Do You Get a Tax Credit if You Lease Solar Panels?

Does a solar lease qualify for the federal tax credit?

Yes. When you lease solar panels or sign a power purchase agreement (PPA), the system still qualifies for a federal tax credit worth 30% of its cost, and you get the benefit as a discounted price. There's nothing to file and no tax bill needed: the company that owns the panels handles the credit, and the savings show up in what you pay.

The credit is the clean electricity investment credit, known by its section of the tax code, 48E. It's a business credit, and the 2025 federal tax law kept it for solar that a company owns and leases to a homeowner. That's why leases, PPAs and prepaid PPAs are the way to put the federal credit to work on a home system in 2026.

This article covers the federal credit only. For how a PPA is billed and how it differs from a lease, see what a solar PPA is. For every way to pay side by side, see our guide to paying for solar.

How does the tax credit reach you with a lease or PPA?

The credit lowers the cost of your system, and that saving comes to you as a lower price. Where you see it depends on the option you choose.

You don't need tax liability to benefit, and there's no form to file. That makes company-owned solar a good fit for retirees, households with a small federal tax bill and anyone who would rather not manage a credit on their own return.

How do you tell whether an offer passes much of the credit through? Ask for the lease or PPA price and the cash price of the same system, then compare what you would pay over the full contract with what the system would cost to buy. The best offers pass a large share of the credit on to you, so the total comes in close to or below the purchase price, with maintenance included.

A prepaid PPA is the most direct way to see the credit's value, because it's built into a single upfront price you can compare against buying the same system.

What bonuses can raise the credit on leased solar?

The 30% base credit can grow with two bonuses, each worth up to 10 extra percentage points for a system the size of a home installation:

• Energy community bonus. A system located in a federal energy community, an area tied to fossil fuel jobs or a closed coal mine or plant, can earn 10 more points. In 2026 that includes Worcester, Berkshire, Franklin, Barnstable, Dukes, Nantucket and Hampden counties in Massachusetts, New Haven and Windham counties in Connecticut, and large parts of Pennsylvania and southern New Jersey. Here's how energy communities work.
• Domestic content bonus. A system built with U.S.-made steel and iron and a set share of U.S.-made components can earn another 10 points. The required share is 50% for projects that begin construction in 2026 and 55% after that.

Either bonus can lower your price further, so ask how it's reflected in your offer. Your address decides the energy community bonus, so it's worth checking before you compare offers.

What deadlines apply to leased and PPA solar?

The 2025 federal law put a timeline on the solar credit. Which rule applies depends on when construction on your system begins.

"Begins construction" has a tax meaning. For a system the size of a home installation, the owner can show it either by starting physical work of a significant nature or by paying or incurring at least 5% of the project's cost, a safe harbor the IRS kept for solar of 1.5 megawatts or less. Signing a contract alone doesn't count.

"Placed in service" means the system is installed and ready to run. A home system that is designed, permitted and installed on a normal schedule has room to meet the 2027 date. Owners must also meet new federal rules on where equipment comes from for projects that begin construction after 2025. That's the owner's job, but it's fair to ask how they handle it.

How does leasing compare with buying for incentives?

The federal homeowner credit, section 25D, applied to systems installed by December 31, 2025. A homeowner who buys a system with cash or a loan today earns their return from different programs instead, and in Massachusetts those are substantial:

• SMART 3.0 payments of $0.03 per kilowatt-hour, or $0.06 for income-eligible households, for up to 20 years
• A state income tax credit of 15% of the cost, up to $1,000
• A 20-year property tax exemption on the added home value

With a lease or PPA, those incentives and the federal credit are built into a discounted rate, and you get a lower bill without the upfront cost or the upkeep. Net metering credits land on your utility bill either way.

Both put incentives to work for you. Owning pays the state programs and every dollar of bill savings to you directly. Leasing turns the federal credit into a lower payment from day one. Our guide to what each option gets you lays it out in one table, and is it better to buy or lease solar panels walks through the trade-off.

What should you ask a solar company about the tax credit?

Get the answers to these in writing before you sign a lease or PPA:

1. How is the federal credit reflected in my price? A clear answer points to the discount in your payment, rate or prepaid price.
2. Does my address qualify for the energy community bonus? If it does, ask whether that changes your offer.
3. When will construction begin, and when will the system be placed in service? That decides which deadline applies.
4. What happens to my price if the project misses a deadline? The answer should be in the contract, not a verbal promise.
5. How does the payment change over the contract? Check whether there is an annual escalator and what the payment is in the final year.

Evergreen Solar offers leases, PPAs and prepaid PPAs alongside cash and loans, so we can price every option on the same system for your home. If you're planning to move in the next few years, see how leased solar transfers when you sell.

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