Solar Tax Credit in 2026: What Changed

If you’re pricing solar in 2026, the most important thing to understand is that the rules changed. For over a decade, homeowners who bought a solar system could subtract 30% of the cost from their federal taxes under the Residential Clean Energy Credit (Section 25D). That credit was repealed for purchased residential systems installed after December 31, 2025, as part of the July 2025 tax law often called the “One Big Beautiful Bill.”

The short version: if you buy solar with cash or a loan in 2026, there is no federal tax credit on your purchase. This guide explains exactly what changed, the exceptions that still exist, and how it affects the price you pay.

What the credit used to do

Under Section 25D, a homeowner who paid $30,000 for a system could claim a $9,000 credit against their federal income tax — cutting the effective cost to $21,000. It applied to panels, inverters, wiring, labor, permitting, and often battery storage. It’s why so much older advice quotes solar prices “after the 30% credit.”

That framing is now outdated for buyers. Any price you see described as “after the federal tax credit” for a 2026 purchase is wrong.

What changed in 2026

	Through 2025	2026 (buyers)
Federal credit if you buy (cash/loan)	30% (Section 25D)	None
Federal credit if you lease / PPA	Available	Still available (through 2027)
Battery storage credit for buyers	30%	None for purchased home systems
State incentives	Varies	Still vary — many unchanged

The residential purchase credit didn’t step down gradually — it ended for systems placed in service after December 31, 2025. So a system energized in December 2025 could claim it; the same system energized in January 2026 cannot.

Who still qualifies for a federal credit

Two categories still have access to federal support in 2026:

1. Third-party-owned leases and PPAs. When a solar company owns the panels on your roof and you either lease them or buy the power they produce (a PPA), the company — not you — owns the system. That company can claim the separate commercial clean-energy investment credit (Section 48E), which remains available through the end of 2027. This is why lease and PPA offers can look competitive in 2026: the installer captures a federal credit and can pass some of the savings into a lower monthly payment. The tradeoff is that you don’t own the system, and the long-term savings stay largely with the provider.

2. Commercial and utility-scale projects. Businesses, farms, and larger installations follow the commercial credit framework with their own phase-down timelines. If you’re a homeowner buying rooftop solar, this doesn’t apply to you — but it’s why you’ll still see headlines about solar “tax credits” that don’t reflect your situation.

State incentives are now the main lever for buyers

Federal is not the whole story. Many states run their own programs, entirely separate from the repealed federal credit:

• State income-tax credits (for example, Arizona and New York).
• Performance-based incentives that pay you over time for the power you generate (New Jersey, Massachusetts, Illinois).
• Property-tax exemptions so solar doesn’t raise your property tax (Florida, Texas, and many others).
• Sales-tax exemptions on equipment.
• Net metering / net billing, which determines how much your utility credits exported power — effectively a recurring incentive.

These vary widely and some have limited budgets, so confirm current terms with your state energy office. Our solar cost by state guide covers where the strongest programs are.

What this means for your cost

The equipment didn’t get cheaper, and losing the 30% credit means buyers pay meaningfully more out of pocket than they would have in 2025. A $28,000 system that would have cost $19,600 after the old credit now costs the full $28,000 to a cash buyer. Practically, that pushes typical payback periods from the old 7–10 year range out to roughly 10–15 years for most buyers. See our payback period guide and is solar worth it in 2026 for the full math.

Should you lease instead of buy?

Because leases and PPAs can still tap a federal credit through 2027, they’re worth comparing seriously in 2026 — but read the fine print:

• Buying costs more up front and gets no federal credit now, but you own the system and keep 100% of the savings and the added home value.
• Leasing/PPA lowers or eliminates the up-front cost and lets the provider claim the federal credit, but you don’t own the system, escalator clauses can raise your payment over time, and total lifetime savings are usually lower.

How to verify what applies to your situation

Because so much online content still assumes the old 30% credit, verify before you rely on any number:

1. Confirm your in-service date. The residential credit hinged on when the system was “placed in service,” not when you signed or paid. Systems energized on or before December 31, 2025 could still claim it; anything after cannot.
2. Identify how you’re paying. A cash or loan purchase gets no federal credit in 2026. A lease or PPA keeps the credit with the provider, who owns the system.
3. Look up your state’s programs. Search your state energy office for current solar incentives, and ask installers to name the specific programs they’re applying — then verify them independently.
4. Ask for it in writing. If a quote claims a federal credit for a 2026 purchase, treat it as a red flag and ask the salesperson to cite the specific provision. There isn’t one for buyers.

Why the change happened

The residential clean energy credit had been extended and expanded several times over the years, most recently under the 2022 climate law that set it at 30% through 2032. The July 2025 tax law reversed that schedule for residential purchases, ending the credit for systems installed after December 31, 2025. The commercial credit that leases and PPAs use was left on a later timeline, phasing down after 2027. The practical effect is a split market: buyers lost their subsidy immediately, while third-party ownership retained one for a couple more years — which is reshaping how solar is sold in 2026.

FAQ

Can I still get 30% off my solar taxes in 2026? No, not if you buy. The 30% residential purchase credit ended for systems installed after December 31, 2025.

Is the solar tax credit gone completely? Not entirely. It’s gone for homeowners who buy. Third-party-owned leases and PPAs can still use the federal commercial credit through the end of 2027, and commercial projects have their own timelines.

What if my system was installed in late 2025? If it was placed in service on or before December 31, 2025, it can still claim the old 30% residential credit on your 2025 taxes. Confirm the in-service date with your installer.

Do batteries still get a federal credit? For a purchased home system, no. A battery bought with your solar in 2026 gets no federal residential credit. Third-party-owned arrangements may still qualify under the commercial credit.

Are there any state credits left? Yes, in many states. State income-tax credits, performance payments, and property-tax exemptions are separate from the federal credit and still active in numerous states.

Does leasing really save the credit? The provider claims the credit, not you, and may pass part of it into your rate. You give up ownership and most long-term savings in exchange for a lower entry cost.

Run your 2026 numbers honestly

Because so much online advice still assumes the old credit, it’s easy to overestimate your savings. Our free solar cost calculator uses 2026 pricing with no federal credit applied for buyers, so you get a realistic out-of-pocket cost, savings, and payback — the number you’ll actually face.