Solar tax credit 2026: did the 30% federal credit expire?

Yes. The 30% federal solar tax credit for homeowners ended with 2025. The Residential Clean Energy Credit (IRC §25D) does not apply to expenditures made after December 31, 2025, a change made by the One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025). If you buy a system and its installation is completed in 2026, your federal credit is $0, whether you pay cash or take out a loan.

Two groups still have something federal to think about in 2026: people who finished a system in 2025 but couldn’t use the whole credit, and anyone considering a lease or power purchase agreement. Both are covered below.

What exactly ended

§25D was a dollar-for-dollar reduction of your federal income tax equal to 30% of the cost of a system you owned. On a $20,000 install it was worth $6,000. The 2022 Inflation Reduction Act had scheduled that 30% to run through 2032 before stepping down. The 2025 law cut it off early.

The same law ended the separate energy-efficiency home improvement credit (§25C) for property placed in service after December 31, 2025, so heat pumps, windows, and insulation installed this year don’t get a federal credit either.

The date that counts: installation completed

This is where people get caught. Under §25D, an expenditure is treated as made when the original installation is completed. Signing a contract, paying a deposit, or even paying in full in 2025 doesn’t matter if the crew finished in 2026.

The IRS answered the exact question in its August 2025 FAQ (FS-2025-05): a system paid for in 2025 but installed after December 31, 2025 is treated as an expenditure made after that date, and it does not qualify. If you’re unsure, the date to look for is the one on which installation was completed. Your installer’s job completion paperwork and the utility’s permission-to-operate letter usually narrow it down; a tax professional can tell you which date your return should rely on.

Leftover credit from 2025? You can still use it

If your 2025 system’s credit was bigger than your 2025 tax bill, you don’t lose the difference. The 2025 Form 5695 instructions let you carry the unused portion of the credit to your 2026 return (line 16 of the form). The law ended the credit for new expenditures; it didn’t cancel amounts you already earned.

A quick example: a $30,000 system completed in October 2025 created a $9,000 credit. If your 2025 federal tax liability was $5,500, you used $5,500 last year and carry $3,500 into 2026. Keep the 2025 Form 5695 with your records; your preparer will need it.

Leases and PPAs: where the federal subsidy went

If a solar company owns the panels on your roof and sells you the power (a PPA) or rents you the system (a lease), the company, not you, claims the credit. It uses the commercial Clean Electricity Investment Credit (§48E), which the 2025 law kept for third-party-owned solar under two alternative deadlines. A project qualifies if either:

• construction began by July 4, 2026, or
• it is placed in service by December 31, 2027.

The law also added a rule (§48E(i)) that denies the credit for certain leased residential equipment. It covers leased solar water heating and small wind property. Leased rooftop solar panels, the kind most homeowners are offered, were not included, according to the statute and Grant Thornton’s review of the law.

There’s a second filter. For projects starting construction after December 31, 2025, the company must meet new “prohibited foreign entity” sourcing rules on its equipment. Treasury’s interim guidance (Notice 2026-15, February 2026) is still being filled in, which is one reason some lease providers have been cautious in 2026.

What this means for you in practice:

• The credit belongs to the company. No rule makes it share the value with you. Some of it may show up as a lower monthly payment or per-kWh rate, but only competition puts it there.
• Compare the contract, not the pitch. Get in writing the starting payment or rate, the annual escalator (2.9% a year compounds to about 2x over 25 years), what happens when you sell the house, and the buyout price.
• Ask how the project qualifies. A provider should be able to tell you whether your system is covered by equipment or construction it already started, or whether it’s counting on being in service by the end of 2027.

The loan vs lease vs cash guide runs the numbers for all three paths.

How much the lost credit changes your payback

The effect is easy to estimate: the credit you no longer get, divided by your annual bill savings. On a $20,000 system:

Simple payback, before state incentives, financing costs, or rate increases. The lower your savings, the more the missing credit hurts, which is why the loss stings most in states with cheap electricity or weak export credit.

That doesn’t make solar a bad decision everywhere. In high-rate states such as Massachusetts, New York, and New Jersey, the 25-year economics still work for many homes. But the right way to judge a 2026 project is with 2026 numbers. The solar savings calculator uses a 0% federal credit for owned systems by default, and the incentives by state guides show what your state still offers, from Arizona’s 25% state credit (capped at $1,000) to New York’s 25% credit (capped at $5,000).

Will Congress bring it back?

Not soon, as far as the record shows. Two Senate bills would restore the residential credit:

• S. 2681, the Lowering Electric Bills Act (introduced August 2, 2025), would extend §25D through 2034 and remove the new limits on §48E.
• S. 3722, the Lowering Home Energy Costs Act (introduced January 29, 2026), would extend §25D through 2032 and restore §25C.

Both were referred to the Senate Finance Committee, and as of October 2026 neither had become law. If one passes, we’ll update this page; until then, plan around $0.

Bottom line

For a system you own, the 30% federal credit is gone for any installation completed after December 31, 2025, including systems paid for in 2025 and finished later. Unused 2025 credit carries into your 2026 return. Leases and PPAs can still carry a commercial credit, but it belongs to the company, so judge those deals by the contract terms. If a quote, ad, or calculator subtracts 30% from a 2026 purchase, it’s out of date. Confirm your own situation with a tax professional, and read the solar panel buying guide before you sign anything.