United States · October 11, 2026
Federal Solar Tax Credit 2026: What Changed After 25D?
Key takeaways:
- Federal solar tax credit: The 30% Section 25D residential credit ended for systems installed after December 31, 2025, killed by the One Big Beautiful Bill Act (P.L. 119-21). A homeowner-owned system installed in 2026 gets no federal credit.
- The deadline follows the installation completion date, not the contract date:
- The Section 48E commercial credit survives: solar projects must have begun construction by July 4, 2026 or be placed in service by December 31, 2027, so lease and PPA customers may still benefit indirectly through the system owner.
- Losing the credit lengthens payback: on an illustrative $25,000 system saving $1,500 a year, simple payback goes from about 11.7 years to 16.7 years, roughly 43% longer.
9 min read | Updated October 2026
The Short Answer
The federal solar tax credit 2026 picture is simple for most homeowners: the famous 30% residential solar tax credit is gone. Section 25D, the credit that cut nearly a third off the cost of a home solar system, ended for systems installed after December 31, 2025. If you buy and own a system installed in 2026, there is no federal credit to claim.
What ended it was the One Big Beautiful Bill Act (Public Law 119-21), signed on July 4, 2025. This guide explains exactly what changed, who can still claim something, which incentives remain, and how the math works now. It is general information, not tax advice, so confirm your situation with a tax professional.
What Is the Federal Solar Tax Credit?
The federal solar tax credit most people know is Section 25D of the tax code, the Residential Clean Energy Credit. It let homeowners claim 30% of a solar system’s cost as a dollar-for-dollar cut in the tax owed. It covered solar panels, inverters, wiring, labor, and, from 2023, battery storage of 3 kWh or more, with no dollar cap. On a $25,000 system, the credit was worth $7,500.
What Changed in 2026 After 25D?
1. The law ended 25D outright. The One Big Beautiful Bill Act states that the credit “shall not apply with respect to any expenditures made after December 31, 2025,” according to a Congressional Research Service summary of the law (congress.gov, IN12611). There was no phase-down. Under the earlier Inflation Reduction Act schedule, the 30% rate would have run through 2032. That schedule no longer applies.
2. The deadline follows the installation date, not the contract date. This is the trap that catches the most people. The IRS treats a solar expenditure as made when the original installation is completed (IRC Section 25D(e)(8)(A)), a point the IRS restated in an August 2026 FAQ. If you signed in 2025 but the crew finished in January 2026, the system does not qualify. Keep your installer’s completion paperwork if your project finished close to the deadline.
3. Unused credit from earlier years still carries forward. The credit was nonrefundable, so any amount bigger than your tax bill rolled into future years, and the Congressional Research Service confirms that carryforward right is unaffected.
| Year | Credit rate | What the law said |
|---|---|---|
| Through 2019 | 30% | Original residential credit |
| 2020 to 2021 | 26% | Step-down held in place by a December 2020 law |
| 2022 to 2025 | 30% | Inflation Reduction Act raised it back; standalone batteries of 3 kWh+ added from 2023 |
| 2026 onward | 0% for homeowner-owned systems | One Big Beautiful Bill Act ended Section 25D for expenditures after Dec 31, 2025 |
25D vs 48E: The Two Credits People Mix Up
Almost every outdated article blurs these two together, and the confusion is now expensive. Here is the difference that matters in 2026:
| Section 25D (residential) | Section 48E (commercial) | |
|---|---|---|
| Who claims it | The homeowner | The business that owns the system |
| What it covered | Owned home solar and batteries | Leased and PPA solar, commercial and farm solar |
| Status in 2026 | Ended for systems installed after Dec 31, 2025 | Alive, with its own deadlines |
| 2026 deadlines | None left | Solar and wind: construction begun by Jul 4, 2026, or placed in service by Dec 31, 2027 (per SEIA summary of the law); foreign-entity-of-concern rules apply |
A homeowner with a system installed in 2026 gets nothing from 25D. But when a solar company owns the system on your roof through a solar lease or power purchase agreement (PPA), the company may still claim Section 48E and pass part of the value through as a lower monthly payment. That pass-through is never guaranteed, so compare total lifetime cost.
Who Can Still Claim a Federal Solar Credit in 2026?
Four groups can still get federal value from solar this year.
1. Homeowners whose installation finished in 2025. Claim 30% of eligible costs on your 2025 return. The credit belongs to the tax year the installation was completed.
2. Homeowners with a carryforward. If you installed in 2024 or 2025 and could not use the whole credit, the remainder still carries to later returns. Check last year’s Form 5695 for the unused amount.
3. Lease and PPA customers. You claim nothing yourself, but the company that owns your system may claim Section 48E if it met the deadlines above. Some of that value may show up as a lower payment, though no specific discount is guaranteed. Compare total lifetime cost, not just the monthly number.
4. Businesses, farms, and nonprofits. Commercial and farm solar can still use Section 48E. Tax-exempt organizations can use elective pay under Section 6417 to receive the credit value as a payment, and farms and rural small businesses can check current USDA REAP grant rounds.
How Do You Claim the Credit If Your System Was Installed in 2025?
Claim it on Form 5695 with your 2025 federal tax return. The credit was 30% of qualifying costs for systems completed in 2025, and batteries of at least 3 kWh qualified from 2023, with or without solar. Because the credit is nonrefundable, it can bring your tax bill to zero but the IRS will not refund the extra. The unused part carries forward instead. Keep your contract, proof of payment, and the installer’s completion certificate with your tax records.
What Other Federal Credits Changed?
The same law reshaped other household energy credits:
- Section 25C (Energy Efficient Home Improvement Credit): ended for property placed in service after December 31, 2025. This covered heat pumps, insulation, windows, and panel upgrades.
- Section 30D (New Clean Vehicle Credit): ended for vehicles acquired after September 30, 2025.
- Section 30C (home EV charger credit): ends for property placed in service after June 30, 2026, so a charger installed early in 2026 may still qualify.
What Incentives Are Left for Homeowners in 2026?
With the federal credit gone, state solar incentives, net metering rules, and local tax exemptions do the heavy lifting. They change often, so verify current terms on the DSIRE database (dsireusa.org) before relying on any of them.
Examples commonly listed on DSIRE include state income-tax credits in New York, Hawaii, Massachusetts, South Carolina, and Arizona, plus sales-tax and property-tax exemptions in many states. California’s property-tax exclusion for active solar systems completed before January 1, 2027 (Section 73, extended by SB 1340) is a real, expiring reason to move this year, and the state’s SGIP program still offers battery incentives, strongest for income-qualified households. On net metering, remember it is usually worth more over time than any one-time incentive, because it sets how much of your bill the system erases every year. Under rules like California’s NEM 3.0, exported power is credited below the retail rate, which makes pairing solar with a battery more valuable.
Which Situation Are You In? Your Next Step
- Installed in 2025: file Form 5695 with your 2025 return, and check whether you have a carryforward from an earlier year.
- Signed in 2025 but finished in 2026: you do not qualify for Section 25D. Do not file for it. Keep your completion documents.
- Installing in 2026: price the project with no federal credit. If a quote shows a “net price after 30% tax credit,” it is out of date. Ask for the installed price in dollars per watt and check state solar incentives on DSIRE.
- Considering a lease or PPA: get the total 20 to 25 year cost in writing, including escalators and buyout terms, and ask how much of the Section 48E value is built into your price.
- A business, farm, or nonprofit: talk to your tax advisor about the Section 48E deadlines and, for tax-exempt organizations, elective pay.
How Does Losing the Credit Change the Payback Math?
The arithmetic is simple and honest. Take an illustrative $25,000 system with $1,500 of yearly bill savings:
- With the old 30% credit: net cost $17,500, so simple payback was about $17,500 / $1,500 = 11.7 years.
- In 2026, no credit: full cost $25,000, so simple payback is about $25,000 / $1,500 = 16.7 years.
That is roughly five years longer, or about 43% more time, because you now recover 100% of the cost from bill savings instead of 70%. These are illustrative numbers, not a promise about your home. Your real payback depends on your electricity rate, your utility’s net metering rules, and how much of your bill the system offsets, which is why sizing the system to your actual use matters more than ever.
Myths Worth Dropping in 2026
| What you may still hear | What is true |
|---|---|
| “Your net cost after the 30% credit is…” | For a homeowner-owned system installed in 2026, the contract price is the real cost. There is no federal credit to subtract. |
| “I signed in 2025, so I qualify.” | Only if the installation was completed by December 31, 2025. The IRS counts the expenditure when the original installation finishes. |
| “Leasing means I get the tax credit.” | You never did. The leasing company claims Section 48E, and what reaches you is whatever is built into the price. |
| “All federal solar incentives are dead.” | Section 48E survives for commercial and third-party-owned systems, and state solar incentives are untouched. |
| “I lost my unused credit.” | Unused Section 25D credit from earlier years still carries forward. |
Frequently Asked Questions
Is there still a federal solar tax credit in 2026?
Not for homeowners who buy and own their system. Section 25D ended for systems installed after December 31, 2025. Leased and PPA systems may still benefit indirectly through the Section 48E commercial credit claimed by the system owner.
I installed solar in 2025. Can I still claim the credit?
Yes. If installation was completed in 2025, claim the 30% credit on your 2025 return using Form 5695. If the credit was bigger than your tax bill, the rest carries forward.
What is the difference between Section 25D and Section 48E?
Section 25D was the residential credit claimed by homeowners, and it ended. Section 48E is the commercial clean electricity credit claimed by businesses, including companies that own leased residential systems, and it continues under its own deadlines.
Are state solar incentives still available in 2026?
Yes. State credits, net metering programs, and property and sales tax exemptions are set by states and utilities, not by the federal law that ended Section 25D. Check current terms on DSIRE.
Can I still claim the federal solar tax credit in 2026?
The federal solar tax credit (25D) ended for systems installed after 31 December 2025. The federal solar tax credit may still be available via lease/PPA structures under 48E, but consult a tax professional.
Sources: Congressional Research Service summary of P.L. 119-21 (congress.gov, IN12611); IRS guidance on the One Big Beautiful Bill changes to Sections 25C, 25D, 25E, 30C, and 30D; IRS Form 5695 instructions; SEIA summary of the clean energy provisions; DSIRE state incentive database (dsireusa.org). General information, not tax advice.
By TheSolarCost Editorial Team
Last reviewed: 11 October 2026.