ITC Archives - Source Advisors

Why the OBBB Matters for Solar Federal Credits

Imran Syed on August 18, 2025

The One Big Beautiful Bill (OBBB) represents one of the most comprehensive clean energy legislative updates since the IRA. For solar investors, it means: 

Accelerated Phase-Out of Credits 
Securing Construction state date to avoid PIS deadline 
Foreign Entity Restrictions 
Material Assistance Cost Ratio (MACR) Compliance 
Consulting tax counsel early to navigate new regulations

One Big Beautiful Bill (OBBB) Key Changes and Updates to ITC: 

Section 48E credit will not be available for qualified solar facilities placed in service after December 31, 2027, if construction began after July 4, 2026 (12 months from enactment of the bill). 
Projects that start within 12 months from the enactment of the bill (i.e., BOC before July 4, 2026) are eligible based for a 4-year continuity safe harbor PIS deadline. 
Projects starting construction after December 31, 2025, must not involve material assistance from prohibited foreign entities or are owned by foreign-influenced entities (FEOC) to be eligible for the credit. 
The bill corrects the domestic content bonus for ITC projects. Construction started before June 16,2025; the adjusted percentage is 40%. If construction begins after June 16, 2025, and before January 1, 2026, the adjusted percentage is 45%.  If construction begins in 2026, the adjusted percentage is 50%, and if construction begins after 2026, the adjusted percentage is 55%. 
The bill imposes new restrictions on elective pay. No elective pays for projects tied to “foreign entities of concern” (e.g., China, Russia, North Korea, Iran). Applicable to taxable years beginning after July 4, 2025. 
The bill preserves the ability to transfer tax credits. However, credits cannot be transferred to Specified Foreign Entities (SFEs) or Foreign Influenced Entities (FIEs). Applicable to taxable years beginning after July 4, 2025.

Bonus ITC Opportunities Under the IRA/OBBB 

The IRA introduced additional bonus credits, and the OBBB further clarified and expanded several provisions, especially for commercial and utility-scale projects: 

10% Domestic Content Bonus: For using U.S.-manufactured components. 
10% Energy Community Bonus: For projects in areas impacted by fossil fuel transitions (Census tract) or contaminated by hazardous substances or pollutants (Brownfield site) 
Up to 20% Low-Income Community Bonuses: For systems benefiting underserved populations.

Example:
Installing a $500,000 solar array could yield a $150,000 tax credit (30%) against your federal liability. If the project site is in the energy community or materials used in the project meets the domestic content requirement threshold, an additional $50,000 bonus (10%) could be added to the base credit. 

How Solar Tax Credits Work 

Imran Syed on August 15, 2025

As demand for renewable energy accelerates, the Solar Investment Tax Credit (ITC) and Clean Electricity Investment Credit (CEIC) continue to serve as a cornerstone incentive for reducing the cost of solar energy systems. Understanding how credit works—and how recent legislation like the One Big Beautiful Bill (OBBB) may impact it—is essential for businesses, homeowners, and investors considering a move to solar. 

What Is Solar Tax Credit (ITC/CEIC)? 

The Solar Investment Tax Credit (ITC/CEIC) is a federal income tax credit available to businesses that install qualifying solar energy systems. Originally enacted under the Energy Policy Act of 2005, the ITC has driven massive growth in U.S. solar adoption. The Inflation Reduction Act (IRA) of 2022 extended and enhanced the credit by transitioning to CEIC for projects be ginning construction after 2025 and gradually phasedown beginning in 2034 or second year after emissions targets are reached (whichever is later). The Recent Passed One Big Beautiful Bill (OBBB) Introduced many changes to solar credit eligibility as discussed below. 

How the ITC Works 

The Solar Investment Credit, also known as ITC, is a dollar-for-dollar reduction of the federal income tax you owe. Here’s how it works: 

Eligible Properties: Commercial, Industrial, and Utility-scale projects. 
Credit Rate: Section 48 ITC remains at 6% base credit increases up to 30% base credit if the project meets PWA requirements or 1MW exception that begins construction before 12/31/2024. All projects beginning construction in 2025 are transitioned to Section 48E CEIC. 
Eligibility: Taxpayers must own the system; leased systems generally don’t qualify. 
Important deadlines: Projects that begin construction by July 4, 2026, the placed-in-service (PIS) deadline for meeting the continuity safe harbor is four calendar years after the calendar year in which construction began. For projects that begin construction after July 4, 2026, the PIS deadline is December 31, 2027. The Bill introduces FEOC restrictions for projects that begin construction after December 31, 2025.

What Costs Qualify? 

Qualified expenses under the ITC typically include: 

Solar panels and inverters 
Installation and labor costs 
Energy storage systems (primarily solar-charged) 
Permitting, inspection, and interconnection fees 
Sales tax and developer fees (for commercial installs)

Take the Next Step 

The solar tax credit remains a powerful tool for reducing the upfront cost of clean energy projects—and with the added provisions of the OBBB, now is the time to act. Proactive steps today can help lock in valuable incentives and keep your solar projects compliant and profitable under the new rules.  Source Advisors helps businesses optimize federal and state energy tax credits through expert guidance and strategic tax planning. Contact us today to learn how we can support your solar investment. 

How to Claim ITC: Claiming Federal Solar Investment Tax Credits

Imran Syed on August 11, 2025

The Federal Solar Investment Tax Credit (ITC) is one of the most valuable incentives available for solar energy projects. Whether you’re an individual homeowner, a business, or a tax-exempt entity, knowing the correct steps to claim—and potentially monetize—this credit is essential to maximizing its benefits.

How to Claim the ITC

The process for claiming the ITC differs depending on whether you’re an individual or a business.

Individuals: File IRS Form 5695 (Residential Energy Credits) with your annual tax return. This form allows you to calculate the credit based on the total eligible costs of your solar energy system. Credits are terminating for projects after 12/31/2025, making it critical to complete work before that date to secure eligibility.

Businesses: File IRS Form 3468 (Investment Credit) as part of your corporate tax return. This form applies to commercial projects, including those for rental properties or business operations. Projects that start construction by July 4, 2026, have a deadline of four years after the start year to be placed in service to meet the continuity safe harbor. For projects that begin construction after July 4, 2026, the PIS deadline is December 31, 2027.

These timelines can impact project financing, permitting schedules, and procurement strategies—especially for large or complex installations.

Tips for Claiming

Keep detailed documentation of your system’s total costs, proof of ownership, and operational status. The ITC is claimed in the tax year the system is placed in service, not the year construction begins. This means the credit applies once the system is installed, connected, and operational.

Common Misconceptions About Federal Solar Credits | ITC Explained

Imran Syed on August 7, 2025

The Federal Solar Investment Tax Credit (ITC) remains one of the most impactful incentives for expanding renewable energy adoption in the United States. Yet, despite its widespread use, there’s still plenty of misinformation about how it works, who qualifies, and how long it will be available. Clearing up these misconceptions is essential for homeowners, business owners, and developers who want to take full advantage of the benefits.

Below, we address three of the most common myths about the ITC and set the record straight.

Myth 1: The ITC Is a Rebate

Reality: The ITC is a tax credit—not a check from the government.

A rebate is cash that you receive after a purchase. The ITC, however, reduces the amount of federal income tax you owe. If you install a qualifying solar energy system, you can claim the credit on your federal tax return for a percentage of the project’s total cost, including equipment, labor, and installation. This credit directly offsets your tax liability, which can significantly lower your total tax bill.

Myth 2: Only Large Developers Benefit

Reality: Residential property owners and small businesses also qualify.

While the ITC has been instrumental for utility-scale solar developers, it is equally available to homeowners (Credit terminating for projects after 12/31/2025) and small business owners who install qualifying solar energy systems. Whether you’re adding panels to your home or investing in solar to reduce your business’s operating costs, the same percentage credit applies—making it a powerful savings opportunity regardless of project size.

Myth 3: There’s No Flexibility on Project Timelines

Reality: Projects that start construction by July 4, 2026, have four years after the start year to be placed in service to meet the continuity safe harbor.

This provision gives developers and owners a longer window to complete their projects without losing eligibility for the ITC. For projects that begin construction after July 4, 2026, the placed-in-service deadline shortens to December 31, 2027. Understanding these timelines is critical for planning—especially for larger or more complex projects that may face permitting, financing, or supply chain delays.

Key Takeaway

The Federal Solar Investment Tax Credit is a powerful tool for reducing the cost of renewable energy projects—whether you’re a homeowner, small business owner, or large-scale developer. Understanding how it works, and separating fact from fiction, ensures you can make informed decisions that maximize your financial and environmental benefits.