Solar Tax Credit Calculator: The Federal ITC Expired Dec 31, 2025 (2026)

Calculate Your Tax Credit

For a system you own and install in 2026 the federal residential credit is $0 (§25D expired Dec 31, 2025). Enter your system details to see gross installed cost and remaining state incentives; the calculator reflects the 2026 rules.

How The Federal Solar Tax Credit Worked

The residential ITC (IRC §25D) expired Dec 31, 2025 under the One Big Beautiful Bill Act, so a system you own and install in 2026 gets $0 federal. The mechanics below applied to systems placed in service through 2025, and still matter if you are filing a 2025 return.

While it was available, the §25D credit was a dollar-for-dollar reduction in federal income tax liability — a credit, not a deduction. It was claimed by filing IRS Form 5695 for the year the system was placed in service (passed inspection and connected to the grid), not the year you signed the contract.

For a system you own in 2026 there is nothing to claim on Form 5695. A lease or PPA can still capture the commercial §48E credit, which the provider claims and may pass through as a lower rate.

The Credit Ended After 2025

The Inflation Reduction Act of 2022 originally set a 30%-through-2032 step-down for the residential §25D credit, but that schedule was overtaken. The One Big Beautiful Bill Act (P.L. 119-21, signed July 2025) ended the residential credit at Dec 31, 2025 — the planned 26%/22% steps never took effect.

The date that matters is when your system is placed in service — fully installed, inspected, and connected to the grid. A system placed in service in 2025 could claim 30%; one you own and place in service in 2026 gets $0 federal.

For commercial systems, the §48E credit remains and can be claimed by a lease/PPA provider, but there is no residential §25D credit in 2026.

What Costs Qualified (through 2025)

While the residential credit (IRC §25D) was available through 2025, it applied to the total installed cost of your solar energy system. Qualifying expenses included:

Qualifying costs:

• Solar panels (photovoltaic modules)
• Inverters (string inverters or microinverters)
• Racking and mounting hardware
• Electrical wiring, conduit, and disconnects
• Installation labor
• Permitting fees
• Engineering and design costs
• Sales tax on equipment (in states that charge it)
• Battery storage systems (minimum 3 kWh capacity)
• Monitoring equipment

Costs that do NOT qualify:

• Roof repair or replacement (unless specifically required for solar mounting)
• Electrical panel upgrades not directly tied to the solar installation
• Tree removal
• Landscaping
• Extended warranty purchases made separately

Worked Example: $33,500 System With Battery (2026, Owned)

Here is how the math works for a 7 kW solar system with a Tesla Powerwall 3 that you own and install in 2026:

For a system you own and install in 2026 there is nothing to claim on IRS Form 5695 — the residential credit expired at the end of 2025, so your net federal cost equals the gross $33,500. State incentives and net metering can still reduce this. (A 2025 install could have claimed 30%, or $10,050, on the 2025 return.)

What If Your Tax Liability Was Too Low (2025 Installs)

This section applies only to systems placed in service through 2025, since the residential §25D credit expired Dec 31, 2025. For those, the credit was nonrefundable — it could only reduce tax liability to zero, but any unused portion carried forward to later tax years until exhausted.

For a system you own and install in 2026 there is no §25D credit, so there is nothing to carry forward. If you are still filing a 2025 return, the carryforward mechanics above continue to apply to that 2025 credit.

Planning tip: This timing strategy only mattered while the §25D credit existed (through 2025). For a system you own and install in 2026 there is no federal credit to time around — focus instead on state incentives and net metering, or on a lease/PPA where the provider captures the commercial §48E credit.

Common Mistakes To Avoid

Confusing Credit With Deduction (Historical)

While the §25D credit existed (through 2025), it was a common misunderstanding: the ITC was a credit that directly reduced taxes owed, not a deduction against taxable income. This no longer applies to a system you own and install in 2026, since the residential credit expired Dec 31, 2025.

Expecting An Instant Refund (Historical)

While the §25D credit existed, it did not produce a check from the IRS beyond over-withholding — it was nonrefundable. This applied to systems placed in service through 2025. A system you own and install in 2026 gets $0 federal credit, so there is no refund interaction to plan for.

The Lease/PPA Credit In 2026

If you lease solar panels or sign a power purchase agreement (PPA), the provider owns the system and claims the credit — now the commercial §48E credit, which they may pass through as a lower rate. In 2026 this is the only way solar carries a federal credit: a system you own gets $0 federal because the residential §25D credit expired Dec 31, 2025.

Getting The Timing Wrong (2025 Deadline)

The residential credit was claimed for the tax year the system was placed in service — and the hard cutoff was Dec 31, 2025. A system placed in service in 2025 could claim 30%; anything you own and place in service in 2026 or later gets $0 federal. There is no longer a target tax year to hit for §25D.

Battery Storage And The Credit (Historical)

While §25D existed (through 2025), battery storage installed with solar qualified for the 30% credit alongside the panels. This no longer applies to a system you own and install in 2026 — the residential credit expired Dec 31, 2025, so a battery you own earns $0 federal credit.

State Rebates And The Federal Basis (Historical)

While §25D existed, a state rebate that reduced installed cost could reduce the federal credit basis. This interaction no longer applies to a system you own and install in 2026, since the residential federal credit expired Dec 31, 2025. State rebates still reduce your out-of-pocket cost directly — consult a tax professional for how state incentives interact on your return.

State Tax Credits And Incentives In 2026

With the federal residential credit (§25D) expired as of Dec 31, 2025, state incentives and net metering are now the primary way to reduce net cost for a system you own. Several states offer their own tax credits or incentives that can meaningfully shorten payback:

Use the DSIRE database to find every incentive available at your address. With the federal §25D credit expired for systems you own in 2026, state incentives and net metering are the main levers left — in the best state markets they can still reduce net system cost meaningfully.

Solar Economics In 2026 (No Federal Credit)

With the federal residential credit (§25D) expired Dec 31, 2025, a system you own and install in 2026 carries its full gross cost. Here is the picture for a 7 kW system at a US-average rate:

Owned, 2026 (no federal credit):

• 7 kW system cost (gross = net federal): $20,000
• Annual electricity avoided: ~$1,615 ($0.17/kWh, ~9,500 kWh) — credit-independent, unchanged
• Simple payback: ~12.4 years
• 25-year ROI: ~160%

Because the 30% federal credit is gone for owned systems, the effective cost is roughly 43% higher and payback runs ~3-5 years longer than a comparable 2024 install would have. State incentives and net metering, or a lease/PPA using the commercial §48E credit, are what improve these numbers now.

Filing The Credit: Step By Step (2025 Installs Only)

These steps apply only to a system placed in service on or before Dec 31, 2025, since the residential §25D credit expired at the end of 2025. A system you own and install in 2026 has no federal credit to file for.

1. Confirm the system was placed in service (inspected, interconnected, producing electricity) on or before December 31, 2025.

2. Gather documentation: Final invoice showing total installed cost, equipment specifications, proof of interconnection, and any state rebate amounts.

3. Complete IRS Form 5695, Part I (Residential Clean Energy Credit) with your 2025 return. Enter your total qualifying costs on line 1.

4. Transfer the credit from Form 5695 to Schedule 3 (Form 1040), line 5.

5. File your 2025 tax return. If the credit exceeds your tax liability, the excess carries forward automatically.

Most tax software (TurboTax, H&R Block) handles Form 5695 for 2025 returns. For a 2026 system you own, there is no §25D credit to file; a lease/PPA provider handles the commercial §48E credit on their own return.

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