction deadline.
Jan 2026: Section 25D expires
Homeowners purchasing solar get $0 federal credit. TPO structures still access 48E.
Jul 4, 2026: Section 48E construction deadline
Last day to begin construction under current 48E terms. TPO installations must start before this date.
The OBBBA's impact varies significantly depending on how you are buying solar:
Homeowners who purchase solar outright with cash or through a solar loan receive zero federal tax credit in 2026. A $30,000 system costs $30,000. Period. The 30% credit that would have saved $9,000 is gone.
What to do: Consider switching to a TPO structure (Propel, lease, or PPA) to capture the 48E credit through a third-party owner. If you prefer cash/loan, solar may still be economical with state incentives and lower panel prices, but the federal benefit is gone.
Homeowners using third-party ownership structures are largely unaffected through July 4, 2026. The Section 48E commercial ITC remains active, and the TPO company captures the credit and passes benefits through. Propel captures 30-50% ITC. Leases and PPAs capture 30%.
What to do: Act before July 4, 2026. Construction must begin by this date. Start the process now to ensure installation is underway in time.
Businesses purchasing commercial solar retain full access to the Section 48E ITC plus MACRS depreciation and Section 179 deductions. The July 4, 2026 construction deadline applies, but businesses can claim the credit directly without TPO structures.
What to do: Install before July 4 to lock in current 48E terms. See our Section 179 guide and MACRS vs ITC strategy guide.
Homeowners who installed solar in 2025 or earlier and claimed Section 25D are not affected. Tax credits already claimed cannot be retroactively revoked. If you installed in 2025 but have not yet filed your 2025 taxes, you can still claim the Section 25D credit on your 2025 return.
| Factor | Before (2025) | After (2026) |
|---|---|---|
| Cash purchase ITC | 30% Section 25D credit | $0 credit |
| Loan purchase ITC | 30% Section 25D credit | $0 credit |
| Lease/PPA ITC | 30% Section 48E (company) | 30-50% Section 48E (company) until July 4 |
| Propel ITC | 30-50% Section 48E (investor) | 30-50% Section 48E (investor) until July 4 |
| Commercial ITC | 30-50% Section 48E | 30-50% Section 48E until July 4 |
| $30K system effective cost (cash) | $21,000 (after 30% credit) | $30,000 (no credit) |
| $30K system effective cost (Propel) | ~$21,000-$18,000 via TPO | ~$21,000-$18,000 via TPO (same) |
| State incentives (MA) | SMART + net metering + tax exemptions | SMART + net metering + tax exemptions (unchanged) |
| Best financing option | Cash/loan (simple) or TPO (for $0 down) | TPO strongly preferred (captures 48E) |
| Market share: TPO | ~45% of installations | ~69% of installations (projected) |
The OBBBA changed the optimal solar strategy. Here is the decision framework for 2026:
Who: Homeowners in ME or TX with 660+ FICO who want eventual ownership.
Why: Captures 30-50% 48E ITC. $0 down. Fixed payments, 0% escalator. Automatic ownership at Year 5. Must begin construction before July 4.
Who: Homeowners in states where Propel is not available. Lower credit requirements (580+).
Why: Captures 30% 48E ITC through the leasing company. $0 down. Lower starting payments. Available in 30+ states. Escalator of 1.99-2.99%. Must begin construction before July 4.
Who: Homeowners who strongly prefer immediate ownership and have cash or good loan terms.
Why: Panel prices are 30% lower than 2020. State incentives still active. No third-party ownership complexity. Payback 6-9 years in NE without credit (vs 4-6 years with credit). Still positive ROI. Makes sense if TPO is unavailable or philosophically undesired.
Who: Homeowners hoping for a new residential credit.
Why not: Electricity rates rise 3-5% annually. The 48E TPO option may expire after July 4. A new residential credit is uncertain. Every month waiting costs money in utility bills. If a new credit is enacted, it will not retroactively help you with electricity costs incurred while waiting.
The OBBBA affected only the federal Section 25D credit. State-level solar incentives are completely independent and remain fully active. Here is what is available by state in our service area:
Reality: Solar panel prices have dropped approximately 30% since 2020. A system that cost $30,000 in 2020 now costs approximately $21,000. The tax credit loss is partially offset by lower equipment costs. With state incentives and net metering, solar still delivers 8-15% annual returns in New England. TPO structures also effectively maintain the credit benefit via Section 48E.
Reality: Homeowners cannot claim a direct credit on their personal tax return. But they can indirectly benefit from the Section 48E commercial credit through TPO structures (Propel, lease, PPA). The TPO company claims the credit and passes savings to the homeowner. This is exactly how most solar will be installed in 2026.
Reality: There is no guarantee a new residential credit will be enacted. Electricity rates rise 3-5% annually. The Section 48E TPO option has a July 4, 2026 deadline. Every month waiting costs money in utility bills. If a new credit does come back, it may be smaller or have different terms. Acting now locks in current TPO terms and current electricity savings.
Reality: Solar panels generate electricity for 25-40 years. In New England, electricity costs $0.25-$0.35/kWh and rising. An 8 kW system producing 9,200 kWh/year saves $2,300-$3,200/year in electricity. Over 25 years, that is $57,000-$80,000 in savings at current rates (more with rate increases). A $21,000 system pays for itself in 7-9 years without any credit. The credit accelerates payback but is not required for positive ROI.
Reality: Solar leases and PPAs are legitimate financial products used by millions of homeowners. In the post-OBBBA era, they are the primary way homeowners access the remaining federal ITC. They are not scams, but homeowners should read contracts carefully, understand escalator terms, and compare options. Propel offers a TPO structure with an ownership path and zero escalator.
Reality: The OBBBA affected multiple clean energy tax credits, not just solar. The 30C EV charger credit, 25C home efficiency credit, and 45L new energy-efficient home credit were all modified or eliminated. However, the impact on solar is the most visible because the Section 25D credit was the most widely used residential clean energy incentive.
Here is how solar pencils out for a typical Massachusetts homeowner in 2026 across different purchasing options, for an 8 kW system producing ~9,200 kWh/year:
| Metric | 2025 Cash (with 25D) | 2026 Cash (no credit) | 2026 Propel (TPO) |
|---|---|---|---|
| System cost | $28,000 | $26,000 | $0 down |
| Federal credit | -$8,400 | $0 | 30-50% via investor |
| Effective cost | $19,600 | $26,000 | ~$69K total payments |
| Annual electricity savings | $2,760 | $2,760 | $2,760 (net of payment) |
| Simple payback | 7.1 years | 9.4 years | ~Year 5 (ownership) |
| State incentives (SMART, NM) | Yes | Yes | Yes |
| 25-year ROI | 250-300% | 180-230% | Owned system + 20yr savings |
| Monthly out-of-pocket | $0 (lump sum) | $0 (lump sum) | $250/mo fixed |
Key Takeaway
Even without the tax credit, cash-purchased solar achieves a 9.4-year payback in Massachusetts and delivers 180-230% ROI over 25 years. TPO structures (Propel) effectively preserve the tax credit benefit through the commercial ITC. The OBBBA made solar harder to finance optimally, but it did not make solar a bad investment. It made the financing decision more important than ever.
The Section 48E commercial ITC is still available through TPO structures, but construction must begin by July 4, 2026. NuWatt offers Propel, standard loans, and can compare lease/PPA options. Get started now to lock in the remaining federal benefit.