The 30% federal residential solar credit ended December 31, 2025. Solar leases and PPAs let third-party companies claim the Section 48E commercial credit and pass savings through lower monthly rates. Here is how that works.
By Solar Installers Near Me Research Team • Published
Direct answer
With a solar lease or PPA, the solar company owns the equipment and can claim the Section 48E commercial credit -- not you. The company may pass a portion of that credit's value to you through a lower monthly rate or per-kWh price. You benefit indirectly; you receive no tax credit yourself. This mechanism requires construction to begin by July 4, 2026 for the full credit window. Source: IRS.gov, Section 48E of the Internal Revenue Code.
If you have read that solar comes with a 30 percent federal tax credit through 2032, that information is out of date for homeowners. The One Big Beautiful Bill Act, signed July 4, 2025, terminated the residential credit (Section 25D) for systems placed in service after December 31, 2025. The commercial credit (Section 48E) is a different program and still active on its own timeline. For your own home in 2026, plan on no federal residential credit, and let us show you what your state still offers.
Key facts
Section 25D residential credit ended December 31, 2025. Homeowners who purchase or finance solar in 2026 receive zero federal credit.
With a lease or PPA, the solar company owns the system and may claim Section 48E (30% base commercial credit) if construction begins by July 4, 2026.
The pass-through to you is a lower monthly rate -- not a tax credit. Ask what the monthly rate would be without the 48E factor.
PPAs are not legal in all states. Verify availability in your state before planning.
Both leases and PPAs avoid dealer fees, which is a meaningful advantage over financed solar loans.
Ownership and the credit
When you purchase solar, you own the equipment. Under prior law, that meant you claimed Section 25D. That credit expired December 31, 2025. A homeowner who buys solar in 2026 receives no federal tax benefit.
When you lease solar or sign a PPA, the solar company owns the equipment. That company is the entity purchasing and placing the system in service. If construction begins by July 4, 2026, the company can claim the Section 48E commercial credit -- 30 percent of the system's installed cost. On a $30,000 system, that is $9,000.
The company may factor that $9,000 into a lower monthly rate for you. Or it may keep most of it as margin. The pass-through is not automatic. Ask the specific company what the monthly rate would be if Section 48E did not exist. The difference is what the pass-through is worth.
Side by side
| Category | Factor | Solar Lease | Power Purchase Agreement (PPA) |
|---|---|---|---|
| What you pay | What you pay | Fixed monthly amount, regardless of production. | Rate per kWh of electricity produced. You pay only for what the system generates. |
| Who owns the system | System ownership | Solar company. You have no ownership stake. | Solar company. You have no ownership stake. |
| Federal 48E credit | Federal 48E credit | Solar company claims it if construction begins by July 4, 2026. May pass savings to you through lower rate. | Same. Solar company claims 48E. Pass-through may appear in lower per-kWh rate. |
| Annual escalator | Annual rate escalator | Typically 2-3% per year. Model the full 25-year payment stream before signing. | Typically 2-3% per year. A $0.09 rate becomes roughly $0.17 by year 25 at 2.5% annual increase. |
| State availability | State availability | Available in most states. | Not legal in all states. Restricted or prohibited in Louisiana, Nebraska, Utah, Iowa, Oklahoma, and others. Verify through DSIRE. |
| Dealer fee risk | Dealer fee risk | None. No loan, no lender, no dealer fee. | None. No loan, no lender, no dealer fee. |
Commercial solar projects must begin construction by July 4, 2026 to qualify for the 30 percent Section 48E federal tax credit. After that date, the system must be placed in service by December 31, 2027.
Ask About Lease and PPA Options Before the DeadlineBefore you sign
01
What is the monthly rate or per-kWh rate?
Compare this to your current utility rate. The lease or PPA rate needs to beat your utility rate meaningfully enough to justify a 20 to 25 year commitment. Ask for the rate without the 48E pass-through factored in so you can see how much the credit is actually worth to you.
02
What is the annual escalator clause, and what does it total over 25 years?
Model the full contract term. A 2.5% annual escalator on a $0.09 rate reaches roughly $0.17 by year 25. Compare that 25-year total to what you would pay the utility over the same period at your current rate plus a 2 to 3 percent annual increase assumption.
03
Is there a purchase option, and at what price?
Many leases include a purchase option at years 10, 15, and end of contract. The purchase price matters. An option at fair market value at year 15 is different from an option at $1. Get the purchase option terms in writing before you sign.
04
What happens at the end of the contract?
Some companies automatically renew; others remove the equipment at no cost; others charge removal fees. Removal fees at year 25 can run $1,000 to $3,000 depending on system size and roof type. Know the end-of-contract terms before you start.
Want to see how a lease or PPA stacks up against a cash purchase for your specific home?
An independent advisor can model both paths using your actual bill, your utility's net-metering rules, and the specific state incentives at your address. No commission on any option. No shared lead.
Q and A
A free in-home assessment models all three paths using your real utility bill, your roof, your state's incentives, and the current Section 48E construction timeline. No commission on any option. No shared lead. No door-knockers.
