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The residential solar tax credit is dead — but the commercial Section 48E ITC (30%) is still available for rental property owners. Plus MACRS depreciation. This is the best solar deal for landlords in years.
Quick Answer
Rental property owners can claim the Section 48E commercial ITC (30% base) because the property is a business asset. The residential ITC (Section 25D) expired December 2025, but 48E remains for projects beginning construction before July 4, 2026. Combined with MACRS 5-year depreciation (20% bonus in 2026), landlords can recover 45-55% of the system cost in tax benefits. Payback: 5-7 years. 25-year ROI: 200-400%.
The residential solar tax credit (Section 25D) expired on December 31, 2025. Homeowners get $0. But landlords are in a different position.
Why rental properties qualify for Section 48E
Section 48E is the commercial/investment ITC. It applies to business entities that own energy property. When you own a rental property, you are a business entity — the property is an investment asset, not a personal residence. The ITC is claimed by the property owner on their business or personal tax return (depending on entity structure: LLC, S-Corp, individual Schedule E). This is different from Section 25D, which only applied to the taxpayer's primary or secondary residence.
How the commercial ITC works for landlords, step by step.
Applied to the total installed cost of the solar system. $30,000 system = $9,000 credit against your federal tax liability.
Use FEOC-certified panels and inverters manufactured in the US to qualify for the domestic content bonus.
If your rental property is in a qualifying energy community (former coal/fossil fuel area), you get an additional 10%.
For qualifying low-income housing projects, an additional 10-20% bonus may apply. Total potential: up to 70%.
The second major tax advantage for landlords: accelerated depreciation of the solar system cost.
Calculate depreciable basis
Installed cost minus half the ITC. Example: $30,000 - $4,500 (half of $9,000 ITC) = $25,500 depreciable basis.
2026 bonus depreciation: 20%
Deduct 20% of the basis in Year 1: $25,500 x 20% = $5,100. At 24% marginal tax rate, that saves $1,224 in Year 1.
Remaining 80% over 5 years
The remaining $20,400 is depreciated using the MACRS 5-year schedule (20%, 32%, 19.2%, 11.52%, 11.52%, 5.76%).
Total tax savings from depreciation
Over 5-6 years, you deduct the full $25,500 against rental income. At 24% marginal rate: $6,120 in total tax savings.
Real-world numbers for a typical multi-family rental property.
Bottom line: The landlord invests $14,880 net after tax benefits and receives $2,800/year in electricity savings — a 18.8% annual cash-on-cash return. Over 25 years, the system generates $70,000 in savings on a $14,880 investment.
How to handle electricity billing when your rental property has solar panels.
Landlord owns solar, pays the electric bill, includes electricity in rent.
Best for: 1-4 unit buildings, vacation rentals, properties where landlord already pays utilities
Pros
Cons
Single solar system credits distributed across multiple tenant meters.
Best for: Multi-family buildings in states with VNM (MA, RI, NY, NJ, ME)
Pros
Cons
Landlord buys all electricity, sub-meters to tenants, solar reduces wholesale cost.
Best for: Large multi-family, commercial mixed-use buildings
Pros
Cons
Key considerations by state for landlords installing solar on rental properties.
Section 48E available. SMART 3.0 incentive for systems under 25 kW. Virtual net metering enabled.
Strong market — solar adds significant rental value in Boston metro.
Section 48E available. REG program for qualifying systems. REF rebate for residential-scale.
Virtual net metering available. 80% retail credit rate post-April 2023.
Section 48E available. Net energy billing through CMP/Versant.
Community solar and VNM available. Propel financing for qualifying properties.
Section 48E available. ADI/SREC-II payments ($85-$95/MWh for 15 years).
One of the best states for rental solar — ADI payments + ITC + MACRS.
Section 48E available. NEM 2.0 (~85% retail credit). No state rebate (SB 303 repealed).
VNM not available. Best for landlord-pays-utility model.
Section 48E available. No state incentives. Deregulated market.
High solar irradiance, fast payback despite no state programs. Propel financing available.
Yes. Section 48E (the commercial/investment ITC) is still available for rental property owners who begin construction before July 4, 2026. The residential Section 25D credit expired December 31, 2025, but Section 48E applies to investment properties because the landlord is a business entity. The base credit is 30%, with potential bonuses for domestic content (+10%), energy communities (+10%), and low-income projects (+10-20%). This is one of the most significant financial advantages landlords have over regular homeowners in 2026.
The Modified Accelerated Cost Recovery System (MACRS) allows landlords to depreciate the cost of a solar system over 5 years. In 2026, there is a 20% bonus depreciation (first-year write-off of 20% of the depreciable basis). The depreciable basis is the installed cost minus half the ITC. For a $30,000 system with a 30% ITC ($9,000), the depreciable basis is $30,000 - $4,500 = $25,500. You can deduct this over 5 years against rental income. This significantly accelerates your ROI.
There are three main models: (1) Landlord pays utility — you own the solar, reduce your operating cost, and include electricity in the rent. Best for small properties (1-4 units). (2) Tenant pays utility with net metering — more complex, requires virtual net metering or separate meters. (3) Master-meter — you buy grid electricity and resell to tenants. Solar reduces your wholesale cost. Each has different legal and regulatory implications by state.
Yes, if you (the landlord) pay the electric bill and include it in the rent. Solar reduces your operating cost by $1,500-$3,000/year for a 4-unit building, and you can raise rents modestly to reflect the included utility value. This is the simplest model — no tenant billing complexity, no virtual net metering required. Many landlords prefer this approach for its simplicity.
Yes, as long as the property is held as a business asset (investment/rental), not your personal residence. A single-family rental qualifies for Section 48E because the owner is making a business investment. If you live in the home part-time (e.g., a vacation rental you also use), consult a tax advisor — the ITC may be prorated based on business vs. personal use percentage.
The solar system transfers with the property and can significantly increase the sale price. Lawrence Berkeley National Lab data shows solar adds $15,000-$25,000 to home value. For multi-family properties, the added value is calculated based on the income approach — the annual electricity savings (or additional rent) capitalized at the market cap rate. ITC recapture may apply if you sell within 5 years of claiming the credit.
Virtual net metering (VNM) allows the electricity credits from a single solar system to be distributed across multiple utility meters in the same building. Available in Massachusetts, Rhode Island, New York, and several other states. The landlord allocates credit percentages to each unit. This lets tenants benefit from solar directly on their individual utility bills, which can be a strong rental amenity.
With Section 48E (30% ITC) and MACRS depreciation, the effective first-year cost reduction is 45-55% of the installed price. For a $30,000 system, your effective cost after tax benefits is $13,500-$16,500. At $2,500/year in electricity savings, the payback is 5-7 years. After payback, the solar system produces free electricity for 18-20+ more years. The total 25-year ROI is typically 200-400% on the net investment.
NuWatt designs solar systems for multi-family and rental properties across 9 states. We handle Section 48E documentation, utility interconnection, and VNM enrollment.