What is an Energy Community, and could it lower your solar payment?
If you live in an Energy Community you may qualify for an additional 10% federal incentive on top of the standard 30% solar credit. Here’s what it is, where it applies, and how to check if your home qualifies.
Most homeowners shopping for solar in 2026 know that the 30% federal tax credit ended for cash and loan solar purchases at the end of 2025. What fewer people know is that a separate, additional incentive, the Energy Community bonus credit, is still on the table, and it applies to a much larger portion of the country than most people expect.
If your home is in an Energy Community, the solar company installing your system may be able to claim up to 40% in federal incentives instead of 30%. And, as with third-party ownership and power purchase agreements, that savings can be passed to you in the form of a lower monthly payment or rate.
Here’s what an Energy Community is and how to find out if you live in one.
In this article:
- What is an Energy Community?
- What’s the bonus, and who benefits?
- Where are Energy Communities located?
- How do you check if your home qualifies?
- What does this mean for your solar payment?
- Is there a deadline?
- Frequently asked questions
What is an Energy Community?
An Energy Community is a geographic area designated under the Inflation Reduction Act (IRA) of 2022. They were created to direct clean energy investment toward communities that have historically depended on fossil fuel industries, and to support areas where those industries have declined.
The IRA defines Energy Communities three ways:
1. Brownfield sites. Properties that have been contaminated by hazardous substances or pollutants from prior industrial or commercial use: things like old industrial yards, former gas stations, decommissioned manufacturing sites. These qualify at the specific parcel level, meaning even a single street or block can be in an Energy Community if it meets the definition.
2. Fossil fuel employment areas. Metropolitan or non-metropolitan statistical areas where at least 0.17% of direct employment (or 25% of local tax revenues) has been tied to the extraction, processing, transport, or storage of coal, oil, or natural gas, and where the current unemployment rate is at or above the national average. These tend to cover large geographic areas, sometimes entire counties or regions.
3. Coal closure communities. Census tracts, or tracts directly adjacent to them, where a coal mine has closed after 1999 or a coal-fired power plant was retired after 2009.
These cover more areas than you might think. Entire counties in states like Massachusetts, Connecticut, and Pennsylvania qualify. Some major metro areas qualify. And at the street level, brownfield designations can cover very specific locations that you wouldn’t assume are connected to fossil fuel history.
What’s the bonus, and who benefits?
Under the IRA, projects located in an Energy Community qualify for a 10 percentage point bonus on the federal Investment Tax Credit (ITC). For solar systems, that means:
- Standard 48E credit: 30%
- Energy Community bonus: +10 percentage points
- Total potential credit: 40%
This credit is claimed by the company that owns the solar system, not directly by the homeowner. So, this bonus really ties in with third-party ownership (TPO) arrangements: solar leases, power purchase agreements (PPAs), and prepaid leases.
When a solar company installs a system under a TPO agreement, they claim the tax credit on the system they own. If your home is in an Energy Community, they can claim 40% instead of 30%. That larger credit reduces their cost, and the savings are typically passed to you in the form of a lower monthly payment or per-kWh rate than you’d get outside an Energy Community.
For homeowners financing with cash or a loan, this bonus doesn’t apply, as we all know by now, the 25D residential credit expired at the end of 2025, and there is no Energy Community adder for owner-purchased systems.
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Where are Energy Communities located?
When the IRA was first passed, many assumed Energy Communities were limited to rural Appalachia or the industrial Midwest. They are not.
Here are a few examples:
- Western Massachusetts: Large portions of the region qualify, covering communities far from what most people would think of as fossil fuel territory
- Northeastern cities: Parts of major metro areas including Philadelphia qualify under brownfield or fossil fuel employment designations
- Coal closure adjacency: The requirement that adjoining census tracts qualify, not just the tract where the mine or plant was, substantially expands the coverage into surrounding communities
- Brownfields: These are scattered throughout urban and suburban areas nationwide, sometimes covering specific streets or neighborhoods
The U.S. Department of Energy updates the designation list annually as new coal mine closures and plant retirements are recorded and as unemployment data is refreshed. That means a community that doesn’t qualify today could qualify next year, and vice versa.
How do you check if your home qualifies?
The fastest way is to use an interactive mapping tool:
energycommunities.gov — The official government source. It shows coal closure census tracts, adjacent tracts, and fossil fuel employment statistical areas. This is the authoritative source, though the interface is somewhat technical.
Baker Tilly Energy Community Mapping Tool — An easier-to-use interactive map built on the same underlying data. You can enter an address or zoom to your area and see whether it falls within an Energy Community designation.
A few things to know about these tools:
- Brownfields are not shown on the energycommunities.gov map — they require separate verification through the EPA’s ACRES database
- The data is updated periodically; the map reflects the most recently published IRS guidance, which as of 2026 is IRS Notice 2026-39
- Your solar installer can also run this check for you, and if they’re not aware of Energy Community designations, that’s probably a red flag
What does this mean for your solar payment?
The actual savings depends on your system size, your installer’s pricing, and your local electricity rate. But it can make a difference, after all, 10% of a system that costs $20,000 is $2,000.
The additional 10% credit gives the TPO company more room to lower their pricing while maintaining their economics. In practice, this can translate to:
- A lower monthly lease or PPA payment compared to what you’d be quoted outside an Energy Community
- A lower per-kWh rate on a PPA, in some cases dropping from the $0.16–$0.18/kWh range into the $0.12/kWh range in higher-cost states
- A lower upfront cost on a prepaid lease structure
The savings varies by installer, not every company will pass the full benefit through to you. So… ask: “My home is in an Energy Community. Does that affect my pricing?” A reputable installer should be able to give you a clear answer. (And simply asking shows that you’re a knowledgeable consumer.)
For more on how TPO financing works and what to look for in a lease or PPA, see our guides on prepaid solar leases and the difference between buying and leasing.
Is there a deadline?
Yes. The 48E Clean Electricity Investment Tax Credit, which includes the Energy Community bonus, is currently set to expire at the end of 2027 under the One Big Beautiful Bill Act (again, we didn’t name it) signed into law in July 2025. Systems need to be installed and operational before that deadline for the credit to apply.
That means there’s still time, but you need to act. If you’re in an Energy Community and considering TPO solar, it can pay to move sooner rather than later.
The bottom line
Energy Communities are one of the lesser-known ways that where you live can affect how much you pay for solar. The geographic coverage is broader than most people assume, the financial impact in high-cost states can be substantial, and the mechanism (a larger federal credit flowing through to lower TPO pricing) is pretty straightforward once you understand it.
The first step is simply checking the map. If your home is in an Energy Community, make sure your installer knows it and can show you what that means for your quote.
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Frequently asked questions
Q: What is an Energy Community?
An Energy Community is a geographic area designated under the Inflation Reduction Act of 2022: either a brownfield site, an area with significant fossil fuel employment history and above-average unemployment, or a census tract near a closed coal mine or retired coal plant. Projects in these areas qualify for a 10 percentage point bonus on top of the standard 30% federal solar Investment Tax Credit.
Q: How do I know if I live in an Energy Community?
The easiest way is to check the interactive map at energycommunities.gov or the Baker Tilly mapping tool. You can search by address or browse the map for your area. Your solar installer can also check for you.
Q: How does the Energy Community bonus affect my solar payment?
The bonus applies to the federal tax credit claimed by a solar company under a TPO (lease, PPA, or prepaid lease) arrangement, not to homeowners who purchase their system with cash or a loan. When a TPO company can claim 40% instead of 30%, the savings are typically passed through as a lower monthly payment or per-kWh rate. The exact impact depends on your installer and location.
Q: Does the Energy Community bonus apply if I buy my solar system?
No. The 25D residential tax credit for homeowners who purchase solar with cash or a loan expired at the end of 2025. The Energy Community bonus applies to the 48E commercial Investment Tax Credit, which is claimed by companies that own systems under TPO agreements. It does not apply to owner-purchased systems.
Q: When does the Energy Community bonus expire?
The 48E credit, including the Energy Community bonus, is currently set to expire at the end of 2027. Systems need to be installed and operational before that deadline to qualify.
Q: Are Energy Communities only in rural or industrial areas?
No. The coverage is broader than most people expect. Parts of major metropolitan areas, entire counties in states like Massachusetts and Connecticut, and specific urban neighborhoods near brownfield sites can all qualify. The best way to know for sure is to check the map for your specific address.
