The Federal Solar Tax Credit Is Gone in 2026 — Here's What Homeowners Need to Know

What Just Happened to the Federal Solar Tax Credit?

The federal residential solar Investment Tax Credit (Section 25D) — the 30% credit that made solar financially compelling for millions of homeowners — officially expired on December 31, 2025.

This was triggered by the One Big Beautiful Bill (OBBB), passed in July 2025, which ended the credit earlier than the original 2032 sunset date.

What This Means for 2026 Homeowners

If you installed solar and had your system placed in service (operational) by December 31, 2025, you still qualify for the 30% credit on your 2025 tax return. Unused credit can roll over to future tax years.

If your system was installed in 2026 or later, the federal residential credit is 0% — it no longer applies to homeowner-owned (cash or loan) systems.

What Incentives Still Exist?

Solar Leases & PPAs (still 30% through 2027)

Commercial solar companies that own leased systems can still claim a 30% credit under Section 48E through December 31, 2027. This means solar leases and PPAs remain financially attractive — the savings get passed to you through lower monthly payments.

Domestic Content Bonus

Projects using U.S.-manufactured components can earn an additional 10% credit (for commercial/lease structures). This is pushing installers toward American-made panels.

State-Level Incentives (still active)

State programs — SRECs, net metering, sales tax exemptions, property tax exemptions — are completely unaffected by the federal change. States like New Jersey, New York, and Massachusetts still offer substantial incentives.

Should You Still Go Solar in 2026?

Yes — but the math has changed. Without the federal credit, payback periods are longer (typically 8–12 years vs. 6–9 years previously). However:

• Electricity rates continue rising 3–5% annually
• Solar panel prices are at historic lows ($2.50–$3.50/watt)
• State incentives remain strong in the Northeast
• Systems still save $37,000–$154,000 over 25 years (EnergySage, 2026)

The Lease vs. Own Decision Has Shifted

With the ITC gone for owned systems, solar leases and PPAs are now more competitive than they were in 2023–2025. The 30% commercial credit still applies to leased systems through 2027, and installers are pricing leases aggressively.

Owned system (cash/loan): No federal credit, but you own the asset and capture all long-term savings

Leased system (PPA): $0 down, lower monthly payments, but no ownership or state tax credits

The right choice depends on your tax situation, state incentives, and how long you plan to stay in your home.