Key takeaways
- The 30% federal Residential Clean Energy Credit (IRS Section 25D) expired December 31, 2025 under the One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025).
- Installed in 2025? You can still claim 30% on your 2025 federal return (filed in 2026) using Form 5695 — including carryforward if your liability was smaller than the credit.
- Buying in 2026? A homeowner-purchased system earns $0 federal tax credit. Payback math must now use the full system price.
- Third-party ownership (lease/PPA) never gave the homeowner the credit anyway — the finance company took it. TPO deals remain available on different economics.
- State and local incentives survive: state credits, property and sales tax exemptions, and utility rebates still reduce real cost — net metering / export compensation is now the biggest financial lever.
The quick answer
There is no federal tax credit for residential solar systems placed in service on or after January 1, 2026. Section 25D(h) terminates the credit for expenditures made after December 31, 2025. If your system was installed and operational in 2025, claim 30% on your 2025 return. If you’re buying in 2026, your economics depend on electricity rates, self-consumption, export compensation, and state incentives — not a federal check.
What changed and when
| Date | What happened |
|---|---|
| Through Dec 31, 2025 | 30% credit on qualified residential solar, batteries (≥3 kWh), geothermal heat pumps, wind |
| July 4, 2025 | One Big Beautiful Bill Act (P.L. 119-21) signed — terminates 25D for expenditures after Dec 31, 2025 |
| Jan 1, 2026 onward | No 25D credit for new homeowner-purchased residential systems |
| 2026 tax season | 2025 installers file Form 5695 with their 2025 return; unused amounts carry forward |
If you installed in 2025: claim it now
- Document the basis — every invoice, contract, and receipt for hardware and labor. The credit applies to the full system cost, not just the financed portion.
- File IRS Form 5695 (Residential Energy Credits) with your 2025 federal return.
- Non-refundable, but carryforward survives — if your 2025 tax liability was smaller than the credit, the unused portion carries forward to future tax years under the standard 25D rules. Tell your tax preparer explicitly; credits get lost when preparers assume the program ended with the year.
- Batteries count — storage ≥3 kWh installed in 2025 on a solar-connected or standalone basis qualified; include it in the basis.
- Lease/PPA? You never claimed 25D — the system owner did. Nothing changes for you.
If you’re buying in 2026: the honest math
Without the 30% check, the payback formula shifts. Example — a 10 kW system at $2.70/watt:
- 2025 economics: $27,000 − $8,100 credit = $18,900 net.
- 2026 economics: $27,000 net. At $0.15/kWh and ~14,000 kWh/year of offset, annual savings ≈ $2,100 — payback stretches from ~9 years to ~13 years (before rate escalation, which works in your favor).
This does not make solar irrational — electricity rates keep rising, and hardware prices keep falling — but it changes the thresholds:
- Shop price hard. Every $0.10/watt matters more now. Compare quotes on cost per watt.
- Maximize self-consumption. Power you use directly displaces retail-rate purchases; exported power often earns far less. Size the system to your load, then run the numbers in the payback calculator with the federal credit set to 0.
- Export compensation is now king. In a full-retail net metering state, solar still pencils cleanly. Under avoided-cost net billing, batteries and load-shifting carry the economics. See our net metering by state guide.
- Consider TPO with clear eyes. Leases and PPAs reprice frequently post-25D. The operator lost the same credit you did; compare the per-kWh contract rate against your utility rate, not against 2025-era marketing.
What incentives still exist in 2026
- State tax credits — several states maintain their own credits (for example, some states credit a share of system cost against state income tax). Check your state’s revenue department or DSIRE for the current list.
- Property tax exemptions — many states exclude the added home value of solar from property tax assessment (e.g., Texas’s full exemption). This survives federal changes.
- Sales tax exemptions — several states waive sales tax on solar equipment.
- Utility rebates and performance incentives — utility-specific programs continue; some pay per-watt at installation or per-kWh exported.
- MACRS depreciation and Section 48E — business and commercial installations follow separate, still-live rules; consult a tax professional if installing on a business property.
FAQ
Is there a federal solar tax credit in 2026?
No. The 30% Residential Clean Energy Credit (Section 25D) expired for expenditures made after December 31, 2025. Systems installed and operational in 2025 remain claimable on 2025 federal returns.
I installed in late 2025 but haven't filed yet — did I miss it?
No. Claim it on your 2025 return with IRS Form 5695. If your tax liability was less than the credit, the remainder carries forward to future years.
Can I still get 30% off solar somehow in 2026?
Not through the federal homeowner credit. Third-party-owned systems (lease/PPA) price differently, and some states still offer their own credits — but there is no federal 25D credit for homeowner purchases placed in service in 2026.
Does a battery still qualify for anything federal?
Not for homeowner-purchased systems under 25D — that ended with the same December 31, 2025 cutoff. Business-storage projects may still qualify under Section 48E; rules differ.
Is solar still worth it without the federal credit?
It depends on your rates, sun, and export compensation. In full-retail net metering states with high utility rates, yes — payback simply runs a few years longer. In avoided-cost states, batteries and self-consumption now carry the case. Run your numbers with the credit set to zero.
Next logical reads
Net metering by state (2026) Solar payback calculator Cost per watt explained How much do solar panels cost?