Energy costs are one of the most stubborn line items in almost any commercial budget. Equipment, HVAC systems, and lighting run nonstop from open to close in a lot of businesses. For many owners, electricity is one of the largest operating expenses, and it keeps climbing. Imagine if you could offset that expense and claim tax credits for doing so. You can, thanks to the federal solar tax credit changes buried in the One Big Beautiful Bill Act.
Buried inside the One Big Beautiful Bill Act, known as OBBBA, signed into law on July 4, 2025, are federal solar tax credit changes that deserve your attention now. Two of the credits that matter most to commercial property owners, the Investment Tax Credit and the Production Tax Credit, are still available, but only if you move fast. A third, the Commercial Building Energy Efficiency Deduction, has a hard termination date that is closer than most people realize.
Investment Tax Credit
The Investment Tax Credit, or ITC, provides businesses with a 30 percent credit against the cost of a qualifying solar installation. For a business owner who owns the building, or who is a tenant with a long term lease and landlord cooperation, this is the most direct path to federal relief on the cost of going solar. The 30 percent base rate can increase depending on where the system is installed and whether domestic materials are used, meaning the effective credit for some projects can exceed 30 percent. The credit applies to the full cost of installing the system, including both equipment and labor.
The critical deadline is July 4, 2026. Wind and solar projects that do not begin construction by that date lose access to the ITC unless the system is placed in service by December 31, 2027. Projects that begin construction on time have a four year window to be placed in service. One important wrinkle is IRS Notice 2025-42, issued in August 2025, which significantly tightened the rules for what qualifies as beginning construction. The five percent cost safe harbor has been eliminated for most solar projects, surviving only for smaller installations with a net output of 1.5 megawatts or less. For any larger system, the contractor must actually begin meaningful physical work on your specific installation. A signed contract and a deposit are not enough.
For business owners who lease rather than own their space, a power purchase agreement or solar lease may still make sense. In those arrangements, the leasing company owns the panels and claims the ITC, but the savings are typically passed through to the customer as lower monthly payments. That path remains viable as long as the leasing company's project meets the construction start deadline, something worth confirming in writing before signing any agreement.
Battery storage paired with solar is worth noting separately. Standalone battery storage systems retain full ITC access through 2033, with phase downs beginning in 2034 and running through 2036. For businesses that want energy resilience against outages as much as they want lower bills, a solar plus storage system may offer the best of both worlds under current law.
The Production Tax Credit
The Production Tax Credit, or PTC, is less commonly used for smaller commercial installations but is the preferred structure for larger utility scale projects. Rather than a one time credit against the cost of a system, the PTC provides a per kilowatt hour credit for the electricity the facility actually generates over ten years. The base rate for 2025 is approximately 0.3 cents per kilowatt hour, rising to 1.5 cents per kilowatt hour, as inflation adjusted, for projects that meet prevailing wage and apprenticeship requirements, with bonus tax credits available on top of that. The ITC and PTC are generally used as alternatives rather than in combination, and for most business owners, the ITC will be the more practical choice. That said, business owners who are part of a larger commercial real estate development or who are exploring shared solar arrangements should know the PTC remains on the table, subject to the same July 4, 2026 construction start deadline and the same Notice 2025-42 beginning of construction rules.
The Commercial Building Energy Efficiency Deduction
The Commercial Building Energy Efficiency Deduction, or CBEEDD, is often overlooked in solar conversations. Still, it is directly relevant to any business owner who owns commercial property or is undertaking a significant build out. The CBEEDD allows commercial building owners, and notably the architects, engineers, and contractors who design qualifying government and nonprofit buildings, to deduct the cost of energy efficient upgrades to interior lighting, HVAC, hot water systems, and the building envelope. For projects placed in service during the 2025 tax year that meet prevailing wage and apprenticeship requirements, the deduction is up to $5.81 per square foot. For qualifying projects placed in service in 2026, the rate rises to $5.94 per square foot under IRS Revenue Procedure 2025-32. In a 3,000 square foot commercial space, that is a potential deduction of more than $17,000 in a single year.
The OBBBA added a hard termination, where the CBEEDD will not apply to any property for which construction begins after June 30, 2026. That deadline is slightly earlier than the ITC and PTC construction start window and deserves immediate attention from any owner planning a renovation or build out. Critically, projects that begin construction by June 30 can still be placed in service later and remain eligible. The clock runs from when you break ground, not when you finish.
State Solar Incentives
The federal pullback makes state programs more important than ever, and what is available may surprise you. Roughly ten states currently offer their own solar tax credits, separate from and stackable on top of federal incentives, and in a handful of cases, those state credits are generous enough that, when combined with sales tax exemptions, property tax exclusions, and performance based payment programs, the total incentive package can rival or even exceed what the now terminated federal residential credit once offered on its own. Beyond tax credits specifically, around fifteen states exempt solar equipment from sales tax entirely, and active Solar Renewable Energy Certificate markets in nearly a dozen states allow system owners to earn ongoing revenue based on the electricity their panels generate, turning a one time capital expenditure into a longer term income stream.
The range is wide. Some states have built robust, well funded programs that will be around for years. Others offer little beyond what the federal government provides. Where your business sits on that map matters enormously to the financial case for going solar right now. Before signing any contract or accepting any installer's quote, it is worth a conversation with a tax professional who understands both the federal picture and your state's specific incentive stack, because in the right state, the numbers may still work out better than you expect.
What This Means for Your Business
The federal government is not done with solar, but it has closed the era of open ended incentives and replaced it with hard deadlines. For business owners, the practical message is straightforward. If you have been thinking about solar or an energy efficient renovation, the window to lock in a construction start is measured in months, not years. The ITC and PTC deadline is July 4, 2026. The CBEEDD deadline is June 30, 2026. Neither offers a grace period.
Navigating these credits requires understanding not just the deadlines but how they interact with your ownership structure, your lease terms, state incentives, and the specific equipment your contractor is proposing. Azarvand Tax Law can help you assess which credits apply to your situation, what documentation you need to establish a qualifying construction start, and how to structure the transaction to maximize your benefit. Call or text us today at 410-698-4005, or email us at [email protected] for a complimentary 30 minute consultation.
About the Author. Tina Azarvand is a Tax Attorney and is the founder of Azarvand Tax Law. She assists businesses with preventing, defending, and resolving tax controversies with the IRS and local taxing authorities. In 2023 and 2024, she was selected to the SuperLawyers Rising Stars list, a distinction that less than 2 percent of attorneys receive.
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