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, ten years ahead of the schedule set by the Inflation Reduction Act. If your system was operational before 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 placed-in-service deadline was December 31, 2025 — your system had to be installed, inspected, and operating before that date. A contract signed in 2025 but installed in 2026 does not qualify.

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 ten years early

The Inflation Reduction Act extended the 30% residential credit through 2032. The One Big Beautiful Bill Act, signed in 2025, terminated it instead — abruptly, with no phase-down. Industry projections that assumed eight more years of credit availability had to be redrawn overnight.

The commercial credit, Section 48E, was not terminated. It pays 30% to the business that owns the solar asset, and it remains available under current law if the project starts construction by July 4, 2026, or is in service by December 31, 2027.

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. A lease that priced near $110 per month in early 2024 now prices closer to $85 to $95 per month in many markets, because the 48E savings get folded into the rate. 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 — equipment, inverter, labor, 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 home storage is effectively gone alongside the solar credit. State programs partly fill the gap. California's Self-Generation Incentive Program still pays rebates for batteries, and several utility-run battery programs continue in the Northeast. None of them match the scale of the federal 30%, and most carry their own caps and waitlists.

If you were waiting to add a battery to a 2025 system, make sure the battery itself was operational by December 31, 2025 if you want it on the 2025 return. A battery added in early 2026 does not qualify even if the solar did.

State incentives stayed active — check yours

Federal policy does not control state programs. California, New York, Massachusetts, Maryland, and Illinois all maintain meaningful 2026 incentives, and most states still 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. Some programs — California's SGIP and New York's NY-Sun in particular — operate on rolling waitlists, so rebate payouts can lag the install date by several months. Factor that timing into your cash-flow planning. Our state incentives guide covers the major programs in detail.