Solar Tax Credit 2026: What Expired, What Remains, and What Replaced It

The 30% federal residential solar tax credit ended at midnight on December 31, 2025. The One Big Beautiful Bill Act terminated Section 25D for new installations, nine years ahead of the schedule set by the Inflation Reduction Act. If your installation was completed by that date, you still claim it on your 2025 federal return. If you are buying in 2026, the federal benefit now flows through the commercial credit, Section 48E, and reaches you only through a lease or PPA.

If you installed in 2025, claim 30% on your 2025 return

The deadline was December 31, 2025. The IRS treats the expense as made when installation is completed, so the installation had to be finished by that date. A contract signed or paid in 2025 but installed in 2026 does not qualify. If you already filed your 2025 return without the credit, you can generally claim it on an amended return, Form 1040-X, within three years of your original filing date.

The credit is non-refundable. On a $28,000 system, the 30% credit equals $8,400. If your 2025 federal liability is $6,000, you reduce it to zero and carry the remaining $2,400 forward to future tax years with no time limit until it is fully used. File Form 5695 with your Form 1040; most tax software handles it automatically once you check the solar box. If you owe little or no federal tax in 2025, the unused portion still has value. It follows you forward to 2026, 2027, and later returns as you accumulate liability.

Why Section 25D ended nine years early

The Inflation Reduction Act extended the 30% residential credit through 2032, with a phase-down to 26% in 2033 and 22% in 2034. The One Big Beautiful Bill Act, signed July 4, 2025, terminated it after 2025 instead, abruptly and with no phase-down. Industry projections that assumed nine more years of credit availability had to be redrawn overnight.

The commercial credit, Section 48E, survived, and the same law put a deadline on it for solar. It can pay 30% to the business that owns the solar asset. A solar facility that began construction by July 4, 2026 keeps the credit under the usual continuity rules. One that begins construction after that date must be placed in service by December 31, 2027. Projects that begin construction after December 31, 2025 must also meet new limits on material assistance from prohibited foreign entities, which the IRS addressed in Notice 2026-15.

For homeowners, the practical effect is a shift in financing economics. Cash and loan buyers lose the credit entirely. Lease and PPA customers do not own the system. The solar company does, so the owner claims 48E and prices the contract accordingly. The 2026 federal subsidy reaches residential customers only through this channel.

Battery storage followed the same calendar

Standalone battery storage became eligible for the 30% Section 25D credit in 2023, expanding the benefit beyond solar-paired systems. That eligibility ended on the same date as the rest of 25D: December 31, 2025.

For 2025 installations, batteries qualify whether paired with solar or installed on their own. Include the full battery cost, covering equipment, inverter, labor, and permitting, in the Form 5695 calculation alongside any panels.

For 2026 installations, neither solar nor batteries qualify under Section 25D. The federal residential subsidy for owned home storage is effectively gone alongside the solar credit. A battery owned by a third party under a lease or PPA is different: its owner can still claim Section 48E, and storage is not bound by the 2027 deadline that applies to solar. State and utility programs partly fill the gap for owners. California's Self-Generation Incentive Program has closed its general-market home battery rebate, leaving only low-income equity funding, most of it waitlisted. Utility battery programs in the Northeast, such as Massachusetts ConnectedSolutions, pay for a battery's performance during peak events rather than for the purchase, and most programs carry their own caps and waitlists.

If you added a battery to a 2025 system, it counts on the 2025 return only if the battery's installation was also completed by December 31, 2025. A battery added in 2026 does not qualify for Section 25D even if the solar did.

State incentives stayed active, so check yours

Federal policy does not control state programs. New York, Massachusetts, New Jersey, and Illinois all maintain meaningful 2026 incentives, and many states exempt the added home value from solar from property tax assessments.

State programs change without federal coordination. Confirm your state's current rules through your public utility commission or the Database of State Incentives for Renewables & Efficiency (DSIRE) before signing a contract. Programs that run on funding blocks and waitlists can close before your install date, as New York's NY-Sun home rebates and California's SGIP general-market battery rebate already have, so confirm a program is open before you count it in your cash-flow planning. Our state incentives guide covers the major programs in detail.

Can I claim the solar tax credit on a house I buy with panels already installed?

No. The Section 25D residential credit belonged to the taxpayer who paid for the system and placed it in service. If the previous owner installed the panels, any credit was theirs to claim in that tax year. Buying the house does not transfer the credit to you, and there is no second credit for a second owner of the same system.

Timing has also closed the door. Section 25D expired on December 31, 2025 for cash and loan purchases, so a system installed in 2026 earns no federal residential credit for anyone, and a system installed earlier already produced its credit for whoever owned it then.

A lease or PPA on the home is a different situation. There, the homeowner never held the tax benefit in the first place. The solar company that owns the system claims the commercial credit, Section 48E for systems placed in service since 2025 and Section 48 before that. That benefit shows up as the lease or PPA rate, not as a line on anyone's tax return. If you are buying a home with a third-party-owned system, the question that matters is not the tax credit. It is whether you assume the contract, and on what terms.