Federal solar tax credit 2026: 25D ended for systems finished after 2025. See who can still claim, carryforwards, leases, PPAs and state credits.
The federal solar tax credit 2026 answer is short: for a system you own, it is gone. As of October 2026, the 30% Residential Clean Energy Credit (25D) does not apply to solar panels or batteries whose installation was completed after December 31, 2025. Systems finished in 2025 still qualify, and leftover credit can carry forward.
That one change touches almost every solar decision this year: payback, how quotes are built, whether a loan still fits and how leases are priced. This guide explains exactly what ended, who can still benefit, what happens with leases and PPAs, and which state credits remain.
Not for homeowners who buy a system installed in 2026. Public Law 119-21, signed July 4, 2025, ended the 25D credit for expenditures made after December 31, 2025. Companies that own leased or PPA systems can still claim a separate business credit under section 48E, subject to deadlines and sourcing rules.
The law's enrolled text (opens in a new tab) amends section 25D so the credit does not apply to "any expenditures made after December 31, 2025." It also removed the old step-down schedule, so the rate stayed at 30% through 2025 instead of falling to 26% and 22% in later years. The IRS Residential Clean Energy Credit page (opens in a new tab) now states that the credit is not available for property placed in service after December 31, 2025.
The related 25C credit for energy-efficient home improvements ended at the same time, for property placed in service after December 31, 2025, per the IRS.
The IRS treats the expense as made when original installation is completed. In its August 21, 2025 FAQ (FS-2025-05), the IRS was asked whether paying in 2025 for a system installed in 2026 qualifies. Its answer was "No." For a newly built home, the expense counts when you begin using the home.
The IRS FAQ on the 2025 law changes (opens in a new tab) bases this on section 25D(e)(8)(A). A signed contract, a deposit, a delivered pallet of panels or a permit doesn't change the date. What counts is a completed installation.
If your project straddled the new year, look at your paperwork. The installer's completion certificate, final inspection sign-off and the date the system was ready to operate help show when installation was completed. Keep those documents with your tax records in case of questions.
Homeowners whose installation was completed between January 1, 2022 and December 31, 2025 can claim 30% of qualified costs. A 2025 installation goes on Form 5695 with your 2025 federal return. Battery storage qualified if it had at least 3 kWh of capacity, per the IRS Form 5695 instructions.
The 2025 return was due April 15, 2026, or October 15, 2026 with an extension. If you missed the credit on a return you already filed, you can generally file an amended return (Form 1040-X) with Form 5695 attached. The IRS sets time limits on refund claims, so act soon and consider a tax professional.
Qualified costs include panels, inverters, mounting, wiring and labor for installation, plus qualifying batteries. The IRS says loan interest and origination fees don't count. It also says traditional roofing that only supports panels doesn't qualify, while solar shingles that generate power do.
The IRS says public utility subsidies for buying or installing clean energy property are subtracted from your qualified costs. Net metering credits for power you send to the grid are not. Many state incentives are also not subtracted unless they qualify as a purchase-price rebate under federal tax law.
Here is how the numbers work for systems completed in 2025, computed with our solar tax credit calculator:
| Scenario | Qualified cost | 30% credit | Federal tax that year | Used in 2025 | Carried forward |
|---|---|---|---|---|---|
| 7.7 kW solar, completed Nov 2025 | $24,000 | $7,200 | $5,000 | $5,000 | $2,200 |
| Solar plus 13.5 kWh battery, completed Dec 2025 | $38,000 | $11,400 | $4,000 | $4,000 | $7,400 |
| Same solar, completed Jan 2026 | $24,000 | $0 | $5,000 | $0 | $0 |
The 25D credit is nonrefundable, so it can't exceed the tax you owe. Any unused part carries forward. The 2025 Form 5695 instructions say the form is used to carry the unused portion of the credit to 2026. Your 2026 return can use that balance even though new installations no longer qualify.
In the second example above, the household owes $4,000 a year in federal income tax. If that stays the same, it uses $4,000 in 2025, $4,000 in 2026 and the last $3,400 the following year. The Form 5695 instructions (opens in a new tab) explain how to carry the balance and how to figure the credit limit.
| Tax year | Credit used |
|---|---|
| 2025 | $4,000 |
| 2026 | $4,000 |
| 2027 | $3,400 |
Source: Worked example (solar plus battery completed Dec 2025); carryforward rules per IRS Instructions for Form 5695 (as of 2026-10)
As of October 2026, we found no IRS statement setting a final year for using a 25D carryforward. Don't assume a specific limit either way. If your carryforward is large compared with your yearly tax, a tax professional can plan how and when you will use it.
With a lease or power purchase agreement (PPA), the company owns the system, so it, not you, may claim a federal business credit under section 48E. Solar facilities must begin construction by July 4, 2026, or be placed in service by December 31, 2027, and must meet foreign-entity sourcing rules.
The rules, from Public Law 119-21 and IRS guidance as of October 2026:
Leasing companies built these rules into their prices well before the deadlines. The Department of Energy's homeowner guide notes that only owners can claim tax benefits. Whether any credit value reaches you shows up only in your monthly payment or per-kWh price, so judge leases and PPAs on total 20- or 25-year cost. Our solar lease vs buy calculator compares them side by side, and our guide to solar lease vs PPA vs loan explains the contract terms.
It adds roughly three years to payback in a typical example. A $24,000 system with $1,890 of first-year savings pays back in about 8.5 years with the 30% credit and about 11.6 years without it, using our payback model with 3% rate increases, 0.5% yearly panel loss and $100 a year of upkeep.
| Item | Completed in 2025 (with 25D) | Completed in 2026 (no 25D) |
|---|---|---|
| Price before incentives | $24,000 | $24,000 |
| Federal credit | $7,200 | $0 |
| Net cost | $16,800 | $24,000 |
| Payback | about 8.5 years | about 11.6 years |
Over 25 years, the same model puts the system about $37,930 ahead without the credit, versus about $45,130 with it. Three years longer is a real change, but it doesn't make solar a bad idea everywhere. Price per watt, sunshine, your electricity rate and how your utility credits exports still decide most of the outcome. Our guide to whether solar panels are worth it walks through those levers state by state.
| Years after installation | Completed 2026, no credit | Completed 2025, 30% credit |
|---|---|---|
| 0 | -$24,000 | -$16,800 |
| 5 | -$14,569 | -$7,369 |
| 10 | -$3,840 | $3,360 |
| 15 | $8,354 | $15,554 |
| 20 | $22,207 | $29,407 |
| 25 | $37,933 | $45,133 |
Source: Worked example: $1,890 first-year savings, 3% rate growth, 0.5%/yr panel loss, $100/yr upkeep; credit rules per IRS FS-2025-05 (as of 2026-10)
The credit's end also affects financing. Many solar loans were designed around a large paydown at month 18, funded by the tax refund. Without that refund, those loans can jump in price. Our guide to how solar loans work explains what to look for in 2026.
Yes, in some states. As of October 2026, New York offers a credit of 25% of equipment costs up to $5,000, South Carolina 25% with a yearly cap, Arizona 25% up to $1,000, and Massachusetts 15% up to $1,000. Each has its own rules, forms and carryforward periods.
up to $5,000; 5-year carryover
yearly cap: lesser of $3,500 or 50% of state tax
up to $1,000 per residence
up to $1,000
Source: NY Dept. of Taxation and Finance; SC Dept. of Revenue; Arizona Form 310; Mass.gov (as of 2026-10)
| State | Credit | Cap | Unused credit |
|---|---|---|---|
| New York | 25% of qualified equipment costs | $5,000 | Carries over up to 5 years |
| South Carolina | 25% of costs | Each year, the lesser of $3,500 or 50% of your state tax | Carries forward up to 10 years |
| Arizona | 25% of cost (Form 310) | $1,000 per residence | Carries forward up to 5 years |
| Massachusetts | 15% of cost | $1,000 | Check state rules |
The New York Department of Taxation and Finance (opens in a new tab) confirms the 25% rate, the $5,000 limit and the five-year carryover. The South Carolina Department of Revenue (opens in a new tab) runs that state's credit. For example, on a $24,000 system in South Carolina, the $6,000 credit would be used at $2,500 a year over three years by a household with $5,000 of state tax.
State credits don't depend on the federal credit, so they still apply to 2026 installations if you meet each state's rules. Our guide to solar incentives by state covers property and sales tax exemptions, rebates and export programs too.
Plan as if there is no federal credit, because for an owned system installed in 2026 there isn't one. Price the system on its full cost, compare it against state incentives and your utility's export rules, and use the 25D credit only for installations that were completed in 2025.
A short checklist:
Not for homeowners who buy a system that is installed in 2026. As of October 2026, the 30% Residential Clean Energy Credit (25D) ended for expenditures made after December 31, 2025, under Public Law 119-21. Companies that own leased or PPA systems may still claim a separate business credit.
No. The IRS says an expenditure counts as made when the original installation is completed, and it answered this exact question with "No" in its August 2025 FAQ (FS-2025-05). The payment date doesn't matter if installation finished in 2026.
Use Form 5695 with your 2025 federal return. If you filed without it, you can generally file an amended return (Form 1040-X) with Form 5695 attached; the IRS sets time limits for refund claims, so don't wait. A tax professional can check your figures.
Yes. The credit is nonrefundable, so if it was larger than your 2025 tax, the 2025 Form 5695 instructions let you carry the unused part to 2026. The IRS hasn't published a clear final year for using carryforwards, so ask a tax professional if your balance is large.
Batteries you own that were installed in 2025 qualified at 30% if they had at least 3 kWh of capacity. Batteries installed in 2026 that you own do not. Batteries owned by a leasing company fall under the business credit rules, which treat storage differently from solar and run longer.
The company that owns the system may, under section 48E, if it meets construction-start or in-service deadlines and foreign-entity sourcing rules. You don't claim anything. Whether any of that value reaches you depends on the price in your contract, so compare offers on total cost.
Usually yes. The IRS says public utility subsidies for buying or installing clean energy property are subtracted from qualified expenses. Net metering credits for power you send to the grid don't reduce them, and many state incentives aren't subtracted unless they count as a purchase-price rebate.
Ask for a corrected quote in writing that shows the full price with no federal credit. For a system you own that is installed in 2026, there is no 25D credit. The Treasury Department warns consumers to be wary of anyone who promises tax credits without confirming eligibility.
Solar incentives by state for 2026: state tax credits, property tax exemptions, rebates, SRECs and the export rules that matter most now that 25D is gone.
Solar lease vs PPA vs loan vs cash in 2026: how each works, 25-year costs, escalators, home-sale rules and what the end of the 25D credit changes.
Are solar panels worth it in 2026 now the 30% tax credit is gone? See real payback math by state, the export credit effect and when solar doesn't pay.
How solar loans work in 2026: monthly payments, hidden dealer fees, the month-18 paydown trap and why loans built around the tax credit no longer fit.
