Solar Tax Credit in 2026: What's Left After 25D Expired

If you've read older guides promising a "30% federal solar tax credit," they're out of date. The residential credit they're describing — Section 25D — expired on December 31, 2025. For homeowners buying solar with cash or a loan in 2026, the federal credit is now $0.

This is the single biggest change to home-solar economics in a decade, and a lot of the advice still circulating hasn't caught up. Here's the accurate picture.

What 25D was — and that it's gone

Section 25D was the Residential Clean Energy Credit. It refunded 30% of the cost of a solar system (panels, inverters, wiring, and qualifying battery storage) as a credit against your federal income taxes. On a $24,000 system, that was a $7,200 reduction in what you owed the IRS.

The credit was scheduled to phase down over time, but legislation moved its end date forward. As of January 1, 2026, systems placed in service in 2026 do not qualify for 25D. If you owned and energized your system in 2025, you may still claim it on your 2025 return — but anything switched on this year does not.

There is no successor residential credit. Don't assume a new one will appear; budget as if the federal subsidy for owned home solar is simply gone.

What this does to the math

The credit used to absorb nearly a third of the sticker price. Without it:

• A system that "cost" $16,800 after the old credit now costs the full $24,000.
• Payback periods stretch by roughly 2–4 years in most markets.
• The break-even decision is much more sensitive to your electricity rate and sun.

None of that makes solar worthless — high-rate, high-sun states still pencil out — but it does mean you should run real numbers instead of trusting a rule of thumb. Our solar cost calculator already bakes in the $0 federal credit for cash and loan buyers, so the payback it shows is the one you'll actually get.

The one place the federal credit survives: 48E

Here's the nuance most homeowners miss. The commercial clean-electricity credit — Section 48E — is still in effect. Homeowners can't claim it on a system they own. But a business that owns panels on your roof can.

That's exactly what happens with a solar lease or a power-purchase agreement (PPA). The leasing company owns the equipment, claims the 48E credit (and depreciation benefits), and prices your monthly payment to pass some of that value back to you. So in 2026:

• Buy it yourself (cash/loan): no federal credit. You own the asset and capture 100% of the savings, just with a longer payback.
• Lease or PPA: the provider captures the federal credit; you get $0-down access and a smaller but immediate monthly saving.

This is why the market has shifted toward third-party ownership this year — it's the only channel where the federal incentive still flows. We compare the two paths in detail in solar lease vs. buy in 2026.

State and local incentives still exist

The federal credit is the big one, but it was never the only one. Depending on where you live, you may still qualify for:

• State tax credits or rebates (a handful of states offer meaningful ones).
• Property-tax exemptions so your assessment doesn't jump when you add panels.
• Sales-tax exemptions on the equipment.
• Utility or local rebates, sometimes performance-based.
• SRECs (Solar Renewable Energy Certificates) in states that have a market for them — these can be worth hundreds of dollars a year.

These vary enormously by state and change often. Our calculator applies the state-level incentive percentage we track for each state, so the estimate reflects what's actually available where you live.

A note on batteries

Under 25D, home batteries charged by solar qualified for the same 30% credit. With 25D gone, a standalone residential battery purchase no longer carries a federal credit either. Batteries can still make sense — for backup power or to capture more value under stingy net-metering rules — but price them on their own merits now, not on an expired subsidy.

Bottom line

• 25D is gone. Cash and loan buyers get $0 federal credit in 2026.
• 48E lives on — but only the lease/PPA provider can claim it, not you.
• State and local incentives may still apply and are worth chasing.
• Run your real numbers before signing anything.

The headline rate matters less than your actual payback. Enter your bill and state to see what solar costs you in 2026 — with no phantom 30% credit baked in.

Open the solar cost calculator →