Solar Tax Credit 2026: The Federal 30% Credit Ended

By Meraj Uddin Provat · Last reviewed August 26, 2026 · Editorial Standards

The federal 30% residential solar tax credit is gone for new installations. Section 25D of the tax code — the credit that put 30% of your solar system’s cost back in your pocket — ended for any system placed in service after December 31, 2025, under the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025. If you’re installing solar in 2026, there is no federal tax credit for a homeowner-owned system. This guide covers exactly what changed, who can still claim the old credit, and what incentives are actually left.

For your specific 2026 numbers — with the federal credit correctly removed and state incentives still applied — our solar payback calculator runs all 50 states plus DC.

What happened to the federal solar tax credit?

The Residential Clean Energy Credit (IRC Section 25D) — also called the solar Investment Tax Credit or ITC — used to give homeowners a 30% dollar-for-dollar reduction in federal income tax for installing solar, solar water heating, battery storage, and geothermal systems. The 2022 Inflation Reduction Act had extended it on a schedule running through 2034.

The One Big Beautiful Bill Act, signed into law July 4, 2025, repealed that schedule early. Per the IRS’s own guidance: “The credit is not available for any property placed in service after December 31, 2025.” That cutoff is based on when the system was installed, inspected, and connected to the grid — not when you signed the contract or paid a deposit.

System placed in service on or before December 31, 2025: you can still claim the 30% credit on that year’s tax return.
System placed in service in 2026 or later: no federal residential credit applies. Full stop.

If you installed before the deadline: how to claim it

If your system was fully installed and turned on by December 31, 2025, you’re still eligible — this section is for you.

Step 1: Get the installed-cost receipt

Your contractor’s paid-in-full invoice showing total system cost — equipment, labor, and permitting. Keep it permanently.

Step 2: File IRS Form 5695

Part I covers the Residential Clean Energy Credit. You report:

Line 1: Cost of solar electric property
Line 6: 30% × line 1 = your credit
Lines 12–13: Carry forward any unused portion to next year

Step 3: The credit reduces your total tax

It lowers the “total tax” line on Form 1040 dollar-for-dollar. If your 2025 federal tax is $7,000 and your credit is $9,000, your tax drops to $0 and the remaining $2,000 carries forward to your 2026 return — this is one of the only places the credit still touches a 2026 filing.

The credit is nonrefundable (it can’t create a refund by itself) but carries forward until fully used, so nobody loses value just because their tax bill was smaller than the credit in year one.

What’s actually left for 2026 solar installs

The federal credit is dead, but it wasn’t the only incentive stacked on top of solar. Here’s what still applies to a system you install in 2026:

Incentive	Status for 2026 installs
Federal 30% credit (Section 25D)	Gone. Ended December 31, 2025.
State income tax credits (NY, HI, SC, UT, MA, NM, AZ and others)	Still active where offered — unaffected by the federal repeal. Check your state; several have their own sunset dates.
Utility rebates (upfront cash from your utility)	Still active where offered — set by individual utilities, not federal law.
Net metering / SRECs	Still active, state-by-state. Not a tax credit — these are ongoing bill credits or certificate sales.
Third-party owned systems (lease/PPA)	The leasing company can still claim the separate commercial credit (Section 48E) on systems they own, and some pass part of that savings through in your monthly rate — see below.

Worked example: a $24,000 system installed in New York in 2026 gets the 25% state credit (capped at $5,000) plus a NY-Sun utility rebate of roughly $2,400 on a typical 6 kW system — but no federal credit. Net cost: $24,000 − $5,000 − $2,400 = $16,600, versus $9,400 for the identical system installed before January 1, 2026. That’s the real-dollar size of the change.

Does leasing or a PPA get around this?

Only indirectly. In a lease or Power Purchase Agreement, a third-party company owns the panels — not you — so it was never your credit to claim, even before 2026. That company can still claim the separate commercial solar credit (Section 48E) on systems it places in service through mid-2026 under OBBBA’s phase-down, and may reflect some of that in a lower monthly rate. You should ask any leasing company directly how much of that savings, if any, is passed to you — it’s not standardized and isn’t guaranteed. Owning a system in 2026 no longer carries a federal tax advantage over leasing the way it did in 2025 and earlier, which changes the buy-vs-lease math.

Is solar still worth it without the federal credit?

Often, yes — but the math is meaningfully tighter, and it now depends much more heavily on your state. States with a strong state credit, high electricity rates, and full-retail net metering (New York, Massachusetts, Hawaii) still pencil out well. States with no state credit and average electricity rates and sun hours will see paybacks stretch several years longer than the pre-2026 estimates you may have seen elsewhere online.

Run your own state and bill through the solar payback calculator — it no longer assumes a federal credit that doesn’t exist, so the payback year and 25-year savings you see reflect current 2026 law, not outdated 2022–2025 assumptions.

Solar Tax Credit 2026: The Federal 30% Credit Ended — What’s Left