Solar Tax Credits in 2026: What Ended, What's Left, and What It Means for You

If you have been researching solar for a while, you have probably read that the federal government covers 30% of the cost. That was true for over a decade. It is no longer true for homeowners buying a system in 2026.

This guide covers what actually changed, what survived, and what to do depending on when your system was installed.

What changed

On July 4, 2025, the One Big Beautiful Bill Act (P.L. 119-21) was signed into law. Among many other provisions, it repealed the Section 25D Residential Clean Energy Credit — the 30% credit — for expenditures made after December 31, 2025.

There is no phase-down and no step-down schedule. Previous law had the 30% rate running through 2032, then dropping to 26% and 22%. That schedule no longer exists. The credit simply ended.

If you installed in 2025 or earlier: your credit is not lost

This is the part most articles get wrong, and it matters to a lot of people.

The credit is non-refundable, which means it only offsets taxes you actually owe. Plenty of homeowners who installed in 2024 or 2025 could not use the full amount in one year.

P.L. 119-21 did not change the carryforward rules. If your qualifying expenditure was made before the end of 2025, you can still carry any unused portion forward into future tax years. The IRS has not set an expiration date on that carryforward.

So if you installed a $20,000 system in 2025, claimed a $6,000 credit, and only owed $4,000 in federal tax that year, the remaining $2,000 still carries into 2026 and beyond. Your future returns will show 25D activity even though no new expenditures qualify.

You will want to keep your final invoice and your original Form 5695 filing, since the carryforward traces back to that year’s calculation.

What is left in 2026: the 48E credit

The Section 48E Clean Electricity Investment Credit is still in effect through the end of 2027. The critical difference is who claims it.

25D was claimed by you, the homeowner. 48E is claimed by the business that owns the system. That means it does not appear on your tax return at all.

Homeowners can still benefit from it, but only through third-party ownership (TPO):

• Solar lease — a company installs and owns the system on your roof, and you pay a fixed monthly fee to use it.
• Power purchase agreement (PPA) — same ownership structure, but you pay per kilowatt-hour generated rather than a flat fee.

In both cases the company claims 48E and, in a competitive market, passes some of that value through in the rate it offers you.

Be realistic about this. TPO is not equivalent to owning. You do not get the asset, the savings are typically smaller over the system’s life, and the contract terms matter enormously — especially escalator clauses that raise your payment annually, and what happens if you sell the house. Read the contract carefully and compare the total cost over the full term against a cash or loan purchase with no credit.

State and utility incentives are unaffected

The federal change did nothing to state-level programs, and in some states these are substantial on their own:

• State tax credits — New York and Massachusetts, among others, offer their own income tax credits that were never tied to 25D.
• SRECs — in New Jersey, Pennsylvania, Illinois, and a few other markets you can sell the environmental attributes of the power you generate, which produces ongoing income rather than a one-time credit.
• Utility rebates — many utilities still offer upfront cash for battery storage or smart inverters, often tied to demand-response participation.
• Property tax exemptions — most states exclude the added home value from your property assessment.

These vary enormously by location and change on their own schedules. Check your state’s program directly before assuming anything.

Does solar still make sense without the credit?

Sometimes yes, sometimes no — and the honest answer depends almost entirely on your local electricity rate.

The credit used to paper over a lot of marginal cases. Without it, the math is simply less forgiving, and the deciding variable is what you currently pay per kilowatt-hour. In a state at 30+ ¢/kWh, self-generating still displaces expensive power and payback can remain reasonable. In a state at 13 ¢/kWh, the case is much harder to make on economics alone.

Two other factors moved in the opposite direction and partly offset the loss:

• Equipment prices have continued to fall.
• Net metering terms in many states have gotten worse, which pushes toward pairing solar with storage rather than exporting to the grid.

Run the numbers for your own rate and your own consumption. Do not accept a payback estimate from a salesperson that still assumes a 30% credit — as of 2026 that estimate is simply wrong, and it is a reasonable signal to walk away.

What to do next

1. Installed in 2025 or earlier? Confirm with your tax preparer how much credit you have left to carry forward, and keep your Form 5695 documentation.
2. Considering solar in 2026? Get quotes for both cash/loan purchase and lease/PPA, and compare total cost over the full term rather than the monthly payment.
3. Check your state programs before assuming there is nothing available.
4. Verify any credit a contractor quotes you. If a 2026 quote still shows a 30% federal credit line item, that quote is wrong.

Sources

• Congressional Research Service — Expiration and Carryforward Rules for the Residential Clean Energy Credit (IN12611)
• SEIA — Clean Energy Provisions in the One Big Beautiful Bill
• IRS Fact Sheet 2025-5 — FAQs on energy credits modified under P.L. 119-21

We cover solar, not tax preparation. Carryforward and eligibility depend on your specific return — confirm your situation with a licensed tax professional before making a purchase decision.