The Federal Solar Tax Credit Ended in 2025 — What Homeowners Need to Know for 2026

What Actually Changed

The One Big Beautiful Bill Act amended Section 25D of the tax code to end the residential credit for systems placed in service after December 31, 2025. Unlike the original phase-down schedule in the Inflation Reduction Act — which would have stepped the credit down gradually through 2035 — this was an immediate, full termination with no transition period.

• Before: 30% credit on total system cost (panels, inverter, labor, permitting, battery storage), scheduled through 2032 with a gradual step-down after
• Now: No federal credit for residential systems placed in service in 2026 or later
• Who it hits: Homeowners who buy their system outright or finance it with a loan — the ownership model the credit was built for
• What it doesn't touch: State tax credits, utility rebates, net metering policies, and property/sales tax exemptions are unaffected — those come from separate state and local laws, not Section 25D

What the Credit Used to Be Worth

For context on just how big this change is, here's what homeowners used to get back on a typical system before the credit ended:

That's a real difference — on an $18,000–$25,000 system, homeowners installing in 2026 are paying $5,400–$7,500 more out of pocket than someone who installed the same system in 2025.

Who This Affects — and Who It Doesn't

The expired credit was always tied to ownership: you had to buy the system (cash or loan) and have federal tax liability to use it. That shapes who feels this change most:

• Cash buyers and loan financers: Hit hardest — you now pay the full installed cost with no federal offset.
• Leases and PPAs: The homeowner never claimed the residential credit in these arrangements anyway — the leasing company owned the system and claimed it. Commercial installers can still claim a separate 30% credit (Section 48E) on systems they own and lease out, through 2027 under current law, and may pass some of that value through in lower lease or PPA payments. Ask an installer directly whether their pricing reflects that.
• Businesses installing solar on commercial property: Unaffected — the commercial Investment Tax Credit under Section 48E is a separate program from the residential Section 25D credit this article covers.

What Solar Incentives Still Exist in 2026

The federal residential credit is gone, but it was never the only incentive. What's left varies a lot by state — check these before assuming solar no longer pencils out:

• Net metering: Most states still require utilities to credit you for excess solar power sent to the grid — this has nothing to do with the federal credit and wasn't touched by its expiration.
• State tax credits and rebates: Programs like NY-Sun (New York), the SMART program (Massachusetts), and SGIP battery rebates (California) are state-level and remain in place as of 2026 — eligibility and amounts vary, so check your state energy office.
• Property and sales tax exemptions: Many states still exempt the added home value from solar from property tax assessments, and some exempt solar equipment from sales tax entirely.
• Utility-specific programs: Some utilities offer their own rebates or performance payments independent of state or federal policy.

Use our solar cost calculator to see your installed cost with current 2026 assumptions — it no longer applies the expired federal credit, so the number you get is the real price before any state or utility incentive you might still qualify for.

What This Means If You're Considering Solar in 2026

Going solar in 2026 still saves most homeowners money over the life of the system — it just takes longer to pay back without the federal credit. A few things worth doing before you sign a contract:

• Get the full installed price, not a number that assumes a federal credit that no longer applies to your purchase — some installers may still be quoting stale numbers.
• Ask your installer directly what state, utility, or local incentives apply in your specific location, since these vary by zip code, not just by state.
• If you're comparing a lease or PPA to buying, ask the provider whether their pricing reflects any commercial credit they're still eligible to claim — that can change which option actually saves you more now that ownership no longer carries the federal credit.