Which Solar Panels and Equipment Qualify for the Investment Tax Credit?
What Counts as "Eligible Basis" for the Section 48E Credit
The commercial Section 48E solar tax credit is calculated as a percentage of a system's eligible basis — the total cost of the equipment and labor that actually make the solar installation function. Getting this basis right matters, because it's the number the entire credit is built on.
What's Included
- Solar panels — the panels themselves, regardless of manufacturer, as long as they're new equipment placed in service for the project
- Inverters — the equipment that converts the DC power panels generate into usable AC power
- Racking and mounting hardware — roof mounts, ground mounts, or carport structures that hold the array
- Wiring, conduit, and electrical components — everything needed to connect the system to the building's electrical infrastructure
- Installation labor — the cost of the crew that physically installs the system
- Battery storage — increasingly one of the most important line items on this list (more below)
What's Generally Excluded
Costs that aren't directly tied to the solar and storage system — unrelated roof replacement, general electrical panel upgrades not required for the solar install, landscaping, or building improvements that would have happened regardless of the solar project — typically don't count toward the eligible basis. A good installer and tax preparer will separate these out clearly on your invoice and documentation.
Does Battery Storage Qualify?
Yes — and this is one of the more significant equipment-related changes for commercial solar buyers in recent years. Battery storage added alongside a new solar array generally qualifies for the same credit percentage as the panels themselves. In many cases, storage added later — to a system that was installed previously — can also qualify, as long as it meets applicable technical requirements.
This matters for the way businesses think about system design. A commercial property adding a 24kWh battery to its solar installation isn't just buying energy resilience and demand-charge reduction — it's adding a component that's part of the same credit-eligible basis as the panels.
Does Panel Type or Brand Matter?
The tax credit itself doesn't require a specific panel brand or technology — what matters is that the equipment is new, placed in service as part of a qualifying project, and properly documented. That said, panel technology affects the underlying economics of the system, which is worth factoring into equipment decisions even though it doesn't change credit eligibility:
- Bifacial panels capture sunlight on both sides of the panel, which can meaningfully increase output on the same footprint compared to standard single-sided panels.
- N-Type TOPCon cells are a newer panel technology generally associated with higher efficiency and better long-term performance than older panel types.
- Efficiency ratings affect how much capacity you can fit on a given roof or lot, which matters most for commercial properties with limited available space.
None of this changes the tax treatment, but it does change how much value a business gets per dollar of eligible basis — which is a separate, equally important part of the ROI conversation.
Turnkey Systems vs. Piecemeal Installs
Businesses generally source commercial solar in one of two ways: assembling a system from separately sourced panels, inverters, batteries, and installation labor, or purchasing a turnkey system where the panels, inverter, battery, and mounting hardware are packaged and sold as a complete kit.
From a Section 48E tax credit standpoint, a turnkey system has a practical advantage: the eligible basis is clearly defined upfront in a single itemized cost, rather than needing to be reconstructed after the fact from multiple vendor invoices. That documentation simplicity doesn't change the credit percentage, but it does reduce the administrative burden of substantiating the basis at tax time — a real consideration for business owners who don't want their solar purchase to turn into a paperwork project.
Bonus Depreciation (MACRS) — Stacking a Second Tax Benefit
The tax credit isn't the only federal tax benefit available on a commercial solar system. Businesses can also depreciate the system under the Modified Accelerated Cost Recovery System (MACRS), which is a separate benefit that stacks on top of the credit.
How the Two Benefits Work Together
Commercial solar equipment generally qualifies for a 5-year MACRS depreciation schedule — a much faster write-off than the system's actual useful life, which typically runs 25 years or more. This lets a business recover a significant portion of its investment through depreciation deductions in the early years of ownership, on top of the tax credit already reducing the amount owed.
One detail worth understanding: when a business claims the federal tax credit, the depreciable basis for MACRS purposes is typically reduced by half the credit amount, not the full amount. So a $200,000 system that receives a $60,000 tax credit still depreciates on a basis of $170,000 ($200,000 minus half of $60,000), not $140,000. This detail is often missed and is worth confirming with a tax professional, since it affects how much depreciation value is actually available.
The Combined Effect
Between the tax credit and accelerated depreciation, many businesses recover a substantial share of a system's total cost through tax benefits alone — often approaching or exceeding half the project cost when both benefits are fully realized, before factoring in any bonus adders or the ongoing energy savings from the system itself. This combined effect is a major reason commercial solar economics tend to outperform residential, where no comparable depreciation benefit exists for a homeowner.
Example: A 12kW Solar + 24kWh Battery Commercial System
To make this concrete, consider a turnkey commercial system built around an 11.7kW panel array and a 24kWh battery — a common sizing range for small commercial buildings, retail locations, or light industrial sites.
Illustrative cost basis breakdown:
- Panels, inverter, racking, wiring, battery, and installation labor: full package cost
- Eligible basis for the tax credit: the full package cost (assuming no excluded costs)
- 30% federal tax credit: applied directly against the business's tax liability
- Remaining basis after credit adjustment: depreciated on a 5-year MACRS schedule
What this means in practice: the business claims the credit in the year the system is placed in service, then begins recovering additional value through depreciation deductions over the following years — all while the system is also reducing the business's electricity costs and providing backup power capacity. The exact dollar figures depend on the final system price and the business's specific tax position, which is why working through the numbers with a tax professional before purchase is worth the time.
Frequently Asked Questions
Do I have to buy new equipment, or does refurbished qualify? The credit generally requires original-use equipment — meaning it needs to be new when placed in service for your project, not previously used elsewhere. Refurbished or secondhand solar equipment typically does not qualify for the credit.
Does a battery added a year after the panels still qualify? In many cases, yes — battery storage added to an existing solar system after the fact can still qualify for the credit, provided it meets applicable technical and capacity requirements at the time it's installed. This is worth confirming with your installer and tax preparer at the time of the addition, since requirements can be specific.
Do EV chargers installed alongside solar qualify for a separate credit? Commercial EV charging equipment has historically had its own separate federal tax credit, distinct from the solar equipment credit. If you're installing EV charging alongside a commercial solar and battery system, treat it as a separate credit calculation rather than assuming it falls under the same 30% solar basis — a tax professional can walk through how the two interact for your specific project.
This article is part of our Commercial Solar Tax Credit series. See Section 48E Investment Tax Credit (ITC) 2026: What You Need to Know for current deadlines, or How the Section 48E Clean Electricity Investment Tax Credit Works for the full claim process. For grants and rebates that can stack with these tax benefits, see Solar Grants for Businesses.
Disclaimer: This article is for general informational purposes and is not tax advice. Businesses should consult a qualified tax professional to determine how the commercial solar tax credit and depreciation rules apply to their specific situation.