The 48E lease path: how battery leases still get federal credit in 2026

If you buy a home battery with your own money in 2026, your federal tax credit is $0.

One federal credit for battery storage did survive into 2026. It is Section 48E, and it is structurally impossible for you to claim as a homeowner. It belongs to whoever owns the equipment. That single fact is the engine behind every "$0 down, we handle the tax credit" pitch on the market this year, and it is worth understanding precisely, because the difference between "there is a federal credit on this system" and "you receive a federal credit" is the difference between a fair description and a misleading one.

This page is the mechanics. What ended, what survived, who can claim it, what the July 2025 tax law changed, and what any of it is actually worth to you.

Nothing here is tax advice. It is a plain-language read of published statute and IRS material, with sources and dates, so you can ask a tax professional or a provider better questions.

What ended: Section 25D

Section 25D was the residential clean energy credit, worth 30 percent of qualifying costs including battery storage, claimed by homeowners on Form 5695.

The statute now reads: "The credit allowed under this section shall not apply with respect to any expenditures made after December 31, 2025." That termination was substituted into 25D(h) by Pub. L. 119-21, section 70506(a), enacted July 4, 2025. (Source: 26 U.S.C. 25D, Legal Information Institute, read August 6, 2026.)

The IRS states the same outcome on its consumer page: the credit "is not available for any property placed in service after December 31, 2025." (Source: IRS, Residential Clean Energy Credit, page last reviewed or updated July 4, 2026, read August 6, 2026.)

Those two formulations are not identical. The statute keys off expenditures made; the IRS consumer page keys off property placed in service. For anyone in the narrow window where the distinction could matter, that is a question for a tax professional with your dates in front of them. For everyone shopping in 2026, the practical answer is the same: no federal credit on a purchase.

The carryforward exception and what it means for a pre-2026 installation is covered in our 2026 battery tax credit guide.

What survived: Section 48E

Section 48E is the clean electricity investment credit. It is the technology-neutral successor to the old energy investment credit, and it covers energy storage explicitly. If you want the plain-language version of how IRC 48E sits against the dead 25D credit before the statutory detail below, start with the tax credit guide.

The operative text: "For purposes of section 46, the clean electricity investment credit for any taxable year is an amount equal to the applicable percentage of the qualified investment for such taxable year with respect to (A) any qualified facility, and (B) any energy storage technology." (Source: 26 U.S.C. 48E, Legal Information Institute, read August 6, 2026. Every statutory citation below comes from that reading unless stated otherwise.)

Three mechanics matter for a home battery.

Storage is covered on its own, not only as a solar add-on. 48E(a)(1)(B) names energy storage technology as a standalone category, and 48E(c)(1) defines the qualified investment for storage as the basis of the energy storage technology placed in service.

Home-sized systems clear the definitional floor. 48E(c)(2) borrows the definition of energy storage technology from section 48(c)(6), "except that subparagraph (D) of such section shall not apply." Section 48(c)(6)(A)(i) requires a nameplate capacity of "not less than 5 kilowatt hours." Mainstream home batteries are well above that. Subparagraph (D), the piece 48E switches off, is section 48's own termination clause excluding property whose construction began after December 31, 2024. (Source: 26 U.S.C. 48, read August 6, 2026.) That carve-out is why the definition survives into 48E while the old credit wound down.

The rate for residential-scale storage runs through the small-system route. 48E(a)(2)(B) sets a base applicable percentage of 6 percent for energy storage technology, and 30 percent for storage "with a capacity of less than 1 megawatt," among other qualifying routes. A home battery is orders of magnitude under 1 MW. The IRS overview page frames the step up from 6 percent to 30 percent through prevailing wage and apprenticeship requirements. (Source: IRS, Clean Electricity Investment Credit, page last reviewed or updated January 5, 2026, read August 6, 2026.) The statute provides the under-1-megawatt route as an alternative. Which applies to a given project is the owner's determination with their tax advisor.

Why you cannot claim it

This is the part that gets glossed over in sales conversations.

48E computes a credit "for purposes of section 46." Section 46 is the investment credit, which is a component of the general business credit under section 38. It is claimed by a taxpayer on Form 3468, Investment Credit, which has a dedicated section for qualified energy storage technology. (Source: IRS, Instructions for Form 3468, Part V Section B, read August 6, 2026.)

A credit is available to the taxpayer who owns the property and places it in service. If a leasing company or PPA provider owns the battery in your garage, that company is the taxpayer with the qualified investment. You are a customer buying a service from them.

So the accurate statement is: on a leased or third-party-owned battery, a federal credit exists on the system, and it belongs to the owner. You do not file for it. You do not receive a check. There is no line on your return where it appears. If a salesperson tells you that you "get the 30 percent credit" on a leased system, that statement is wrong, and it is a reason to slow down rather than sign.

This is the same ownership logic that governs utility incentives. Hawaiian Electric states it flatly about its own program: if a lease is signed, "the leasing company is the system owner and therefore eligible for the upfront incentive." (Source: Hawaiian Electric, Bring Your Own Device Plus, read August 6, 2026. Details in our BYOD Plus guide.) Ownership decides who the money goes to, over and over, across every incentive in this market.

What the July 2025 law changed, and what it did not

Pub. L. 119-21, enacted July 4, 2025, amended 48E in several places. Three of those changes bear on a leased home battery.

A new leasing denial, narrower than its heading. The law added 48E(i), headed "Denial of credit for expenditures for wind and solar leasing arrangements." The operative text: "No credit shall be determined under this section for any qualified investment during the taxable year with respect to property described in paragraph (1) or (4) of section 25D(d) (as applied by substituting 'lessee' for 'taxpayer') if the taxpayer rents or leases such property to a third party during such taxable year."

Read the cross-references. In section 25D(d), paragraph (1) is qualified solar water heating property and paragraph (4) is qualified small wind energy property. Solar electric property is paragraph (2). Battery storage technology is paragraph (6). (Source: 26 U.S.C. 25D, read August 6, 2026.)

So as the statute is written on the date we read it, the leasing denial reaches solar water heating and small wind, and does not name battery storage. We are reporting the text, and we are flagging the obvious tension: the subsection heading says wind and solar, while the operative cross-references land on two paragraphs that are not residential solar electric. Headings do not control operative text, but Treasury guidance, technical corrections, and litigation all exist. Anyone structuring a transaction around this should be reading current IRS guidance with counsel, not a consumer website.

Storage is carved out of the wind and solar termination. The law added 48E(e)(4), which turns off 48E for qualified property placed in service after December 31, 2027 that is part of a wind or solar facility. Subparagraph (C) then states: "This paragraph shall not apply with respect to any energy storage technology which is placed in service at any applicable facility." Storage is exempted from that specific cut-off.

Supply chain restrictions now apply. New 48E(c)(3) excludes from energy storage technology any property whose construction begins after December 31, 2025 if construction "includes any material assistance from a prohibited foreign entity," as defined in section 7701(a)(52). New 48E(d)(6) denies the credit entirely to taxpayers that are specified foreign entities or foreign-influenced entities. For a 2026 leased battery, that is a live constraint on the lessor and, indirectly, on which hardware ends up in offers.

There is also a phase-out, but it is not a calendar date. 48E(e)(1) to (3) step the credit down to 75 percent, then 50 percent, then zero for construction beginning in the calendar years following an "applicable year," defined by reference to section 45Y(d)(3), which is tied to national electricity emissions falling to a threshold rather than to a fixed year. The IRS overview page describes the phase-out as starting at "the later of 2032 or when U.S. greenhouse gas emissions from electricity are 25% of 2022 emissions or lower."

One caution on that IRS page: it was last reviewed January 5, 2026 and does not reflect the July 2025 amendments discussed above, including the leasing denial and the foreign-entity restrictions. When an agency overview and the current statutory text disagree, the statute and current guidance are the authority. That gap is also a good illustration of why every claim on this site carries a read date.

Why this produces $0-down offers

Put the pieces together and the market behavior explains itself.

Before 2026, a homeowner writing a check for a battery could claim 30 percent back under 25D. Cash purchase was the tax-efficient path for a homeowner with tax liability, and the industry sold it that way.

From 2026, that credit is gone on the purchase side. The only way a federal credit stays in a residential battery transaction is for a business to own the equipment. So providers own it, claim 48E, and sell you the use of the battery instead of the battery itself. The lease or PPA is not a marketing gimmick layered on top of the tax change. It is the tax change, expressed as a product.

That is a legitimate structure. It is also worth naming clearly: the reason someone is offering to install a battery at your house for nothing down is that they, not you, can now access a federal credit you no longer qualify for.

The full breakdown of what you give up in exchange, including contract length, escalators, home-sale transfer, and end-of-term ownership, is in our $0-down leasing guide. The definitional difference between a lease and a PPA is in the glossary.

What the credit is actually worth to you

Here is the honest answer: unknown, and unverifiable from the outside.

The credit reduces the provider's cost of owning the asset. Competitive pressure may push some of that into your pricing. How much, if any, is a business decision inside a company you cannot audit. There is no disclosure requirement that shows you the arithmetic, and there is no line on any document you sign that reads "your share of the 48E credit."

Which means the only useful test is a price comparison, not a credit conversation.

Get both prices for the same hardware. Ask the same installer for a cash purchase price and a lease or PPA price on the identical system. Then total every payment across the full lease term, including escalators, and compare it to the outright price.

Ask what happens to the other incentives. State rebates and utility performance payments frequently follow ownership too. In California, SGIP typically goes to the owner on a leased system. In New England, ConnectedSolutions administrators disclose that implementers may collect the seasonal incentive. In Hawaii, the upfront BYOD Plus incentive goes to the system owner. If a provider owns the battery, assume they also capture those unless the contract says otherwise, and ask them to say otherwise in writing.

Do not accept "we pass the credit through" as an answer. Ask what the price would be if they could not claim it. A provider who has actually priced the pass-through can answer. One who cannot is describing a marketing position.

Treat any specific pass-through promise as a contract term. If it is not in the signed document, it does not exist.

The short version

Section 25D does not apply to expenditures made after December 31, 2025, so a 2026 homeowner purchase gets no federal credit.

Section 48E survives and covers energy storage technology, with a definitional floor of not less than 5 kilowatt hours of nameplate capacity that home batteries clear, and a route to a 30 percent applicable percentage for systems under 1 megawatt.

48E is an investment credit claimed by the owner on Form 3468. On a leased or third-party-owned system, that is the provider. You never claim it and you never receive it directly.

The July 2025 amendments added a leasing denial whose operative text reaches solar water heating and small wind property, exempted energy storage from the 2027 wind and solar termination, and layered on foreign-entity supply chain restrictions that constrain which projects qualify.

The practical takeaway for a homeowner is simple. A lease is a financing product whose economics were reshaped by a tax change. Judge it on total cost across the full term against the outright purchase price, on the contract terms, and on what you give up in ownership and incentives. Run both scenarios in the calculator. Ask a tax professional about anything specific to your return, and confirm current federal rules with the IRS or your advisor before acting on them, because this area of law changed materially in 2025 and can change again.