As a business owner or commercial property investor, you know timing is everything — and that’s especially true when it comes to maximizing your federal solar tax incentives. With the future of the 30% Investment Tax Credit (ITC) uncertain, understanding Safe Harbor under IRS Notice 2018-59 could mean the difference between locking in thousands (or millions) in savings or missing out entirely.

In this article, we’ll break down what Safe Harbor is, why it matters, and how you can act now to secure today’s 30% ITC — even if your project won’t break ground until later.

What Is Safe Harbor for Solar Projects?

Safe Harbor is a provision in IRS Notice 2018-59 that allows commercial solar projects to “lock in” the full tax credit percentage from the year construction begins, even if installation wraps up years later.

Put simply: if you start your solar project in 2025, you can secure the 30% ITC available this year, even if you don’t complete the project until 2027. This allows businesses a powerful hedge against future reductions in solar incentives.

Why Safe Harbor Matters for Your Bottom Line

• Current Incentives Are Generous: The 2025 ITC is 30% of your total system cost.

• Future Reductions Possible: Congress may phase down or eliminate credits, slashing your potential savings.

• Protect Your Investment: By locking in today’s rate, you ensure your tax planning reflects current incentives, regardless of future policy changes.

For example, if your business plans a $2 million solar project, utilizing Safe Harbor now could mean $600,000 in tax credits — savings you’d forfeit if rates drop in later years.

How to Qualify for Safe Harbor: Two IRS-Approved Methods

The IRS recognizes two ways to begin construction and qualify for Safe Harbor:

1. Physical Work Test

   • Start “significant” physical work on-site or off-site related to your solar system.

   • Examples include installing racking, preparing transformers, or building inverter foundations.

   • Work must be continuous — substantial delays can jeopardize your Safe Harbor status.

2. 5% Safe Harbor (Most Common)

   • Pay or incur at least 5% of your total project cost within the tax year you want the ITC.

   • For a $1M system, spend at least $50,000 on qualifying equipment.

   • Unlike the physical work test, you don’t need to break ground right away — but you must show continuous efforts to complete the project.

Deadlines Are Approaching: Don’t Wait

To secure the 30% ITC for 2025, you must:

• Issue purchase orders before December 31, 2025.

• Make the minimum 5% payment.

• Obtain a title transfer on equipment or meet the physical work test requirements.

Failing to complete these steps this tax year means you’ll miss out on 2025’s higher tax credit rate — and risk paying significantly more for the same system if credits drop.

How Our Team Supports Your Strategy

Navigating Safe Harbor can feel overwhelming, but our team of solar and tax professionals ensures a seamless process. We provide:

Qualified Equipment Procurement — Secure eligible equipment from reputable vendors.
Vendor Invoices & Legal Documentation — Detailed records to satisfy IRS requirements.
Strategic Tax Partner Guidance — Collaborate with your accountants to maximize deductions.
Comprehensive Safe Harbor Dossier — Organized documentation package for your tax filings.

With our support, you can act confidently and protect your business’s solar investment.

Who Should Consider Safe Harbor?

• Commercial and industrial facility owners planning solar upgrades

• Real estate developers seeking to preserve tax incentives

• REITs and asset managers focused on long-term portfolio performance

• Corporations with significant tax liabilities looking to offset costs

Secure Your Solar Tax Credit Before It’s Too Late

If you’re planning a commercial solar project, there’s no better time to act. By using Safe Harbor in 2025, you’ll lock in the maximum 30% tax credit — even if your project takes years to complete. With potential legislative changes looming, the sooner you act, the better positioned your business will be.

Ready to protect your solar investment? Contact our team today to learn how we can help you secure your ITC and future-proof your energy strategy.