Reviewed by: Dylan DeSantis, SolarMetric
Last Updated: May 6, 2026
The short answer: The federal residential solar tax credit no longer exists for new solar installations completed in 2026. The “One Big Beautiful Bill,” signed by President Trump on July 4, 2025, eliminated the 30% Residential Clean Energy Credit (Section 25D) for systems placed in service after December 31, 2025 — nearly a decade ahead of its previously scheduled expiration. If you installed solar before January 1, 2026, you can still claim the 30% credit on your 2025 tax return. If you’re installing in 2026 or later, there is no federal residential solar tax credit available.
⚠ Important: Many solar installers and comparison websites are still showing outdated information stating the federal ITC is “30% through 2032.” That was accurate before July 4, 2025. It is no longer accurate. This guide reflects current law.
What Happened to the 30% Solar Tax Credit?
For over a decade, the federal Investment Tax Credit (ITC) — formally the Residential Clean Energy Credit under Section 25D of the U.S. tax code — let homeowners deduct 30% of their solar installation cost from their federal tax bill. It was one of the most powerful financial incentives in residential solar.
The Inflation Reduction Act of 2022 had extended the 30% rate through 2032, with a planned step-down to 26% in 2033, 22% in 2034, and 0% in 2035. Homeowners and the solar industry built financial models around that decade-long timeline.
On July 4, 2025, President Trump signed the “One Big Beautiful Bill” (OBBB, Public Law 119-21) into law. Among its energy provisions, the law terminated Section 25D for systems placed in service after December 31, 2025. There was no phase-down, no transition period, and no grandfather clause for contracts signed before the legislation passed. The credit simply ended at midnight on December 31, 2025.
If You Installed Solar in 2025 (or Earlier): How to Claim Your Credit
If your solar system was installed and placed in service on or before December 31, 2025, you are still entitled to the 30% Residential Clean Energy Credit. Here’s exactly how to claim it.
What the Credit Covered
For eligible installations, the 30% credit applied to:
| Covered Expense | Qualifies? |
|---|---|
| Solar PV panels | ✅ Yes |
| Labor costs for installation | ✅ Yes |
| Permits and inspection fees | ✅ Yes |
| Solar roofing tiles (e.g., Tesla Solar Roof) | ✅ Yes |
| Battery storage (installed with solar, or standalone after IRA 2022) | ✅ Yes (for 2025 installs) |
| Sales tax on qualifying equipment | ✅ Yes |
| Wiring, mounting hardware, inverters | ✅ Yes |
| Roof repairs required before installation | ❌ No |
| Extended warranties or service contracts | ❌ No |
| HOA fees or application fees | ❌ No |
How to Calculate Your Credit
The calculation is straightforward: multiply your total eligible system cost by 30%.
| System Cost | 30% Credit | Your Out-of-Pocket After Credit |
|---|---|---|
| $20,000 | $6,000 | $14,000 |
| $25,000 | $7,500 | $17,500 |
| $30,000 | $9,000 | $21,000 |
| $35,000 | $10,500 | $24,500 |
| $40,000 | $12,000 | $28,000 |
Example: A homeowner in Austin, TX who paid $28,500 for a 9 kW solar system installed in October 2025 qualifies for a $8,550 federal tax credit ($28,500 × 30% = $8,550).
How to Claim It: IRS Form 5695
You claim the Residential Clean Energy Credit on IRS Form 5695 (Residential Energy Credits) and attach it to your federal tax return (Form 1040).
Step-by-step:
1. Obtain Form 5695 from IRS.gov or your tax software (TurboTax, H&R Block, TaxAct all include it)
2. Complete Part I — Residential Clean Energy Credit
3. Enter your total qualified costs on line 1
4. Multiply by 30% (line 6 calculates this automatically)
5. Enter the resulting credit on Schedule 3 (Form 1040), Line 5
6. File with your 2025 federal tax return — due April 15, 2026 (standard deadline)
You must claim the credit for the tax year in which the system was placed in service (turned on and operational), not merely purchased or contracted.
The Non-Refundable Rule: Critical to Understand
The Residential Clean Energy Credit is non-refundable. This is the most misunderstood aspect of the ITC, and many guides get it wrong.
Non-refundable means the credit can reduce your federal tax liability to zero — but it cannot generate a refund. If you owe $6,000 in federal taxes and earn an $8,500 credit, you receive the full $6,000 reduction (bringing your bill to $0), but the remaining $2,500 does not come back to you as a check.
However: unused credits carry forward. If your credit exceeds your tax liability in the year you claim it, you can carry the unused portion forward to the next tax year. Under Form 5695 instructions, excess 25D credit from 2025 can be applied to your 2026 tax return.
| Your 2025 Tax Liability | Your 2025 Solar Credit | Used in 2025 | Carried to 2026 |
|---|---|---|---|
| $10,000 | $8,000 | $8,000 | $0 |
| $5,000 | $8,000 | $5,000 | $3,000 |
| $2,000 | $8,000 | $2,000 | $6,000 |
| $0 | $8,000 | $0 | $8,000 |
Note: The carryforward applies to credits earned on 2025 or earlier installations. It does not allow new 2026 installations to claim any credit.
Who Qualified for the Credit
To claim the 25D credit for a 2025 installation, all of the following must be true:
- You own the system. If you signed a solar lease or Power Purchase Agreement (PPA), the installer owns the system and claims any credits — you do not.
- The system was installed at your U.S. home. The property can be your primary residence or a second/vacation home. Rental properties you own but don’t live in do not qualify.
- The system was new. Pre-owned solar equipment does not qualify.
- The system was placed in service by December 31, 2025.
- You have federal tax liability. Because the credit is non-refundable, you need at least some federal tax owed to benefit. Low-income households with minimal tax liability may see limited benefit.
If You’re Installing Solar in 2026: No Federal Credit Available
There is no federal residential solar tax credit for systems placed in service in 2026 or later. This is current law as of May 2026. No legislation has been introduced that would restore the residential ITC.
This changes the financial math of residential solar significantly. A system that cost $30,000 and previously netted to $21,000 after the federal credit now costs the full $30,000 out of pocket (before state incentives).
What this means for payback periods: Without the 30% ITC, EnergySage estimates solar payback periods extend by roughly 40–43% nationally. A system with a 7-year payback under the old rules might now take 10 years. In lower-sunlight or lower-rate states, payback periods can push to 12–15 years, which changes the calculus considerably.
Battery Storage: Also Affected by the OBBB
The Inflation Reduction Act had extended the ITC to standalone battery storage systems (not just those paired with solar). The OBBB eliminated the residential battery credit (Section 25D) along with the solar credit.
For homeowner-owned battery systems:
– Batteries installed with solar or as standalone by December 31, 2025: ✅ 30% credit applies
– Batteries installed in 2026 or later (homeowner-owned): ❌ No federal credit
Commercial and third-party owned battery systems still qualify for tax credits under Section 48E (the commercial ITC), which runs through 2033 with gradual phase-downs starting in 2034. This is relevant if you’re considering a solar lease or PPA — the installer may pass some savings to you, though not in the form of a direct tax credit.
What State-Level Incentives Still Exist in 2026
With the federal credit gone, state and utility incentives matter more than ever. Here’s where the most meaningful programs are:
| State | State Tax Credit | Key Programs | Notes |
|---|---|---|---|
| New York | 25% credit (up to $5,000) | NY-Sun (NYSERDA per-watt incentives), VDER compensation | Strongest state credit in the country |
| Massachusetts | 15% credit (up to $1,000) | SMART program (~$0.03/kWh adder for 20 years) | SMART rates step down as capacity fills |
| New Jersey | None | SuSI (SREC program — sell certificates to utilities) | SRECs can generate $500–$1,200/year |
| California | None | SGIP battery rebate (up to $1,100/kWh for income-qualified), NEM 3.0 for net metering | NEM 3.0 (April 2023+) reduced export rates significantly |
| Arizona | 25% credit (up to $1,000) | APS/SRP net metering, sales tax exemption | Property tax exemption statewide |
| Colorado | 10% state tax credit | Xcel Energy rebates, RENU loan program | Combined with utility rebates can be substantial |
| Maryland | None | MGE/BGE rebates ($750–$1,000), SREC market | SREC values have declined in recent years |
| Texas | None | Austin Energy/CPS rebates vary by utility | No statewide program, utility-specific |
| Florida | None | FPL/Duke net metering, sales tax exemption | No state income tax, so no state credit benefit |
| Nevada | None | NV Energy net metering | Net metering policy significantly weakened |
Property and sales tax exemptions: Many states exempt solar installations from property tax assessment increases and from sales tax. Arizona, Colorado, Connecticut, Florida, Maryland, Massachusetts, New Jersey, New York, and Texas all offer full or partial property tax exemptions. These have real dollar value even without a direct tax credit.
Net metering: How your utility credits excess solar generation back to you varies dramatically by state and utility. California’s NEM 3.0 (2023) and Nevada’s net metering rollbacks have reduced the value of solar exports. States like Massachusetts, New Jersey, and Minnesota maintain favorable net metering policies.
Is Solar Still Worth It in 2026 Without the Federal Credit?
For homeowners in states with high electricity rates and strong net metering, solar can still make financial sense even without the federal ITC — especially when state incentives are factored in. For homeowners in states with low utility rates and weak net metering, the economics have become substantially less favorable.
The honest answer: it depends heavily on your state, your utility, and your electricity rate. The federal credit was doing a lot of work in the ROI calculation. Without it, you need more sunlight, a higher utility rate, or strong state support to maintain the same payback period.
For a detailed state-by-state analysis, see our is solar worth it guide.
What the Original Credit Schedule Had Been
For historical reference and context — this is what Section 25D originally looked like under the Inflation Reduction Act before the OBBB changed it:
| Year | Credit Rate (Homeowner-Owned) | Status |
|---|---|---|
| 2022–2032 | 30% | ~~Active through 2032~~ — Eliminated; ended Dec 31, 2025 |
| 2033 | 26% | ~~Scheduled~~ — Eliminated |
| 2034 | 22% | ~~Scheduled~~ — Eliminated |
| 2035+ | 0% | — |
The OBBB effectively moved the “0%” date from 2035 to January 1, 2026.
FAQ
Q: If I signed a solar contract in 2025 but my system wasn’t installed until 2026, can I still claim the credit?
No. The credit is based on when the system is “placed in service” — meaning installed, operational, and connected — not when you signed the contract or made a deposit. If your system wasn’t running by December 31, 2025, you do not qualify.
Q: My solar installer told me I can still get the 30% tax credit in 2026. Are they wrong?
Almost certainly, yes — at least for homeowner-owned residential systems. Some installers may be referencing commercial ITC rules (Section 48E), which still apply to business and third-party-owned systems. The residential Section 25D credit that homeowners can directly claim is gone for 2026 installations. Get this confirmed in writing before signing any contract that prices in a federal tax credit.
Q: If I lease solar in 2026, does the installer get a tax credit?
Leased systems and PPAs qualify under the commercial ITC (Section 48E) if they meet construction start requirements. The installer can claim credits on qualifying systems, which is why some companies still offer favorable lease rates. You, as the homeowner, do not receive a tax credit — but you may benefit indirectly through lower lease pricing.
Q: I installed solar in 2024 but my tax liability was too low to use the full credit. Can I still carry it forward?
Yes. Unused Section 25D credits from 2024 (and 2025) can be carried forward to subsequent tax years, including 2026. Use the carryforward line on Form 5695 when filing. The carryforward continues until the credit is fully used.
Q: Are there any other federal incentives for solar homeowners in 2026?
The residential solar and battery credits are gone. However, some related incentives may still exist depending on your situation: the Section 25C Energy Efficient Home Improvement Credit covers specific home upgrades (insulation, heat pumps, windows) but not solar panels. Check with a tax professional for your specific situation, as federal energy tax law changed significantly in mid-2025 and guidance continues to evolve.
Q: Does the elimination of the federal credit affect solar panel warranties or company guarantees?
No. Equipment warranties from manufacturers (typically 25 years for panels, 10–12 years for inverters) and workmanship warranties from installers are independent of federal tax policy. The credit change doesn’t alter what you’re entitled to from the companies you hire.
How We Researched This Guide
This guide is based on:
– IRS.gov — Residential Clean Energy Credit page, Form 5695 (2025), and IRS FAQs on OBBB modifications to Sections 25C, 25D, and related provisions (IR-2025-86)
– IRS OBBB FAQ page — FAQs for modification of sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D under Public Law 119-21 (July 4, 2025)
– EnergySage — Federal solar tax credit analysis and market impact reporting, 2025–2026
– SEIA (Solar Energy Industries Association) — Clean energy provisions analysis of the One Big Beautiful Bill
– Enphase and Solar.com — Installer-perspective reporting on credit termination and carryforward mechanics
– State energy agency websites — NYSERDA (New York), MassCEC (Massachusetts), NJBPU (New Jersey), California PUC (California)
Data was collected in May 2026. Tax law is complex and individual circumstances vary. Consult a tax professional before making decisions based on this guide.
External Sources
- IRS Residential Clean Energy Credit
- IRS Form 5695 (2025)
- IRS Form 5695 Instructions (2025)
- IRS FAQ: OBBB Modifications to Energy Credits
- SEIA: Clean Energy Provisions in the One Big Beautiful Bill
- EnergySage: Federal Solar Tax Credit Explained
- EnergySage: Congress Passes Bill Ending Residential Solar Tax Credit
- Energy.gov: Homeowner’s Guide to the Federal Tax Credit for Solar Photovoltaics
Get Free Quotes →
Comparing multiple installer quotes is more important than ever in 2026. Without the federal ITC smoothing the economics, the difference between a competitive installer and an overpriced one has a bigger impact on your payback period.
We connect you with pre-vetted installers in your area. No obligation. See our best solar companies guide for our top national picks and what to look for when evaluating a quote.
For current installation costs by state, see our solar panel cost guide. For an honest state-by-state look at whether solar makes financial sense in 2026, see our is solar worth it guide.