The federal solar tax credit for homeowners is over: the 25D residential clean energy credit does not apply to expenditures made after December 31, 2025, under P.L. 119-21. If your system was fully installed in 2025 you can still claim it, and unused credit carries forward. If installation finishes in 2026 or later, you get no federal credit for buying the system, though third-party owners can still claim a business credit and state or utility incentives may apply. Here is what that means for the solar tax credit in 2026 and how to redo your payback math.
By the Solar Bid Analyzer research team · Updated November 2026
What ended: the 25D credit
The 25D credit was a nonrefundable credit worth 30% of system cost for homeowner-owned solar. The law now says it "shall not apply with respect to any expenditures made after December 31, 2025." The Congressional Research Service notes that an expenditure counts as made when the original installation is completed, not when you sign or pay a deposit. The IRS instructions for Form 5695 say the same: costs are treated as paid when installation is finished. So a 2025 deposit on a system that went live in 2026 does not qualify.
What still works for homeowners who finished in 2025
Because the credit is nonrefundable, any amount above your tax liability can be carried forward. CRS reports the law did not change that, and the IRS says unused credit can be carried to 2026 and that you should still file Form 5695 even if you cannot use any of it in 2025. If your system was completed by December 31, 2025, talk to a tax professional about your carryforward.
What is left in 2026
| Buyer or owner | Federal credit status in 2026 | What to know |
|---|---|---|
| Homeowner who buys (cash or loan), installed after 2025 | None under 25D | System cost is roughly 30% higher than it would have been with the credit, per EnergySage. |
| Homeowner who leases or signs a PPA | Provider may claim the commercial credit (Section 48E) | Provider owns the system and claims the credit; ask how any value reaches you through lower rates. |
| Business owner or commercial project | Section 48E commercial credit, subject to deadlines | Solar must begin construction by July 4, 2026 or be placed in service by December 31, 2027. |
| Prepaid lease or PPA | Same as third-party ownership | EnergySage reports prepaid options have averaged lower cost per kWh than cash purchase in first-half 2026 data. |
SEIA summarizes the business side this way: there is no phasedown, but solar projects must either begin construction by July 4, 2026 or be placed in service by December 31, 2027. Because July 4, 2026 has passed, a project today generally qualifies only if it already began construction, or if it will be in service by the end of 2027. Treasury's Notice 2025-42 tightened what counts as beginning construction for larger solar, eliminating the 5% safe harbor for projects above 1.5 MW AC, while smaller "low output" solar facilities keep it. Starting in 2026, foreign-entity restrictions also apply to projects claiming these credits.
The practical takeaway: a leased or PPA system can still carry a federal credit, but the owner claims it. You benefit only if the provider prices the contract accordingly. Compare with our guide to loan vs lease vs PPA and see the federal solar tax credit page for background.
Do batteries still qualify?
For homeowner purchases, no: the residential credit that covered storage ended with 25D, so a battery you buy in 2026 gets no federal homeowner credit. For third-party-owned systems, EnergySage notes storage can still be part of an ITC-eligible project. Ask any provider offering storage which entity owns it and what credit is being claimed.
How to re-run your payback
Old quotes and online calculators may still assume a 30% credit. Subtract it before you trust the payback number. The example below is illustrative only, using a $25,000 system (the CFPB cites about $25,000 as the average residential project cost) and an assumed $1,800 per year in bill savings. Your numbers will differ based on system size, utility rates, net metering rules and financing.
| Scenario (illustrative) | Net cost | Simple payback at $1,800/yr |
|---|---|---|
| With 30% credit (before 2026) | $17,500 | About 9.7 years |
| No credit (2026 purchase) | $25,000 | About 13.9 years |
| No credit plus $2,000 state or utility incentive | $23,000 | About 12.8 years |
Simple payback ignores financing cost, rate increases and degradation. Our solar payback period guide shows a fuller method, and is solar worth it covers the decision itself.
Ways to still lower the cost
- State and utility programs. Rebates, state credits and sales-tax exemptions vary by location; EnergySage cites Florida's sales-tax exemption as one example.
- Net metering and SRECs. Where available, these change how much a system earns.
- Third-party ownership. A lease or PPA may pass some of the provider's credit through lower rates.
- Competing bids. Without the credit, a price difference between quotes is a larger share of your decision.
Be skeptical of anyone still advertising a 30% federal credit on a 2026 homeowner purchase. That is a common red flag; see solar proposal red flags. Tax situations vary, so confirm with a tax professional.
If a quote still assumes a 30% credit, that is worth questioning. Ready to see how your own quote stacks up? Upload your solar quote for a free grade.
Frequently asked questions
Is there still a federal solar tax credit in 2026?
Not for homeowners who buy a system. The 25D credit ended for expenditures made after December 31, 2025. Third-party owners of leased or PPA systems may still claim the Section 48E commercial credit, and businesses can use it too, subject to construction and in-service deadlines.
Can I still claim the solar credit if I signed in 2025?
Only if installation was completed by December 31, 2025. The credit counts when the original installation is finished, not when you sign or pay a deposit. If it finished in 2026, the 25D credit is unavailable even if work began in 2025.
Can I carry forward unused solar tax credit?
Yes, for qualifying 2025 or earlier installations. The credit is nonrefundable, so the part you cannot use against your tax liability carries to later years, per the IRS and CRS. File Form 5695 even if you cannot use any this year, and confirm with a tax professional.
Do solar leases and PPAs still get a tax credit?
The provider that owns the system may claim the Section 48E commercial credit if the project meets the deadlines. You do not claim it yourself. Ask how the provider passes value to you and get the escalator and buyout terms in writing.
Does the end of 25D apply to batteries?
For homeowner purchases, yes: the residential credit that covered storage ended with 25D for expenditures after 2025. Batteries inside a third-party-owned system may still be part of a provider's business credit claim, so ask who owns the storage.
Sources
- SEIA — The clean energy provisions in the One Big Beautiful Bill (2025)
- Congressional Research Service — Expiration and Carryforward Rules for the Residential Clean Energy Credit (2025)
- IRS — Instructions for Form 5695
- Pierce Atwood — IRS issues new beginning of construction guidance for solar and wind (2025)
- EnergySage — Federal solar tax credit in 2026
- CFPB — Report on solar energy loans (2024)