The Phaseout of Solar Tax Credits: Key Dates

Clean energy credits have been a hot topic since the passage of the Inflation Reduction Act (HR 5376). While these incentives created opportunities for property owners and investors, many of them are temporary, and the clock is ticking.

Here’s what real estate investors should know about solar tax credits, their phaseout timelines, and how they can still be leveraged strategically.

The Transition from § 48 to § 48E

Currently, solar energy investments fall under the § 48 Investment Tax Credit (ITC). But this credit phases out soon:

• § 48 Credit: Only applies to property placed in service before December 31, 2024
• § 48E Credit: Applies to clean energy property placed in service after January 1, 2025

The key difference is that § 48E comes with stricter requirements, including:

1. Prevailing Wage and Apprenticeship Standards
2. Emissions and Output Thresholds for a “qualified facility”

A “qualified facility” is defined as having a maximum net output of less than one megawatt. In practice, this covers relatively small installations (consult an engineer for specifics).

The 2027 Sunset

The new § 48E credit isn’t permanent. Under the latest tax bill, all property must be placed in service by December 31, 2027. After that, the credit sunsets for good.

This creates a clear timetable that will impact:

• Syndicators and leasing companies that are marketing solar as a long-term tax strategy
• Large facilities, which may still lock in the credit if construction begins by July 4, 2026

Why This Matters for Real Estate

Despite stricter rules, most real estate properties with solar installations can still qualify for the credit without tripping output restrictions. And the benefits are compelling:

• Tax Credit: Up to 30% of purchase price (e.g., a $100,000 solar system generates a $30,000+ tax credit)
• Bonus Depreciation: After reducing the property’s basis by 50% of the credit, investors can take a § 179 or § 168(k) bonus depreciation deduction on the remaining cost

This combination can create powerful tax savings, but only if projects are completed before the 2027 deadline.

Personal Real Estate Considerations

The timeline applies to residential solar as well, with an even shorter horizon: the residential solar tax credit expires entirely at the end of 2025.

For homeowners considering solar, it may make sense to move sooner rather than later to capture available incentives.

Final Thoughts

Solar tax credits remain a valuable tool for both investors and homeowners, but they are time-sensitive strategies. Unlike much of the tax code, these provisions were not made permanent.

If solar makes business sense for your property, act within the current timelines to maximize both credits and deductions. Waiting too long could mean missing out altogether.

Book a discovery call with our team today.