Federal Solar Tax Credit in 2026: Status After the Repeal

Key Takeaways

• The 30% Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025 — the One Big Beautiful Bill Act moved the sunset up from 2034.
• The IRS treats a cost as paid when the original installation is completed, so a system finished in 2026 gets nothing, regardless of when you signed or paid.
• Unused 2025 credit still carries forward: the Form 5695 instructions explicitly allow carrying the unused portion to 2026.
• In 2026, the live savings levers are state incentives, net metering, utility rebates, and — indirectly — leases and PPAs that ride on the business credit through 2027.

Is the federal solar tax credit gone in 2026?

Yes, for homeowner-owned systems it is gone. The IRS states it plainly in the 2025 Form 5695 instructions: "You can't claim residential clean energy credits for expenditures made after December 31, 2025." The credit — 30% of the cost of qualified solar panels, batteries, and related equipment under Section 25D — had been scheduled to run until 2034. The law commonly known as the One Big Beautiful Bill Act, signed July 4, 2025, terminated it nine years early.

The companion Energy Efficient Home Improvement Credit (Section 25C, covering insulation, heat pumps, windows and similar upgrades) died on the same date: no credit "for expenditures or property placed in service after December 31, 2025."

What if I paid in 2025 but installation finished in 2026?

This is the question filling installer inboxes this year, and the IRS answer is unforgiving. The Form 5695 instructions define the timing rule: "Costs are treated as being paid when the original installation of the item is completed." Signing a contract in November 2025, or even paying in full, does not lock in the credit. If the crew finished the installation in January 2026, the expenditure is treated as made in 2026 — outside the credit.

The flip side helps 2025 buyers: if your installation was completed by December 31, 2025, you claim the credit on the 2025 return you filed (or file) in 2026, using Form 5695 as usual.

Rules as of August 2026, per IRS Form 5695 instructions and IRS.gov.

Can I still use a carryforward from 2025?

Yes. The credit was never refundable — it could only offset your tax liability — but unused amounts rolled forward, and the repeal did not confiscate them. The 2025 instructions say it directly: "If you can't use all of the credit because of the tax liability limit... you can carry the unused portion of the credit to 2026." If your 2025 system generated a $9,000 credit and you could only absorb $6,000 against last year's tax, the remaining $3,000 belongs on this year's return.

Does leasing or a PPA still get any federal money?

Indirectly, yes — and this is the loophole reshaping the market in 2026. The business Clean Electricity Investment Credit (Section 48E) survived with deadlines rather than repeal: solar projects qualify if placed in service by December 31, 2027, and projects that began construction before July 4, 2026 get a longer completion window. A company that owns the panels on your roof and leases them to you — or sells you the power under a PPA — can still claim that credit and price your monthly payment accordingly. Early drafts of the bill excluded residential solar leases from 48E, but the final signed law dropped that restriction.

That does not make leasing automatically better than buying; it makes the comparison worth running again. An owned system now competes without federal help, while a leased one carries an embedded subsidy until the end of 2027 — on the provider's terms, not yours.

What solar incentives are actually left in 2026?

The federal layer is gone, but the stack below it is intact where your state built one:

• State tax credits — several states run their own residential solar credits, unaffected by the federal repeal.
• Property and sales tax exemptions — dozens of states exempt solar equipment from sales tax, added home value from property tax, or both.
• Net metering and net billing — the compensation rules for exported solar power are state and utility policy, and remain the single biggest driver of payback math.
• Utility and local rebates — per-watt or per-battery rebates continue in specific service territories.
• SRECs — a handful of states still operate solar renewable energy certificate markets that pay for generation.

The authoritative map is DSIRE, the Database of State Incentives for Renewables & Efficiency — check your state before assuming the repeal killed your economics.

Is solar still worth it without the federal credit?

The honest arithmetic: a credit worth 30% of system cost is gone, so payback periods for owned systems stretch — how far depends entirely on your electricity rate, your state's incentive stack, and your export compensation. High-rate states with strong net metering still pencil comfortably; low-rate states with weak export credits were marginal even with the federal credit. The repeal did not change the physics of your roof — it changed the spreadsheet, and the spreadsheet is now local. Run your state's numbers before anyone — including a salesperson quoting pre-2026 payback figures — runs them for you.

Keep reading: what the Big Beautiful Bill changed · claiming on Form 5695 · solar leasing after the credit.