While renewable energy champions celebrate the success of solar and storage tax credits, a looming fiscal precipice threatens to upend the entire industry. The so-called “tax credit cliff” is rapidly approaching, and it’s no joke.
Commercial solar developers must have their projects placed in service by December 31, 2027, to qualify for technology-neutral credits – unless they’ve started construction earlier.
Here’s the kicker: projects that break ground by July 4, 2026, get a sweet deal – up to four extra years after construction begins to finish the job. That pushes potential deadlines all the way to 2030. Start after that magical July date? Tough luck. You’re stuck with the 2027 deadline. Talk about pressure.
Beat the solar tax credit clock: break ground by July 4, 2026 or kiss those precious deadline extensions goodbye.
For smaller commercial solar systems under 1 MW AC, it’s an all-or-nothing game. The 30% federal tax credit vanishes overnight on December 31, 2027. No gradual phase-down. Just gone. Poof. Zero percent.
Meanwhile, storage systems – whether standalone or paired with solar – keep their 30% credit longer. Odd timing, right?
Residential solar faces an even earlier cliff. Homeowners hoping to claim the 30% tax credit must have systems installed by December 31, 2025. After that? Zilch. Battery storage for homes follows the same brutal timeline.
But wait – there’s a loophole! Homeowners can still access the benefits indirectly after 2025 through third-party ownership models like leases or PPAs. The companies own the systems and pass along some savings. Not ideal, but something.
The One Big Beautiful Bill Act made things more complicated. It tightened “begin construction” rules dramatically. No more token equipment purchases to claim you’ve started. Now you need “substantial” project build-out to qualify.
The Investment Tax Credit established under the Inflation Reduction Act was meant to provide long-term stability, but the new legislation has created unprecedented uncertainty in the solar market.
The accelerated phaseout has been particularly challenging for projects with Foreign Entities of Concern in their supply chains, as these now face additional restrictions on tax credit eligibility.
This rapid transition comes just as the industry has generated private investment of $60 billion in 2023 alone.
The clock is ticking. Developers are scrambling. Equipment orders are piling up. Project timelines are accelerating. It’s a mad dash to beat these deadlines. Ready or not, the cliff is coming.
References
- https://pv-magazine-usa.com/2025/08/20/solar-tax-credit-cliff-tightens-project-deadlines/
- https://www.forefrontpower.com/solar-tax-credits-window-obbb/
- https://www.quitcarbon.com/help/not-over-yet-what-you-need-to-know-about-federal-tax-credits-for-solar-and-batteries
- https://colitetech.com/blog/what-the-end-of-the-solar-tax-credit-means-for-your-investment/
- https://www.projectfinance.law/publications/2025/august/new-construction-start-rules-for-wind-and-solar/
- https://electrek.co/2026/01/07/the-30-home-solar-tax-credit-is-dead-long-live-the-30-home-solar-tax-credit/
- https://www.novoco.com/notes-from-novogradac/the-final-one-big-beautiful-bill-act-is-bad-news-for-solar-wind-home-energy-efficiency-other-clean-energy-tax-credits
- https://sol-ark.com/news/homeowners-save-30-percent-solar-tax-credit-before-december-2025/
- https://www.acdirect.com/blog/2026-2027-us-solar-hvac-incentives-post-federal-credit-era
