Solar Tax Credit 2026: What's Actually Still Available

If you've been researching solar and keep seeing "30% federal tax credit," you're reading outdated content. That credit ended for homeowner-purchased systems on December 31, 2025. Here's what's actually true in 2026, and what you can still get.

What changed on January 1, 2026

The Residential Clean Energy Credit — Section 25D of the tax code, commonly called the solar Investment Tax Credit (ITC) — let homeowners who bought a solar system with cash or a loan claim 30% of the total installed cost back on their federal taxes. It had no cap and could be rolled forward if you didn't owe enough tax to use it all in one year. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, repealed Section 25D for any expenditures made after December 31, 2025 — with no phase-down period. If you completed and paid for a qualifying installation by that deadline, you can still claim the credit on your 2025 tax return using IRS Form 5695. If your system goes into service in 2026 or later as a cash or loan purchase, the federal credit for that system is $0.

The one path that still works: leases and PPAs

There's a meaningful exception. Section 48/48E of the tax code — the commercial Investment Tax Credit — was not eliminated in the same way, and it applies to systems owned by a business rather than a homeowner. In a solar lease or Power Purchase Agreement (PPA), the financing company technically owns the panels on your roof and sells you the electricity (or leases you the equipment) at a fixed rate. Because the company is the owner, it can still claim the 30% commercial credit and typically passes some of that value through as a lower monthly payment. There's a real deadline pressure here too: projects need to begin construction by July 4, 2026 to lock in the safe-harbor eligibility under the current rules, so if a lease/PPA quote leans on this incentive, ask your installer directly how they're securing eligibility.

The trade-off: you don't own the system, so you don't get the property-value bump some cash buyers see, and buyout terms at the end of a lease vary a lot by contract. Read the escalation clause (many PPAs raise your per-kWh rate 1-3% annually) before signing.

What's left for cash and loan buyers

Losing the federal credit is real money — on a typical $22,000-$28,000 system it was worth $6,600-$8,400. But it's not the only incentive left standing:

• State tax credits. A handful of states still run their own income tax credit on top of (or instead of) the old federal one — South Carolina (25%, capped), New York (25%, capped at $5,000), Arizona (25%, capped at $1,000), New Mexico (10%, capped), Montana, Utah, Iowa, and Massachusetts among others. See our state-by-state guide for specifics.
• Sales and property tax exemptions. Most states still exempt solar equipment from sales tax and exclude the added home value from property tax reassessment — this alone is often worth several hundred to a few thousand dollars and wasn't touched by the federal repeal.
• SRECs (Solar Renewable Energy Certificates). In SREC market states — New Jersey, Illinois, Pennsylvania, Maryland, Massachusetts, DC — your system generates certificates you can sell for ongoing income for years after installation, independent of any tax credit.
• Net metering. Most states still require utilities to credit exported solar power, which is the mechanism that actually pays your system back over time — this wasn't part of the federal tax code change at all.
• Utility rebates. Programs like Illinois Shines, NY-Sun, and various municipal utility rebates pay cash incentives independent of your tax situation.

Does solar still make financial sense without the federal credit?

For most homeowners, yes — just with a longer payback window. Solar electricity typically costs the equivalent of $0.06-$0.09/kWh over the system's 25-30 year life once it's paid off, compared to grid rates that are usually $0.12-$0.30+/kWh and have historically risen 3-5% a year. Without the federal credit, a system that used to pay for itself in 6-9 years in a high-incentive state might now take 9-13 years; in a low-incentive, low-electricity-rate state it can stretch past 15. Run your specific state's numbers on our cost calculator before assuming either way.

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