Commercial solar isn’t just good for the environment. It’s a smart financial move. With federal incentives available in 2026, installing a solar energy system can significantly reduce your operating costs, boost property value, and accelerate your return on investment.

Navigating the complex landscape of tax credits and depreciation benefits can be overwhelming. This guide breaks down the federal incentives that make going solar a powerful economic decision for U.S. businesses in 2026 and beyond.

Federal Solar Tax Credits: The Investment Tax Credit (ITC)

At the heart of federal solar incentives is the Investment Tax Credit (ITC), one of the most valuable financial benefits available to businesses that install solar.

What the ITC Means for Your Business

Under current federal policy, businesses that begin construction on a solar project in 2026 qualify for a 30% tax credit on the total cost of the system, including panels, inverters, wiring, and installation labor.

For example:

A $200,000 solar installation could generate a $60,000 federal tax credit.

This credit directly reduces your federal tax liability, a dollar-for-dollar savings.

FEOC Rules

An additional layer to all this are the new Foreign Entities of Concern (FEOC) restrictions that were put in place by the OBBB. These new rules began on January 1st, 2026 and will impact any solar project not safe harbored at that time.

While the specifics around FEOC rules have not yet been released, FEOC will limit tax credit eligibility for solar projects based on the percentage of materials that come from certain countries. Projects that have significant “material assistance” from countries like China, Russian and North Korea will have limited access to the tax credits.

The IRS is anticipated to release rules on FEOC in 2026. Until then, our team is staying up to date on guidance to ensure your project receives the most tax credit and adders available. We’ll continue to provide updated information with you with as it becomes available.

Why Timing Matters Now More Than Ever

Under previous law, commercial solar projects could lock in a 30% federal tax credit for years to come. After new legislation passed in mid-2025, that window has sharply narrowed.

Here’s the bottom line:

• 30% Federal Commercial ITC still exists, but only for projects that meet accelerated deadlines.

• Projects must begin construction by July 4, 2026 or be fully operational by Dec. 31, 2027 to qualify for the tax credit.

• Projects that miss these deadlines won’t qualify for any federal solar ITC at all.

This compressed timeline makes prompt planning and execution critical if you want the full benefit.

What Counts as “Starting Construction”?

To protect your eligibility for the 30% ITC, you need to prove your project has “begun construction.” There are two primary ways to do this:

1. Physical Work of a Significant Nature

This method now applies to all larger commercial projects (typically above 1.5 MW). You must perform meaningful onsite or offsite construction activities, like racking installation or manufacturing key components, to establish eligibility.

2. 5% Safe-Harbor Rule (Smaller Projects)

Smaller systems (≤ 1.5 MW AC) can still use the traditional 5% cost method: if you incur at least 5% of your total project cost early in the project year, you can safe-harbor the credit.

Good to know: Once you start construction, you must either finish within four years or maintain continuous progress or you risk losing your federal ITC.

Bonus Incentives That Boost Your Solar Savings

Beyond the base 30% credit, there are additional ways to increase federal incentives:

Domestic Content Bonus: If your project includes a required percentage of U.S.-manufactured components, you may earn an extra 10% credit.

Energy Community Bonus: Projects in designated brownfields or former fossil fuel zones can also qualify for up to 10% more credit.

100% Bonus Depreciation: Commercial solar and standalone battery systems still qualify for 100% first-year depreciation, significantly improving cash flow and ROI.

These bonus adders can combine to push your total tax benefit well above 40% of system costs in certain cases.

REAP Grants for Rural Businesses

If you’re a rural small business or agricultural producer, the Rural Energy for America Program (REAP) offers competitive grants and loan guarantees that can cover up to 50% of your solar project cost.

REAP grants can be paired with federal tax credits like the ITC, driving your overall investment cost down, making solar not just affordable but highly profitable.

Standalone Battery Storage Is Now Eligible Too

Thanks to recent law changes, battery systems (≥ 3 kWh) qualify for the same federal tax incentives as solar — even if not paired with a PV array.

That means businesses investing in energy resilience and demand management can also capture a 30% tax credit on batteries and related labor.

Calculate Your Return on Investment

To understand the real financial impact of a solar project, consider:

Total Project Cost – Equipment, installation, and design

Energy Savings – Reduced utility bills over decades

Federal Tax Credits – ITC and potential bonus adders

Depreciation Benefits – MACRS write-offs over time

Seasoned solar professionals will perform a detailed cost-benefit analysis that shows your projected payback period, often 3–7 years, and lifetime savings over a system’s 25+ year lifespan.

Why Now Is the Time to Act

Federal incentives make 2026 a pivotal year for commercial solar. Businesses that begin construction this year lock in the full suite of federal tax benefits and position themselves for long-term energy savings.

Delaying your project could mean missing out on the best available financial incentives and leaving money on the table.

Good Energy Solutions Can Help You Maximize Savings

At Good Energy Solutions, we specialize in helping businesses like yours unlock the full financial value of commercial solar. From siting and system design to incentive optimization and installation, we manage every step, ensuring you claim every tax credit and depreciation benefit available.

Contact us today for a custom cost-benefit analysis and see how solar can transform your bottom line.

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