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The residential solar ITC (Section 25D) expired December 31, 2025. Texas 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. NuWatt Propel is available in Texas with FEOC-compliant Silfab 440W panels.
30%
ITC Rate (Section 48)
$9,075
Example ITC (11 kW)
LIVE in TX
Propel Status
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.
Why Section 48 is critical for Texas homeowners
Texas has no state solar rebate, no state income tax (so no state solar credit), no mandatory net metering, and an 8.25% sales tax on solar equipment. Without Section 48 TPO financing, Texas homeowners face the worst possible combination: $0 federal credit, no state incentive, and sales tax on top. Section 48 through a lease, PPA, or Propel is the only remaining path to federal solar savings in the Lone Star State.
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, Propel (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, Propel (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.
A third-party owner (financing company) purchases a solar system — for example, an 11 kW system at $2.75/W costs approximately $30,250. 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 $30,250 system, that is $9,075 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 $30,250 example, MACRS provides roughly $4,780 in additional tax benefits over 5 years. This is a commercial tax benefit unavailable to individual homeowners.
The TPO receives approximately $13,855 in combined tax benefits ($9,075 ITC + ~$4,780 MACRS). With NuWatt Propel in Texas, the financing company also captures the 10% domestic content bonus using FEOC-compliant Silfab 440W panels. These savings are baked into your lower monthly lease payment or per-kWh PPA rate. This is not a loophole — it is the intended mechanism Congress designed to encourage solar deployment at scale.
System Cost
$30,250
25 x Silfab 440W
Section 48 ITC
-$9,075
30% to TPO
MACRS (5-yr)
-$4,780
20% bonus in 2026
TPO Tax Benefits
~$13,855
Passed to you as savings
Three system sizes showing how Section 48 ITC and MACRS translate to real savings for Texas homeowners. Based on $2.75/W average TX pricing.
Smaller homes, 600–800 sq ft roof
Average TX home, offsets AC-heavy usage
Large homes, EV charging, pool pumps
Not all financing captures the ITC. Here is which options benefit from Section 48 and which do not. Note: NuWatt Propel is available in Texas.
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
TX Note: In TX’s deregulated market, your savings depend on your retail electric plan. A lease payment of $100–145/mo can beat a $200+/mo summer electric bill.
You pay per kilowatt-hour at a rate lower than your retail electric rate. The TPO owns the system, claims Section 48 ITC + MACRS, and sells you the power at a discounted rate.
Advantages
Limitations
TX Note: At $0.08–0.13/kWh vs retail rates of $0.12–0.16/kWh, the spread is tighter in TX than New England. But TX sunshine produces more kWh per panel, which compensates.
NuWatt’s third-party ownership program — AVAILABLE IN TEXAS. The financing company owns the system, claims Section 48 ITC + MACRS + domestic content bonus. Requires FEOC-compliant Silfab 440W panels.
Advantages
Limitations
TX Note: Propel is LIVE in Texas. Silfab 440W FEOC-compliant panels qualify for 30% ITC + 10% domestic content bonus. Energy community bonus (+10%) is address-dependent — verified during consultation.
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
TX Note: TX has no state income tax, so there’s no state-level solar credit either. With $0 federal ITC and 8.25% sales tax, cash purchase economics are weaker than TPO.
No mandatory net metering in Texas makes TPO the safer choice.
Unlike states with mandatory 1:1 net metering, Texas operates a deregulated ERCOT market where solar buyback rates are set by individual Retail Electric Providers (REPs). Some plans offer competitive buyback; others pay wholesale or nothing for exported solar.
Credits at retail rate for surplus
100% renewable, competitive buyback
Tiered buyback, varies by plan
Wholesale credit or no credit
TPO eliminates buyback risk
With a lease, PPA, or Propel arrangement, the TPO manages the solar buyback complexity. You pay a fixed rate for the solar electricity consumed at your home, regardless of what the REP pays for exported surplus. The TPO absorbs the market risk, and you get predictable savings.
Municipal utilities (Austin Energy, CPS Energy) operate outside ERCOT and have their own solar programs. Austin Energy offers a competitive Value of Solar tariff. CPS Energy provides capacity rebates. If you are in a municipal territory, the buyback dynamics differ — but Section 48 TPO still works.
Not all panels qualify for the full ITC stack. Propel uses FEOC-compliant panels.
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
Many TX census tracts qualify (oil & gas areas)
Most residential projects qualify for 30–40%. Up to 50% is theoretically possible with all bonuses (domestic content + energy community + low-income), but few residential projects meet every condition. Exact eligibility verified during consultation.
Texas + Energy Community Bonus
The TPO claims the base 30% ITC on every qualifying project. Projects using domestic-content-qualifying panels (like Silfab 440W) may qualify for an additional 10%. If your address falls in an IRS-designated energy community census tract — common in Texas due to its extensive oil and gas infrastructure — another 10% bonus may apply. Total ITC ranges from 30% to 40% for most qualifying residential projects. NuWatt Propel with Silfab 440W panels ensures eligibility for the domestic content adder. Energy community eligibility is address-specific — we verify during your consultation.
FEOC Compliance Deadline: July 4, 2026
After this date, projects using non-FEOC panels may face additional restrictions beyond losing the domestic content bonus. NuWatt Propel in Texas uses Silfab 440W panels specifically to ensure full FEOC compliance before the deadline.
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 Propel arrangement, the third-party owner (TPO) 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 Texas, where solar production is 20–30% higher than the Northeast, PPA rates of $0.08–0.13/kWh can compete with retail rates — especially in summer when usage spikes.
“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).
“Texas net metering makes solar a no-brainer either way.”
Texas does NOT have mandatory net metering. The deregulated ERCOT market means solar buyback varies by retail electric provider. Some plans (TXU Solar Buyback, Green Mountain) offer near-retail credits; others pay wholesale or nothing. This makes TPO even more important in TX — the TPO manages the buyback risk, not you. With a lease or PPA, you pay a fixed rate for the solar electricity consumed at your home, regardless of buyback policies.
The construction deadline for Section 48/48E is approaching. Here is the timeline every TX 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 TX gets $0 from the IRS.
You are here. TPO arrangements (including Propel) signed now have ample time to begin construction before the deadline. TX permit timelines run 2–6 weeks — faster than most states.
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 $30,250 system, that is approximately $1,513 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 (lease, PPA, or Propel) 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 Texas 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/Propel), 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 NuWatt Propel (available in Texas), 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.
Yes. NuWatt Propel is available in Texas. The program uses FEOC-compliant Silfab 440W panels, which qualify for the 30% base ITC plus the 10% domestic content bonus. The financing company owns the system, claims all Section 48 benefits (ITC + MACRS + domestic content), and passes savings to you through competitive monthly payments. Contact NuWatt for a Propel quote in your TX utility territory.
Texas’s deregulated ERCOT market means there is no guaranteed net metering. Solar buyback rates vary by retail electric provider (REP). With a TPO arrangement (lease/PPA/Propel), this variability is the TPO’s problem, not yours. You pay a fixed rate for solar electricity regardless of buyback policies. If you own the system (cash/loan), you need to carefully select an REP with a solar buyback plan — and even the best plans can change terms.
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 Texas, typical PPA rates are $0.08–0.14/kWh compared to retail rates of $0.12–0.16/kWh, so homeowners still see 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. NuWatt Propel in Texas uses Silfab 440W specifically for this reason.
Yes. Under SB 1637, Texas provides a mandatory 100% property tax exemption for the added home value from solar energy systems. This applies statewide, regardless of county. However, Texas does NOT exempt solar from sales tax — you pay the full 8.25% on equipment and installation. These state-level rules apply whether you own the system or use a TPO arrangement.
Most lease, PPA, and Propel 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.
Texas is one of the strongest cases for TPO in 2026. Here’s why: (1) $0 federal ITC for cash buyers, (2) 8.25% sales tax adds ~$2,500 to a cash purchase, (3) no state solar rebate, (4) no guaranteed net metering, (5) no state income tax (so no state solar credit either). TPO eliminates all of these risks: the financing company absorbs the tax, navigates buyback complexity, and passes ITC + MACRS savings to you. If you have $25,000+ in cash and a great solar buyback plan locked in, ownership can work. For everyone else, TPO is the pragmatic choice.
Comprehensive guide to solar energy in Texas — costs, incentives, and timeline.
Deep dive into lease vs PPA structures, rates, and contract terms for TX.
Side-by-side financing comparison with 25-year savings projections.
Honest analysis of whether solar still works in TX without Section 25D.
City-by-city pricing, system sizes, and cost breakdowns across Texas.
Compare TXU, Reliant, Green Mountain, and other solar buyback programs.
Available in TX — FEOC-compliant Silfab 440W panels with Section 48 ITC + domestic content.
Section 25D is gone. Section 48/48E is still here — but the clock is ticking. NuWatt Propel is available in Texas with FEOC-compliant Silfab 440W panels. Get your quote before the July 4, 2026 construction deadline.
Free quote • No obligation • NABCEP-certified installers • Silfab 440W FEOC panels • Propel available in TX