The most common question homeowners are asking about solar right now is a simple one: is the federal solar tax credit still available? The short answer is: not for most homeowners in 2026. The 30% Residential Clean Energy Credit — known as Section 25D — expired on December 31, 2025, after being terminated nearly a decade early by the One Big Beautiful Bill Act signed July 4, 2025.
For homeowners who purchased and installed their own solar system before that date, the credit still applies to their 2025 tax return. For homeowners going solar in 2026 and beyond with a cash purchase or solar loan, no federal tax credit is available. The rules changed — but solar incentives did not disappear entirely. State programs, property tax exemptions, sales tax exemptions, SRECs, and third-party ownership arrangements all still exist and can meaningfully reduce the cost of going solar depending on where you live.
This guide explains exactly what the federal solar tax credit was, what the One Big Beautiful Bill Act changed, what still exists in 2026, and how all of it affects the financial case for going solar today.
What the federal solar tax credit was — and what happened to it
The federal solar tax credit — officially the Residential Clean Energy Credit under Section 25D of the U.S. Tax Code — was the single most powerful financial incentive for residential solar in the United States. For most of its existence it worked the same way: homeowners who purchased and installed a qualifying solar system could claim 30% of the total installed cost as a direct credit against their federal income tax bill.
That is a meaningful number. On a typical $30,000 residential solar installation, the credit was worth $9,000 — not a deduction, but a dollar-for-dollar reduction in what you owed the IRS. That distinction matters because a tax deduction only reduces taxable income, while a tax credit directly reduces the tax you owe. The 30% credit was one of the most direct and valuable consumer financial incentives in the U.S. tax code.
How it worked in practice
The credit had a few key characteristics homeowners needed to understand to use it correctly:
| Feature | How it worked |
|---|---|
| Credit type | Nonrefundable — reduced your federal tax liability but could not produce a refund beyond what you owed |
| Income limits | None — available to any homeowner who owed federal income tax |
| Credit amount | 30% of qualified installed costs including panels, labor, wiring, inverters, and mounting |
| Carryforward | Unused credit could carry forward to future tax years if your liability was lower than the full credit value |
| Ownership requirement | You had to own the system — lease and PPA customers could not claim it directly |
| Battery storage | Qualified if installed alongside solar or as standalone storage meeting minimum capacity requirements |
One common misunderstanding: the credit was nonrefundable. That means if the 30% credit exceeded your total federal tax liability for the year, you could not receive the difference as a cash refund. You could only use as much of the credit as you owed in taxes — with the remainder carrying forward to the following year. For most homeowners with a typical tax bill, this was not a problem. But for homeowners with very low federal tax liability, it meant the full $9,000 benefit might be spread across multiple tax years.
What the One Big Beautiful Bill Act changed
Under the Inflation Reduction Act of 2022, Section 25D was set to remain at 30% through 2032, then step down to 26% in 2033 and 22% in 2034 before expiring. That gave homeowners a long, predictable window to plan solar installations and budget around the incentive.
That window closed abruptly. On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. Among its changes to the tax code, the law terminated Section 25D for any solar system installed after December 31, 2025 — with no phase-down period. The credit did not step from 30% to 26% to 22%. It went from 30% directly to zero, nearly a decade ahead of the original schedule.
The IRS confirmed the rule clearly: if installation is completed after December 31, 2025, the expenditure will be treated as made after December 31, 2025, which will prevent the taxpayer from claiming the Section 25D credit. Paying a deposit in 2025, signing a contract in 2025, or having a system partially installed in 2025 does not qualify — only a fully completed installation placed in service on or before December 31, 2025 counts. See IRS guidance on the OBBBA credit changes for the official confirmation.
The credit did not phase down. It did not expire gradually. It ended on a single date — December 31, 2025 — for any homeowner who purchased their own system.
For homeowners who installed solar in 2025, the credit still applies to the 2025 federal tax return. The filing deadline is April 15, 2026, with an extension available to October 15, 2026. Any unused credit from a 2025 installation can carry forward to future tax years under the existing carryforward rules — those were not changed by the OBBBA.
Is the solar tax credit still available in 2026?
The answer depends entirely on how you go solar. For homeowners who purchase and own their system outright — with cash or a solar loan — no federal tax credit is available for systems installed in 2026. For homeowners who lease a system or sign a Power Purchase Agreement, a federal credit still exists indirectly through the commercial Section 48E pathway. The credit goes to the leasing company, not the homeowner, but it may be passed through as lower monthly rates.
Understanding which side of that line you are on is the most important thing to know before evaluating solar in 2026.
- Section 25D credit — expired Dec 31, 2025
- No federal tax benefit for new owned installations
- You own the system and all its output
- Eligible for state credits, SRECs, and local rebates
- Home value increase from solar ownership
- Highest long-term financial return in most cases
- Section 48E commercial credit — leasing company claims it
- Savings passed through as lower monthly rates
- No upfront cost in most cases
- You do not own the system or its output
- Cannot claim state credits or SRECs directly
- No home value increase from third-party owned systems
The practical takeaway for most homeowners in 2026 is straightforward. If you want to own your system and maximize long-term financial return — and you live in a state with strong state incentives — buying outright still makes sense even without the federal credit. If you want zero upfront cost and are in a state with few state incentives, a lease or PPA may now look more attractive because it is the only remaining pathway to any federal benefit at all.
Neither option is universally better. The right choice depends on your state’s incentive landscape, your electricity rate, your tax situation, and how long you plan to stay in the home. The sections below explain what still exists at the state level and how to think about the financial case for solar in 2026 without the federal credit.
What solar incentives still exist in 2026
The end of the federal credit does not mean the end of solar incentives. Depending on where you live, you may still have access to a meaningful package of state and local programs that can reduce the upfront cost of going solar, generate ongoing income from your system, or lower your effective payback period. The key difference is that these incentives now vary significantly by state — there is no longer a single nationwide program every homeowner can count on.
There are four main categories of incentives still available to homeowners in 2026. Understanding each one helps you build a realistic picture of what solar could actually cost — and save — in your specific market.
The practical lesson from this data is stark: where you live now determines more of your solar economics than any single factor. A homeowner in New Jersey with access to the SuSI SREC program, sales tax exemption, property tax exemption, and full net metering is in a fundamentally different financial position than a homeowner in a state with no active programs. Before evaluating any solar quote in 2026, understanding what your state offers is the essential first step.
How the credit expiration changes solar payback
The most direct financial consequence of losing the federal credit is a longer payback period. The math is straightforward: a $9,000 credit on a $30,000 system reduced the net cost to $21,000. Without it, you are recovering the full $30,000 through electricity bill savings instead of $21,000. At the same annual savings rate, that takes meaningfully longer.
Nationally, the expiration of the 30% credit adds roughly 3 to 5 years to the average residential solar payback period — pushing it from roughly 6 to 10 years with the credit to roughly 8 to 12 years without it. That range shifts significantly depending on your electricity rate, your state’s remaining incentives, and your total system cost.
Does solar still make financial sense without the tax credit?
For most homeowners in most markets — yes. The long-term financial case for solar does not depend on the federal credit existing. It depends on the relationship between what grid electricity costs, what solar installation costs, and how long the system produces power. None of those three fundamentals changed when the credit expired.
The average U.S. solar homeowner still saves around $61,000 over 25 years according to EnergySage — credit or no credit. That number reflects electricity bill reduction over the life of the system. The credit affected the upfront cost and the payback timeline, but it never changed the underlying electricity savings that accumulate year after year once the system is installed and running.
Understanding what solar could cost before factoring in incentives is the right starting point. See How to Estimate Solar Installation Cost for a step-by-step breakdown of how upfront cost is calculated before any credits are applied.
The clearest way to evaluate whether solar makes sense for your specific home is to model the numbers before talking to any installer. That means estimating upfront cost, annual savings, available state incentives, and payback timeline using your own bill, electricity rate, and local assumptions — not national averages. The three calculators below do exactly that.
What to do if you installed solar in 2025
If your solar system was physically installed and placed in service on or before December 31, 2025, you are still entitled to claim the 30% federal credit — even though the credit has now expired for new installations. The expiration only applies to systems installed after that date. For 2025 installations, the credit is claimed on your 2025 federal tax return using IRS Form 5695.
One important note: the IRS confirmed that simply paying for a system in 2025 when installation was completed in 2026 does not qualify. The physical installation completion date is what determines eligibility — not the contract date, payment date, or utility interconnection date. If you are uncertain whether your system qualifies, consult a tax professional before filing. See the IRS FAQ on the OBBBA credit changes for official guidance.
FAQ – Solar tax credit
Is the federal solar tax credit still available in 2026?
Not for most homeowners. The 30% Residential Clean Energy Credit (Section 25D) expired on December 31, 2025 under the One Big Beautiful Bill Act. Homeowners who purchase and own their solar system with cash or a loan in 2026 cannot claim any federal tax credit. The only remaining federal pathway is through third-party ownership — solar leases and PPAs — where the leasing company claims the commercial Section 48E credit and may pass savings through as lower monthly rates.
What happened to the 30% federal solar tax credit?
The One Big Beautiful Bill Act, signed July 4, 2025, terminated Section 25D nearly a decade ahead of schedule. Under the Inflation Reduction Act of 2022, the credit was set to remain at 30% through 2032 before stepping down. The OBBBA ended it immediately on December 31, 2025 with no phase-down period. On a typical $30,000 system, that credit was worth $9,000 — its loss adds roughly 3 to 5 years to the average payback period nationally.
Can I still claim the solar tax credit if I installed in 2025?
Yes — if your system was physically installed and placed in service on or before December 31, 2025. Claim the credit by filing IRS Form 5695 with your 2025 federal tax return. The primary filing deadline is April 15, 2026, with an extension available to October 15, 2026. Any unused credit carries forward to future tax years. The installation must have been physically completed by December 31, 2025 — signing a contract or paying a deposit in 2025 with installation completed in 2026 does not qualify.
Does the solar tax credit apply to leased systems?
Not directly to the homeowner. With a lease or PPA, the leasing company owns the system and claims the federal credit — currently the commercial Section 48E credit, available through end of 2027. The homeowner does not claim the credit on their personal tax return. The benefit may be passed through as lower monthly lease or PPA rates, but the homeowner has no direct control over how the credit is used.
What solar incentives are still available in 2026?
Four main categories remain: state income tax credits (New York 25% up to $5,000, Hawaii 35% up to $5,000, South Carolina 25% no cap); SRECs in states like New Jersey, Massachusetts, Maryland, Pennsylvania, and Illinois; property and sales tax exemptions available in 34 and 22 states respectively; and utility and local rebates that vary by market. The best resource for finding what applies in your state is the DSIRE database.
Which states have the best solar incentives in 2026?
New York and New Jersey offer the most comprehensive packages. New York provides a 25% state tax credit up to $5,000, NY-Sun upfront rebates, sales tax exemption, and property tax exemption. New Jersey’s SuSI SREC program pays $85.90 per MWh of production for 15 years — worth over $10,000 lifetime on a typical system — plus sales tax and property tax exemptions. Massachusetts, Illinois, Maryland, and Hawaii also have strong programs. States like Texas and Florida offer only property tax exemptions. Most other states have minimal or no active programs.
Does the solar tax credit apply to battery storage?
The federal Section 25D credit covered battery storage installed alongside solar — but that credit expired December 31, 2025. For homeowner-owned battery systems installed in 2026, no federal credit applies. Some states still offer battery-specific incentives — California’s SGIP program and New Jersey’s GSEP program both remain active. Batteries installed through a lease or PPA arrangement may still benefit indirectly from the commercial Section 48E credit through the leasing company.
Is solar still worth it without the federal tax credit?
For most homeowners — yes. The average U.S. solar homeowner still saves around $61,000 over 25 years according to EnergySage, credit or no credit. That number reflects electricity bill reduction over the system’s life — the credit affected upfront cost and payback timeline but not the underlying electricity savings. The financial case is strongest in high-rate markets like New York, New Jersey, California, Massachusetts, and Hawaii, and in states with strong remaining incentive programs. It is weaker in low-rate states with minimal programs, where payback can stretch to 15 to 20 years without the federal credit.