The Federal Inland Revenue Service (FIRS) has introduced a significant new rule in 2026: property owners can now fully deduct the cost of solar and renewable energy installations on rental properties in the year the system is installed.
This policy change is expected to accelerate solar adoption among landlords, reduce operating costs for tenants, and make rental real estate more attractive as an investment in the current high-tariff environment.
Key Details of the New FIRS Rule (2026)
- Full deduction allowed: The entire cost of qualifying solar PV systems, inverters, batteries, and related installation expenses can be claimed as a business expense in the year of installation.
- Eligible properties: Rental properties (residential or commercial) where the solar system is used to power the building.
- Qualifying items: Solar panels, inverters, deep-cycle batteries, charge controllers, wiring, and professional installation costs.
- No depreciation spread: Unlike previous rules that required spreading the cost over several years, the full amount is now deductible immediately.
Documentation Requirements
To claim the deduction, landlords must keep:
- Detailed invoices from reputable suppliers/installers showing item descriptions and costs
- Proof of installation (photos, completion certificate, or engineer report)
- Evidence that the system is connected to the rental property (utility bills showing reduced grid usage)
- Bank transfer receipts or payment proofs
These records should be retained for at least 6 years in case of FIRS audit.
Tax Savings Examples (2026)
Example 1 – Small Rental Property
- 3-bedroom rental in Ikorodu
- Solar hybrid system cost: ₦8.5 million
- Tax savings at 30% CIT (company) or marginal rate (individual): ≈ ₦2.55 million in the year of installation
Example 2 – Mid-Sized Estate
- 12-unit mid-market estate in Mowe–Ofada
- Total solar investment: ₦65 million
- Immediate tax deduction → savings of ≈ ₦19.5 million (at 30% corporate rate)
How This Changes Investment Math
- Faster payback: Solar installation now pays for itself much quicker when combined with electricity bill savings (₦150k–₦400k per unit/month in many areas).
- Higher net yields: Landlords can achieve 2–4 percentage points higher net rental yields after accounting for the tax benefit.
- Increased attractiveness: Makes solar upgrades viable even for smaller landlords who previously found the upfront cost prohibitive.
Eligibility Notes
- The property must be actively used for rental income (not personal use).
- The solar system must be primarily for powering the rental property.
- Claim is available for both individuals (under PIT) and companies (under CIT).
Final Thoughts
The new FIRS rule allowing full immediate deduction of solar installation costs is one of the most landlord-friendly tax changes in recent years.
It significantly improves the economics of going solar on rental properties and is expected to drive a wave of retrofits and new installations throughout 2026.
For landlords, this is a clear incentive to invest in reliable power while reducing taxable income in the same year.
Are you a landlord planning to install solar this year? How much do you expect to save in taxes and electricity bills? Share your plans or experience below!
Disclaimer: This information is for general purposes only and not legal advice. Consult a qualified real estate lawyer for guidance.
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