Solar Tax Credit 2026: The Federal Credit Expired — What Homeowners Can Still Get

But "the credit is gone" is not the whole story. Three things are still true in 2026: leases and PPAs can still capture a federal credit (through a different section of the tax code, on the installer's side), most state programs survived, and anyone who installed in 2025 can still claim their 30% on their 2025 return. This page explains exactly what changed, what remains, and runs the numbers for your specific system.

How current is this page: Last reviewed July 12, 2026. Federal figures below are sourced to the statute (Public Law 119-21) and IRS guidance — see the Sources at the foot of this page. Tax law here is genuinely complex and still generating IRS guidance; this is educational information, not tax advice. Confirm your situation with a CPA. State-program details change constantly — always verify current terms at DSIRE.

What changed: the 30-second version

Solar Net-Cost Calculator (2026)

Enter your system details to estimate your net cost after state and utility incentives. The calculator reflects current law: no federal credit for a system you buy in 2026. If you installed in 2025, switch the calculator to "2025 install" to see your 30% credit.

Why the credit ended: the One Big Beautiful Bill Act

The federal solar Investment Tax Credit for homeowners lived in Section 25D of the Internal Revenue Code (officially the Residential Clean Energy Credit). Under the Inflation Reduction Act of 2022, it was set to stay at 30% through 2032, then step down to 26% (2033) and 22% (2034).

The One Big Beautiful Bill Act (OBBBA) — Public Law 119-21, signed July 4, 2025 — repealed it roughly seven years early. Under the new law, expenditures for residential solar made after December 31, 2025 do not qualify for the Section 25D credit. The IRS treats an expenditure as "made" when the system's original installation is complete, so a system finished and placed in service (operational) on or before December 31, 2025 is the cutoff — a signed contract, a deposit, or a partial install in 2025 does not count.

The same law also ended the Section 25C Energy Efficient Home Improvement Credit (heat pumps, insulation, efficiency upgrades) on the same date, and the Section 30C EV charger credit (30%, up to $1,000) on June 30, 2026.

If you installed in 2025: you can still claim it

The repeal is forward-looking. If your system was installed and operational by December 31, 2025, you claim the 30% credit on your 2025 federal return using IRS Form 5695, Part I, and carry the amount to Form 1040, Schedule 3.

• The credit is non-refundable. It reduces the tax you owe dollar-for-dollar but won't refund you beyond your liability.
• Unused credit carries forward. OBBBA did not change the carryforward rules — if your 2025 liability was too small to use the full credit, the remainder carries to future years (the IRS has not set an end date for carrying forward pre-2026 credits).
• "Placed in service" is strict. Panels bolted on in December 2025 but not switched on (utility permission-to-operate) until January 2026 generally miss the window. Keep your interconnection/PTO documentation dated 2025.

The one federal path left in 2026: leases and PPAs (Section 48E)

Here is the nuance most stale articles miss. OBBBA's draft would have killed the credit for leased residential solar too — but the final law preserved it. When a third party owns the panels on your roof (a lease, PPA, or prepaid product), that company is a commercial entity and can claim the Section 48E commercial clean-electricity credit (~30%, plus possible bonus adders). You don't claim anything; the company factors its credit into a lower monthly lease payment or a below-retail PPA rate.

This is not free money, and it comes with real trade-offs: you don't own the system, you don't get the resale/end-of-life value, most leases have an annual escalator that erodes savings, and leased systems typically add little to home value. It is a financing structure, not a windfall — but in 2026 it is the only route to federal solar dollars on a home.

The deadlines are the catch, and they moved recently. Under OBBBA (Section 48E(e)(4)):

• Projects that began construction on or before July 4, 2026 keep the standard continuity window — generally up to four calendar years to be placed in service (so a project that started in 2026 could finish as late as December 31, 2030) and still claim the credit.
• Projects that begin construction after July 4, 2026 must be placed in service by December 31, 2027 — or they get no credit at all.

As of this page's July 2026 review, that July 4 safe-harbor has already passed. New lease/PPA projects now fall under the harder December 31, 2027 placed-in-service deadline, which shortens the runway considerably. There are also Foreign Entity of Concern (FEOC) equipment-sourcing rules on 48E projects starting in 2026 (at least ~40% non-prohibited-entity content, rising to ~45% in 2027) — a compliance burden the installer carries, but one that can affect availability and pricing. If a provider quotes you a lease "with the 30% credit built in," it's fair to ask when their project began construction and whether their equipment is FEOC-compliant.

State incentives: mostly intact, and now the main lever

OBBBA is federal law — it did not touch state programs. In many states, state-level incentives now do more of the work than the federal credit used to. The types of program that still exist in 2026:

• State income-tax credits — several states (e.g., New York, Arizona, South Carolina) still offer a percentage credit on top of what used to be the federal one.
• Performance payments / SREC markets — Massachusetts (SMART), Illinois (Illinois Shines), New Jersey (the SuSI program), and the SREC states (Maryland, D.C., Pennsylvania, Ohio) pay you per unit of generation.
• Utility rebates — one-time upfront rebates in some service territories (varies by utility, e.g., parts of Colorado).
• Property- and sales-tax exemptions — most states exempt the added home value (and often the equipment purchase) from tax.
• Net metering / net billing — how your utility credits exported power. This varies enormously by state and by utility, and is changing (e.g., California's NEM 3.0). See Net Metering Explained.

Sourcing note (transparency): We are not publishing specific state dollar figures on this page yet, because our prior values pre-date OBBBA and at least two are known to be stale — New Jersey moved off the SREC/TREC model to the SuSI administratively-set incentive, and Connecticut's RSIP closed to new applicants and was replaced by the Residential Renewable Energy Solutions (RRES) tariff. Rather than repeat unverified numbers, we link the authoritative source. DSIRE (the Database of State Incentives for Renewables & Efficiency, run by the NC Clean Energy Technology Center) is the canonical, continuously-updated record — look up your state there, and confirm current terms with the administering agency or utility before you budget around them. A fully sourced, per-state incentive breakdown is in progress on TheGreenWatt.

Is solar still worth it without the federal credit?

Often yes — but the math is tighter and location matters more than ever. Losing 30% pushed the effective cost of an owned system up by roughly 40%, which stretches payback by several years. Where it still pencils out:

• High-rate states (Hawaii, California, Massachusetts, New York, Connecticut, New Jersey): still strong — payback commonly in the high-single to low-double digits of years, especially with a surviving state program.
• Mid-rate states (Texas, Arizona, Florida, Georgia): positive but more marginal; the details of your utility rate and net-metering terms decide it.
• Low-rate states (Washington, Oregon, Louisiana, North Dakota): borderline for a cash purchase without a state program.

The one question that decides it: will you still own this home in ~8+ years? If yes, an owned system usually still wins over its lifetime. If no — or if you can't use a large tax credit anyway — a lease/PPA or community solar is often the better fit. Run your own numbers with the Are Solar Panels Worth It? calculator.

Common misreadings (2026 edition)

1. "There's still a 30% federal solar tax credit." Not for a system you buy. Section 25D expired December 31, 2025. Owned residential = $0 federal in 2026.
2. "I'll just get it through a lease." The leasing company claims the credit (Section 48E), not you. You benefit only indirectly, via a lower rate, and only if their project met the construction/placed-in-service deadlines.
3. "It's coming back in 2027." There is no indication of that. The law explicitly repealed it; planning around a reinstatement is speculation.
4. "Batteries still qualify for 30%." Standalone home batteries qualified under Section 25D — which is now gone. An owned battery bought in 2026 gets $0 federal credit, same as the panels. (Batteries owned by a commercial 48E project are a separate case.)
5. "I missed the deadline, so solar makes no sense now." Not necessarily. Rising utility rates and state programs still drive positive returns in many markets — the credit made a good investment better; its loss makes it a longer one, not a bad one.

Bottom line

For a system you buy in 2026, the federal solar tax credit is $0 — Section 25D expired December 31, 2025 under OBBBA. The federal credit survives only for third-party-owned systems (leases/PPAs) via Section 48E, where the installer claims it and passes part of the value through — and where the easy pre-July-2026 deadline has already closed. State programs are now the main incentive lever, and they mostly survived. If you installed in 2025, claim your 30% on your 2025 return with Form 5695. And solar still pays off in most high- and mid-rate markets — just over a longer horizon than it did in 2024.

Keep Reading

• How Much Do Solar Panels Cost? (2026, After the Credit Change)
• Are Solar Panels Worth It? (The Math Without the Credit)
• Solar Cost Per kWh — LCOE
• Net Metering — How Solar Reduces Your Bill
• Solar Battery Sizing Calculator