Solar Tax Credit 2026: What Happened to the Federal Credit, and Is Solar Still Worth It?
By PVFirms Editorial Team, Published on 2026-10-24 • 7 min read
If you are searching for the solar tax credit 2026 rules, the headline is simple: for most homeowners buying a system this year, there is no federal residential solar tax credit. The Residential Clean Energy Credit (Section 25D), which covered 30% of qualifying costs, was terminated for expenditures made after December 31, 2025, under the federal budget law signed in July 2025, widely known as the One Big Beautiful Bill Act.
That changes the math, but it does not automatically make solar a bad deal. This guide explains what changed, what is left, and how to run the numbers. Tax rules have edge cases, so confirm your own situation with the IRS or a qualified tax professional.
In short:
- The 25D credit ended for expenditures after December 31, 2025; it covered solar panels and home batteries alike.
- Systems completed in 2025 may still be claimed on a 2025 return, filed in 2026.
- State incentives, net metering rules and quote price now decide whether solar pays off.
- Be wary of any 2026 quote that still deducts a "30% federal tax credit."
What happened to the residential clean energy credit
Section 25D let homeowners claim part of the cost of solar panels, battery storage and some other equipment against federal income tax, until the 2025 budget law ended it early. Timing matters. IRS guidance indicates that an expenditure is generally treated as made when the installation is complete, not when you sign or pay a deposit. A system paid for in 2025 but switched on in 2026 may therefore not qualify. Check the current IRS guidance or ask a tax professional before relying on a credit.
| Your situation | Federal credit status (as of 2026, verify) | What to do |
|---|---|---|
| Installation completed in 2025 | Likely eligible on your 2025 return | File Form 5695 and keep invoices and completion records |
| Contract or deposit in 2025, installed in 2026 | Likely not eligible under IRS guidance | Confirm with the IRS or a tax professional |
| Buying and installing in 2026 | No 25D credit | Judge the system on savings and state or utility incentives |
| Lease or PPA signed in 2026 | The company that owns the system may still use business credits for a limited time | Ask how that is reflected in your price |
| Unused credit from an earlier year | Carryforward may still apply | Ask a tax professional |
Solar incentives 2026: what is still available
Other incentives are separate from 25D, and many continue. Availability varies by state and utility:
- State tax credits or rebates. A number of states run their own programs, sometimes with annual budgets that run out.
- Property tax exemptions. Many states exclude the added value of a solar system from property tax assessments.
- Sales tax exemptions on solar equipment in some states.
- Performance payments. Some states, particularly in the Northeast, pay for the renewable energy certificates your system generates.
- Utility rebates and battery programs. Some utilities pay for batteries that can be called on during peak demand.
Check the Database of State Incentives for Renewables & Efficiency (DSIRE), your state energy office and your utility, and confirm terms before you sign.
Net metering and net billing now matter most
- Net metering credits exports at or near the retail rate, so the timing of your usage matters little.
- Net billing credits exports below the import rate, so every kWh you use yourself is worth more than one you export.
California's Net Billing Tariff, often called NEM 3.0, is the best-known example. Since April 2023, new customers there have received export credits based on avoided cost, which are typically far below retail rates. That shifts the value toward smaller systems sized to your own use, and toward batteries.
Other states have revised or are reviewing their rules, so confirm your tariff with your utility or state public utility commission.
Is solar worth it without the tax credit? A worked example
Solar panels' cost in the US varies by state, roof and installer. As an indicative 2026 range, many residential systems are quoted at roughly $2.50–$3.50 per watt before incentives.
Take an illustrative 7 kW system at $3.00 per watt: $21,000. In a location yielding about 1,350 kWh per kW per year, it produces roughly 9,450 kWh. What each kWh is worth to you depends on your rate and export rules:
| Value per kWh (illustrative) | Yearly savings | Simple payback, no credit | Payback with the old 30% credit |
|---|---|---|---|
| $0.12 (low rates or poor export credit) | ~$1,130 | ~18.5 years | ~13 years |
| $0.20 (mid-range) | ~$1,890 | ~11 years | ~7.8 years |
| $0.30 (high-rate states) | ~$2,840 | ~7.4 years | ~5.2 years |
Panels typically last 25–30 years with modest yearly degradation (see how long solar panels last). In high-rate areas, solar can still pay back comfortably. In low-rate areas with weak export credit, it may not, unless state incentives close the gap. Use your own bills and utility tariff to redo the math.
Cash, loan, lease or PPA?
- Cash usually delivers the best lifetime value if you have the savings.
- Loans: compare the cash price with the financed price. Some low-rate loans carry dealer fees built into the system cost. Avoid loan structures designed around a lump-sum paydown from a tax refund you will no longer receive.
- Leases and PPAs: a third-party owner may still be able to use commercial clean energy credits for a limited period. Ask how that benefit shows up in your monthly price, and check the annual escalator, transfer terms if you sell the home and end-of-term options.
How to evaluate solar quotes in 2026
- Price per watt, calculated the same way on every quote.
- Production estimate, with shading and orientation assumptions stated.
- Export assumptions: which net metering or net billing tariff is used.
- Equipment and warranties: panel, inverter, battery and workmanship.
- Incentives claimed: any 2026 quote that subtracts a federal homeowner credit should be explained in writing. Treat it as a red flag until it is.
- Who handles permits, interconnection and utility paperwork.
Our guide to solar panel scams and red flags covers high-pressure sales tactics, and the PVFirms checklist on how to choose a solar installer helps you vet the company itself. If you also drive electric, see charging an electric car with solar panels.
How to find a trustworthy installer
PVFirms lists 3,643 solar companies in the United States as of October 2026. Browse US solar companies or filter the installer directory by state, then compare profiles side by side. Each profile shows a verification tier. A Verified company has had its identity, business registration and at least one real customer checked with documents; see how verification works. Requesting quotes is free.
FAQ
Is there a federal solar tax credit in 2026?
For homeowners who buy and install a system in 2026, the Section 25D Residential Clean Energy Credit is no longer available, because it was terminated for expenditures made after December 31, 2025. Leased or PPA systems may be treated differently because the owner is a business. Confirm your situation with the IRS or a tax professional, since timing rules matter.
Can I still claim the credit for a system installed in 2025?
Generally yes, if the installation was completed in 2025 and you meet the other requirements. You would claim it on your 2025 federal return using Form 5695. Keep your contract, invoices and proof of completion. If the credit exceeds your tax liability, ask a tax professional about carrying the unused amount forward.
Is solar worth it without the tax credit?
It depends mainly on your electricity rate and export rules. Homes in high-rate states with fair export credit can still see payback well within the panels' lifespan. Homes with low rates and weak export credit may wait much longer. Get several quotes and run the numbers against your own bills.
Does the battery tax credit still exist?
Home batteries were covered by the same Section 25D credit, so the federal homeowner credit for batteries ended at the same time. Some states and utilities now offer battery rebates or payments for letting the utility draw on stored power during peak demand. Check with your state energy office and utility.
Do solar leases and PPAs still get tax credits?
With a lease or PPA, the homeowner claims nothing; any credit goes to the company that owns the equipment. Under the 2025 law, those business credits may remain available only for a limited window, so the pricing on offer may shift during 2026. Ask the provider to put any incentive-linked pricing in writing.
Run your own numbers next
Pull your last 12 months of electric bills, check your utility's export tariff and your state's incentives, then get three comparable quotes. Start with verified US solar installers on PVFirms and request quotes for free. For background on federal energy programs, the U.S. Department of Energy publishes homeowner guidance.