The Federal Solar Tax Credit: Your Questions, Answered

Right now, the federal tax credit for solar has been a huge interest driver for businesses, farms, and nonprofit organizations we've been speaking with. It is also changing fast. The credit for solar panels now has a firm end date, the credit for batteries runs for years longer, and some projects can earn extra bonus credits on top. Here are straight answers to the questions we hear most.

The short version

• Solar: businesses and nonprofits can still get 30% of the project cost back, but the system has to be up and running by December 31, 2027.
• Batteries: the 30% credit for battery storage stays in place through 2033, then it decreases.
• Bonus adders: the tax credit can increase by 10% for using U.S.-made equipment on a project, and also increase by 10% for being in a qualifying "energy community."

What is the federal solar tax credit?

It is a federal tax credit, officially an Investment Tax Credit or "ITC." Investment tax credits help businesses cover the upfront cost of new equipment. The Clean Electricity Investment Credit reduces your tax bill by a percentage of what you spend on a qualifying solar or battery system (baseline is 30%). A tax credit is better than a deduction: it reduces your tax bill dollar for dollar. If your business owes $40,000 in federal income tax and earns a $30,000 credit, you now owe $10,000.

How much is it worth?

The base credit is 30% of the total eligible project cost. On a $100,000 commercial system, that is a $30,000 credit. Eligible costs include the panels, inverters, racking, batteries, wiring, labor, engineering, and permitting.

Businesses can usually stack a second federal benefit on top: accelerated depreciation. This allows you to write off the cost of the system on your taxes much faster than most equipment will actually depreciate. Under current law, many businesses can deduct the full depreciable amount in the first year. Together, the credit and depreciation often cover around 40% to 50% of the project's cost for a business that pays taxes. Non-tax-paying entities cannot use the accelerated depreciation incentive.

Who can use it?

• Businesses of any size that own their system, including LLCs, S corps, farms, and landlords.
• Nonprofits, churches, schools, cities, and tribes. Even though they owe no income tax, they can receive the 30% as a direct cash payment from the IRS (called "direct pay" or "elective pay").

Is the credit really going away?

For solar, yes. The federal tax law passed in July 2025 set an end date. In plain terms:

• A new commercial solar project needs to be placed in service by December 31, 2027 to get the credit. "Placed in service" means installed, inspected, and approved by your utility to turn on.
• Projects that officially started construction on or before July 4, 2026 have a longer runway to finish. That date has passed, so for anyone starting a project today, the end of 2027 is the line.
• Starting in 2028, new solar systems no longer qualify.

How much time do I actually have?

Commercial solar projects usually take six to 12 months from signed agreement to the day the system turns on. That time covers design, engineering, permits, ordering equipment, installation, and the utility's approval to connect to the grid, which is often the slowest step.

The deadline is December 31, 2027, and it is a finish line, not a starting line. Signing a contract or breaking ground by that date is not enough: the system has to be fully installed and approved by your utility to operate.

Are there any incentives for batteries?

Good news here. Commercial battery storage, unlike commercial solar, is on a separate, much longer track. The full 30% credit stays in place for battery projects that start construction through 2033, then drops to 22.5% in 2034 and 15% in 2035.

• A battery can qualify paired with solar, added to solar you already have, or on its own.
• Batteries can cut demand charges, keep critical equipment running during outages, and store solar power for later in the day.
• Because the solar credit ends sooner, the smartest plan for many businesses is to get solar in by 2027 and add or expand storage on their own timeline after that.

Can I earn additional credit beyond 30%?

Yes, if the project meets certain conditions. Each credit adder is worth 10% of the project cost, and they can stack.

• Domestic content (+10%). If a high enough share of the equipment cost comes from U.S.-made components, the project earns an extra 10%. The bar is 50% for projects starting in 2026 and rises to 55% after that. This is harder to hit than it sounds, because many "American" panels still use imported parts, so it takes careful documentation from each manufacturer. Great Lakes Solar has secured the 10% domestic content adder for previous clients and handles all of the paperwork for you.
• Energy community (+10%). Projects located in certain areas tied to the fossil fuel industry qualify: near a closed coal mine or coal power plant, on a brownfield site, or in an area with high fossil fuel employment and higher unemployment. The Department of Energy publishes a map you can check by address.
• Low-income communities (+10% or +20%). A limited, competitive program for projects in low-income areas or that serve low-income residents. It requires an application and is not guaranteed. Great Lakes Solar has secured the 10% low-income community adder for previous clients and handles all of the paperwork for you.

So a project that hits both the domestic content and energy community adders could reach 50% instead of 30%. We check every project for every adder we can find, and we will tell you plainly when one is out of reach rather than count on it in your numbers prematurely.

Are there rules about where the equipment comes from?

Yes. Starting in 2026, projects must limit how much of their equipment comes from companies tied to certain foreign governments, often called the "FEOC" rules. In practice, this means your developer needs written documentation from manufacturers on where key components are made. We collect that paperwork for every project so you have it if the IRS ever asks.

My business doesn't owe much tax. Can I still benefit?

Yes you can, and here are some of the routes to get the most out of the solar tax credit:

• Use it over several years. If the credit is bigger than your tax bill, the unused part can be carried back to the previous 3 tax years (to get a refund of taxes already paid, but not for years before 2023) or carried forward for up to 22 years to reduce future taxes.
• Sell it. Businesses can sell ("transfer") the credit to another company for cash, typically around 90 cents on the dollar.
• Direct pay for nonprofits and public entities, as described above.
• Third-party ownership. A financing partner owns the system, claims the credit, and passes the savings to you through a lower lease or power price.

Every situation is different, so talk with your tax advisor about which option fits you.

Do I need to pay prevailing wages to get the full credit?

Not for most rooftop projects. Federal prevailing wage rules require contractors to pay local market-standard rates and benefits to construction workers on a project. Solar systems under 1 megawatt (which covers nearly every business rooftop) qualify for the full 30% tax credit without the federal prevailing wage and apprenticeship rules. Larger projects must meet those rules or the credit drops sharply.

What should I do next?

• Get real numbers. We will model your actual building, your utility bills, the credit, depreciation, and any adders or local grants you qualify for.
• Loop in your tax advisor early so the credit lands where it should.
• Start soon. With solar's end date set, the projects that finish comfortably are the ones that start in the next few months.

Have more questions about solar and batteries? See our frequently asked questions.