The federal solar tax credit no longer applies to systems installed in 2026. The Residential Clean Energy Credit (Section 25D) — which had given homeowners back 30% of the cost of a solar panel installation — was repealed for residential property placed in service after December 31, 2025, by the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025. The credit was originally scheduled to run at 30% through 2032, but OBBBA ended it about seven years early. If you’re shopping for solar in 2026, don’t budget for this credit.
Quick answer: No federal tax credit for residential solar, battery storage, or geothermal installed in 2026. If your system was placed in service on or before December 31, 2025, you can still claim the 30% credit on that year’s return. Check state and utility incentives separately — those are unaffected by the federal change.
What Changed
| Detail | Before OBBBA | After OBBBA (current law) |
|---|---|---|
| Credit rate | 30% through 2032, then 26% (2033), 22% (2034) | N/A — credit repealed for residential property |
| Last date to qualify | December 31, 2034 (fully phased out) | December 31, 2025 |
| Cap | None | N/A |
| Applies to | Solar panels, battery storage, solar water heating, geothermal heat pumps, small wind, fuel cells | Same categories — but only if placed in service by Dec 31, 2025 |
If You Installed Before January 1, 2026
If your solar or qualifying clean energy system was placed in service on or before December 31, 2025, you can still claim the 30% credit on your 2025 federal return (the one filed in early 2026). The historical rules still apply to that claim:
- You must own the system. Leased panels or power purchase agreements (PPAs) never qualified for the homeowner credit — the leasing company claimed it instead.
- The credit covers equipment, labor, wiring, permits, and inspection fees for solar panels, solar water heaters, battery storage (3+ kWh, no solar required since August 2022), geothermal heat pumps, small wind turbines, and fuel cells.
- Unused credit carries forward. If the credit exceeds your 2025 tax liability, the unused portion still carries forward to future years, even though the credit itself no longer accrues on new installations.
- File Form 5695, Part I, with your 2025 return to claim it.
Why the Credit Ended
The Residential Clean Energy Credit was created by the Inflation Reduction Act of 2022, with a 30% rate scheduled to run through 2032 before stepping down to 26% (2033) and 22% (2034). The One Big Beautiful Bill Act, signed July 4, 2025, repealed the credit for individual homeowners’ residential property placed in service after December 31, 2025 — years ahead of the original schedule. This is a similar pattern to the federal EV tax credit, which OBBBA also terminated early (for vehicles acquired after September 30, 2025).
What’s Still Available
| Option | Status in 2026 |
|---|---|
| Federal residential solar credit (Section 25D) | Ended for property placed in service after Dec 31, 2025 |
| Federal commercial/utility-scale solar credit (Section 48E) | Remains available, but applies to businesses and large-scale projects — not homeowners |
| State solar tax credits and rebates | Vary by state; unaffected by the federal repeal — check your state energy office |
| Utility net metering and rebate programs | Vary by utility; unaffected by the federal repeal |
| Property tax exemptions for added solar value | Many states still exempt solar from property tax reassessment — check local rules |
Rethinking the Solar Math for 2026
Before the repeal, a typical $20,000–$25,000 residential system came with a $6,000–$7,500 federal credit, meaningfully shortening the payback period. Without that credit, the same system costs $6,000–$7,500 more out of pocket, which extends the payback period and changes the buy-vs-lease comparison. Before committing to a purchase in 2026:
- Get current quotes that clearly separate equipment cost, installation, and any remaining state or utility incentives.
- Recalculate the payback period using your actual electricity costs and the full system price — without assuming a federal credit.
- Compare lease and PPA offers on their current terms, since the competitive advantage of ownership shrank when the residential credit disappeared.
- Check whether your state or utility increased its own incentives in response to the federal change — some states have expanded programs to offset the loss.
Does Installing Solar Still Affect Property Taxes or Home Value?
Adding solar typically still increases resale value, and many states — including California, Florida, Arizona, and New York — continue to exempt solar installations from property tax reassessment, independent of the federal credit’s status. Check your state’s specific rules, since this benefit did not change under OBBBA.
Related Articles
- EV Tax Credit Guide 2026 — the federal EV credit ended on a similar timeline
- Energy Efficient Home Improvement Credit 2026 — the companion 25C credit also ended after 2025
- Home Office Tax Deduction 2026
- Tax Deductions for Homeowners 2026
- Federal Income Tax Brackets 2026
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