The Federal Solar Tax Credit Ended. Here's What's Left in 2026

What ended, and when

For three years the federal solar tax credit was the easiest number in home energy: 30% of the installed cost, no cap, no income limit. The Inflation Reduction Act of 2022 had scheduled that rate to run through 2032. Then the One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, rewrote the schedule. The 30% Residential Clean Energy Credit, Section 25D of the tax code, now allows no credit for expenditures made after December 31, 2025.

The same law ended several other household credits on staggered dates. Here is where each one landed:

Two things did not end. The IRA's state-run Home Energy Rebates (HOMES and HEAR, $8.8 billion in total) were not repealed, and every state-level incentive, from tax credits to net metering, is untouched by the federal law. Both are covered below.

The completion-date rule that decides everything

The whole question of "do I get the credit?" comes down to one date. Under 25D, an expenditure is treated as made when the installation is completed. Not when you signed the contract. Not when you paid the deposit. Not when the panels arrived in your driveway. If your installer finished the work on or before December 31, 2025, you are inside the line. If the last of the work happened on January 2, 2026, you are outside it.

That is why the paperwork matters so much this year. The records that best show a completion date are:

• The installer's final invoice or completion certificate with a dated sign-off.
• The final building or electrical inspection from your city or county.
• Your utility's interconnection approval or permission-to-operate (PTO) letter, which shows the system was finished and ready to connect.

If those dates straddle the new year, for example the crew finished on December 20 but the utility's PTO came in January, keep all of it and talk to a tax professional before you file. The test in the law is completion of the installation, and your file should show that date clearly.

Who can still claim the 30% credit

Plenty of people still have real money on the table. You can claim the full 30% credit, with no dollar cap, if:

• Your system was installed and completed in 2025, including systems finished in the year-end rush last December. You claim it on your 2025 federal return.
• You completed a qualifying system in an earlier year and never claimed it. An amended return can still recover it, within the normal amendment window.
• You are carrying forward unused credit from a system installed in 2025 or before. That balance is still usable on future returns.

The same rule covered more than panels. A battery of 3 kWh or more, solar water heating, a geothermal heat pump, small wind and fuel cells all fell under 25D, and all of them qualified if completed by December 31, 2025. Eligible costs for those 2025 systems included:

A second home you lived in part-time could qualify; a pure rental you never occupied could not. If your 2025 project included a re-roof, only the solar-specific costs belong on the form.

How to claim a 2025 install on Form 5695

If your system was finished in 2025, you claim the credit on the 2025 return you file in 2026. The process has not changed:

1. Confirm the completion date falls on or before December 31, 2025, using the documents listed above.
2. Total your qualifying costs from the itemized invoice: equipment, labor, permits, sales tax and any qualifying battery.
3. Fill out IRS Form 5695, Part I ("Residential Clean Energy Credit"). The form multiplies your costs by 30%.
4. Carry the result to Schedule 3 (Form 1040) and then to your Form 1040. The credit reduces the federal income tax you owe.
5. Note any carryforward. If the credit is larger than your tax for 2025, Form 5695 calculates the amount that rolls into 2026 and later years.

Most tax software walks you through Form 5695 once you enter the total cost. If you filed an extension, you still have until the extended deadline in October. Keep the invoice, payment proof and completion records with your tax file; you do not send them in, but you need them if the IRS asks.

A short worked case: a homeowner finishes a $21,000 system on November 14, 2025. The credit is $6,300. If they owe $4,500 in federal income tax for 2025, they use $4,500 now and carry $1,800 forward. The credit is non-refundable, so it cannot create a refund beyond the tax you owed, but withholding already paid still counts, so it can increase your refund up to your total tax for the year.

Missed it? How to amend with Form 1040-X

Some homeowners filed early, forgot the credit, or used software that skipped Form 5695. If that is you, the fix is an amended return on Form 1040-X, attaching a completed Form 5695 for the year the system was completed. You can generally amend within three years of the date you filed the original return.

The same route works for older installs. If you completed a system in 2023 or 2024 and never claimed the 30%, an amended return for that year can still capture it, as long as you are inside the amendment window. Given that a typical system's credit runs into thousands of dollars, it is worth an hour with your records or a modest fee to a preparer.

What you cannot do is "amend" your way into the credit for a system that was completed in 2026. Moving a completion date on paper is not a gray area; it is a misstatement on a federal return.

Carryforward credit from earlier years still counts

A common worry since the law passed: "I still have $3,000 of solar credit I couldn't use. Did I lose it?" No. The end of 25D stops new credit for new expenditures. It does not erase credit you already earned on a system completed in 2025 or earlier. Unused credit carries forward and can still be applied to future tax years.

To use it, you complete Form 5695 each year you have a carryforward, entering the amount from the prior year's form. Keep every year's Form 5695 in your files so the chain is easy to follow. If you switched tax software or preparers, make sure the new one picks up the carryforward line; it is one of the most commonly dropped items on a return.

Signed in 2025, finished in 2026: what happens

This is the painful case. Many families signed contracts in the fall of 2025, paid deposits, and expected panels before Christmas. Supply backlogs, permit queues and utility delays pushed a lot of those installs into January and February. Because the credit follows the completion date, a system finished in 2026 gets no federal credit, no matter when the contract was signed or how much was paid in 2025.

If you are in this position, here is what is worth doing:

• Read your contract. Some installers wrote price-adjustment, cancellation or "tax credit guarantee" clauses into late-2025 contracts. If the sales pitch promised the credit, ask in writing what the company will do now.
• Ask about converting to a lease or PPA. A third-party owner may still claim a commercial credit (see the next section) and may be able to reflect some of that in your monthly rate. Get any offer in writing and compare the total cost over the term.
• Re-run the numbers at full cost. Use the Payback Calculator with a $0 federal credit and your actual state incentives before deciding whether to keep, resize or renegotiate the project.
• Check state programs again. State tax credits and SREC eligibility do not depend on the federal credit, so they may still close much of the gap.

Leases and PPAs: the one federal angle left

When a solar company owns the system on your roof, through a lease or a power purchase agreement (PPA), the homeowner credit never applied to you anyway. The owner claimed a commercial credit instead. That commercial side, now the Section 48E clean electricity credit, did not end on the same date as 25D.

Under the OBBBA, a third-party owner may still claim 48E for a residential solar system if construction began by July 4, 2026, or if the system is placed in service by December 31, 2027. Restrictions on components and sourcing from "foreign entities of concern" (FEOC) also apply, so not every system will qualify. Leased solar water heating and small wind are excluded.

What that means for you: a lease or PPA signed today might be priced lower than it would be without the credit, because the owner may be able to claim it. "Might" is doing real work in that sentence. Ask any installer offering a lease or PPA three direct questions:

1. Do you expect to claim the 48E credit on this system, and does it meet the FEOC sourcing rules?
2. How much of that value is reflected in my rate, compared with the same system sold for cash?
3. What is the total I will pay over the full term, including any annual escalator?

Leases still have the drawbacks they always had: you do not own the equipment, an escalator can erode savings, and the contract has to be transferred if you sell the house. Our lease vs buy vs loan guide walks through the trade-offs, and the lease vs buy calculator lets you compare them in dollars.

What's still left for solar in 2026

With the federal credit gone, the incentives that remain are the ones that were always local. They vary a lot by state, which is why the same 7 kW system can be a good buy in one place and a weak one next door.

• State tax credits. A few states still run their own. Hawaii offers a 35% state credit (subject to the state's per-system caps), and New Mexico offers a 10% state credit. These never depended on the federal credit.
• SRECs and performance payments. In states with solar renewable energy certificate markets, you earn certificates for the power you generate and sell them for years. Examples include Illinois Shines, New Jersey's SuSI SREC-II program, and Maryland's SREC market. Our SREC guide explains how the income works.
• Net metering. Where full-retail net metering survives, as in Florida's 1:1 policy, every exported kilowatt-hour is credited at the price you pay, which does more for payback than most rebates. Where states have moved to net billing, a battery can matter more. See how net metering works.
• Property tax exemptions. Many states exclude the added home value from solar from your property tax assessment, so the system does not raise your tax bill.
• Sales tax exemptions. Many states exempt solar equipment from sales tax, which takes several hundred to a thousand-plus dollars off the price up front. Florida offers both property and sales tax exemptions.
• Grants and utility rebates. Maryland offers a $1,000 state grant, and some utilities still pay rebates for solar or batteries. These change often, so check before you sign.

Two federal programs come up in sales pitches. The Home Energy Rebates (HOMES and HEAR) were not repealed, but they mainly fund heat pumps, electrical panels, wiring and whole-home efficiency, not solar panels. They can still help if your project includes a panel upgrade (HEAR covers up to $4,000) or wiring (up to $2,500) and your household income qualifies. Check status at energy.gov/save/rebates. Separately, the EPA moved in August 2025 to terminate the $7 billion Solar for All program, and that decision is in litigation. Do not count on Solar for All money for a 2026 project; if an installer quotes it as a sure thing, ask for written proof that funds are committed to you.

Find what applies where you live on our Solar Incentives by State hub, then confirm on the official DSIRE database.

Payback math without the credit

Here is the honest arithmetic. When the 30% credit applied, a $21,000 system cost you $14,700 after tax. In 2026, net cost equals gross cost: $21,000, before any state help. Dividing a bigger number by the same annual savings gives a longer payback, about 35–45% longer in most real cases. A system that paid back in 8–11 years with the credit now takes roughly 11–15 years.

Two things soften that picture. First, state incentives now carry more weight: a 10% state credit, an SREC check or a sales tax exemption knocks years off the timeline. Second, payback is not the whole story. Panels typically last 25–30 years, so a 12-year payback still leaves well over a decade of near-free power. And if electricity rates keep rising, the real payback shortens. Run your own numbers with the Payback Calculator and the ROI Calculator; both now default to a $0 federal credit.

A full worked example

The Patel family in New Mexico gets a quote for a 7 kW system at $21,000 plus a 10 kWh battery at $11,000: a $32,000 project. Here is the same project completed in 2025 versus 2026:

The state credit survives, but the $9,600 federal piece is gone, so the family pays half as much again. That gap pushes them to look harder at the battery. Without the federal credit, an $11,000 battery has to earn its keep through backup value or savings under net billing. In a full-retail net metering area, dropping the battery and installing panels alone at $21,000, less the $2,100 state credit, brings the net to $18,900 and the payback back toward the low teens. Check storage economics with the Solar Battery Calculator and our battery worth-it guide.

Is solar still worth it without the credit?

For many homes, yes, just with less margin for error. The cases where it still pays well are clear:

• High electricity rates. In places like Hawaii, the bill savings are big enough that solar pays back fast even at full price.
• Strong state support. SREC states and states with their own credit recover part of what the federal credit used to cover.
• Full-retail net metering. Every exported kilowatt-hour is worth the retail rate, which keeps payback short.
• Long ownership. If you plan to stay 15 years or more, the post-payback years do the heavy lifting.

It is a harder call if you are in a low-rate state with net billing and no state credit, if your roof needs replacing within a few years, or if you might sell soon. In those cases, get two or three quotes, compare cash and loan offers against a lease that may carry the 48E value, and check what solar adds to resale in our home value guide. Our best states for solar in 2026 ranking is a quick way to see where you stand.

2026 solar buyer's checklist

1. Ignore any quote that subtracts a 30% federal credit from a 2026 purchase price. That number is out of date.
2. Ask for the cash price, loan price and lease/PPA price side by side, with total cost over the full term.
3. List every state and local incentive: state credit, SRECs, net metering terms, property and sales tax exemptions, utility rebates.
4. If you are offered a lease or PPA, ask about 48E and FEOC sourcing, and how the credit shows up in your rate.
5. Check HEAR eligibility if your project needs a panel upgrade or wiring and your income may be under 150% of your area median.
6. Run payback at $0 federal credit and decide whether a battery earns its keep where you live.
7. If you finished a system in 2025, claim the credit on Form 5695, or amend with Form 1040-X if you already filed without it.
8. Keep claiming any carryforward on each year's Form 5695 until it is used up.

Mistakes that now cost real money

• Trusting old marketing. Sales pages, mailers and even some calculators still show "30% back." For 2026 installs that is wrong.
• Leaving a 2025 credit unclaimed. If your system was completed in 2025, the full 30% is still yours. Don't skip Form 5695.
• Dropping the carryforward. Earlier credit you could not use is still valid. Make sure it appears on this year's return.
• Assuming a deposit locked in the credit. Only completion counts. A 2025 deposit on a 2026 install earns nothing federally.
• Counting on Solar for All. The program is in litigation after the EPA moved to terminate it. Treat it as unavailable unless funds are confirmed in writing.
• Overpaying for a battery you don't need. At full price, storage has to pay for itself. In full net metering areas it often doesn't.
• Signing a lease without reading the escalator. A 2.9% annual increase compounds over 20 years. Compare the total, not the first-year rate.