Solar Tax Credit 2025: What Changed in 2026?
- Sarah Lozanova
- Jul 15
- 8 min read
If you have been searching for answers on the solar tax credit for 2025 and 2026, you are not alone. The federal solar tax credit changed in a big way this year, and a lot of homeowners are trying to figure out what it means for them. Whether you already installed solar, you are mid project, or you are still deciding, this guide breaks down the residential solar tax credit rules, what the federal solar tax credit covers now, and how to actually claim it if you qualify.
For over a decade, GreenLancer has supported solar professionals nationwide with design, engineering, and permitting services. We've completed over 200,000 clean energy projects, helping installers adapt to policy shifts like the changing solar ITC. Now that the solar tax credit is ending, project timelines matter more than ever.
Is There Still a Solar Tax Credit in 2026?
Here is the short answer. The homeowner claimed Section 25D credit ended for new qualifying expenditures after December 31, 2025. If your system was completed by that deadline, you can still claim the credit on your 2025 tax return.
Previously earned but unused credit amounts can still carry forward into future years. Homeowners do not personally claim a credit on a leased or PPA financed system, but the company that owns that system may still qualify under a separate section of the tax code.
A few key facts to keep in mind:
The 30% Residential Clean Energy Credit generally applied to qualifying solar and battery expenditures for property placed in service by December 31, 2025.
No new Section 25D credit is available for homeowner owned systems placed in service in 2026 or later.
Unused credit from an eligible 2025 project can generally be carried into future tax years.
Leases and power purchase agreements may still connect to a federal credit, but it belongs to the system owner, not the homeowner.
The IRS confirms this directly on its Residential Clean Energy Credit page, which states the credit is not available for property placed in service after December 31, 2025.
Solar Tax Credit 2025 vs. 2026: What Changed
The table below shows the difference between what applied last year and what applies now for homeowner owned systems.
Question | 2025 | 2026 |
Can a homeowner owned system qualify for Section 25D? | Yes, if completed by the deadline | No new credit available |
Credit percentage | 30% | Not applicable for new homeowner owned systems |
Can earned credit carry forward? | Yes | Yes, for credit earned on eligible pre 2026 projects |
Can a lease or PPA provider use a federal credit? | Yes, potentially | Yes, potentially, subject to construction deadlines |
This comparison reflects the statutory language in 26 U.S. Code Section 25D, which governs the residential clean energy credit.
Why Did the Federal Solar Tax Credit End Early?
The residential solar tax credit was originally set to run at 30% through 2032 under the Inflation Reduction Act. That changed when the One Big Beautiful Bill Act was signed into law on July 4, 2025. The new law ended Section 25D nearly a decade ahead of its original schedule.
The commercial side of the tax code was not eliminated. Businesses and third party system owners can still access a separate credit under Section 48E, though it now comes with new sourcing and construction timing rules. SEIA's breakdown of the bill walks through these changes in more detail.
Installed Solar in 2025? How to Claim the Credit
If your system was completed in 2025, you can still claim the 30% credit when you file your federal return. The process runs through one specific tax form.
File Form 5695 with your federal tax return for the year your system was placed in service.
Include eligible costs such as equipment, labor, wiring, and permitting fees.
Keep your paid invoices, contracts, and any manufacturer certifications on file.
The credit is nonrefundable, meaning it cannot exceed your federal income tax liability for the year. However, it may still increase your refund if federal taxes were already withheld from your income.
For a full walkthrough, our step by step Form 5695 guide covers each line of the form. You can also review the official IRS Form 5695 instructions for line by line detail.
Need help with a solar repair or upgrade while you get your paperwork together? GreenLancer's repair team can help keep your system running at full output.
Can You Carry Forward an Unused Solar Tax Credit?
Yes. If your project qualified but your tax liability was not large enough to use the full credit in one year, the leftover amount generally carries into future tax years. This rule was not changed by the new law.
A Congressional Research Service summary confirms that carryforward rules for the credit remain intact, even though new expenditures are no longer eligible. Every household's tax situation is different, so it is worth reviewing your specific numbers with a tax professional.
What If You Signed a Solar Contract in 2025 but the System Was Completed in 2026?
This is one of the most common questions right now, and the answer depends on timing, not paperwork. Signing a contract or making a deposit in 2025 does not by itself guarantee eligibility.
The credit generally applies based on when the system was completed and placed in service, not when the contract was signed. A system placed in service by December 31, 2025, may qualify, assuming the project and expenses meet the other Section 25D requirements. If it was finished in 2026, the new Section 25D credit does not apply, even if you paid a deposit the year before.
The IRS covers this timing question in its home energy tax credit FAQ. Because individual project timelines vary, this is a good detail to confirm with a tax professional before you file.
Do Solar Batteries Qualify for a Tax Credit in 2026?
Battery eligibility follows the same deadline as solar panels. Here is how it breaks down.
A battery installed as part of an eligible 2025 project could qualify along with the rest of the system.
A standalone battery placed in service through December 31, 2025 could also qualify on its own.
A homeowner owned battery added in 2026 does not qualify for a new Section 25D credit.
A battery owned by a qualifying third party, such as a lease provider, may fall under different commercial credit rules.
Thinking about adding storage to an existing system? Our guide on adding a battery to an existing solar system covers sizing and planning, separate from the tax credit question. EnergySage's tax credit explainer also has helpful detail on how battery eligibility has shifted.
Can a Solar Lease or PPA Still Receive a Federal Tax Credit?
Yes, but not in the way most homeowners expect. In a lease or power purchase agreement, the solar company owns the system on your roof, not you. That means the company, not the homeowner, is the one who can claim a federal credit under Section 48E.
Some providers factor part of that benefit into lower monthly payments, but it is not an automatic dollar for dollar pass through. Before signing a lease or PPA, it helps to compare a few things closely.
Monthly payment amount and any annual rate escalators.
Buyout terms if you want to purchase the system later.
What happens to the agreement if you sell your home.
Total contract cost over the full term, not just the first year.
SEIA's page on the solar investment tax credit explains how the commercial credit works for third party owned residential systems, including current construction and placed in service deadlines.
State and Local Solar Incentives Available in 2026
The federal credit is gone for new homeowner owned systems, but it is not the only incentive on the table. State and local programs work differently from each other, so it helps to know which type you are looking at.
State tax credits reduce what you owe on your state return.
Rebates lower or reimburse part of your project cost upfront.
SRECs generate ongoing revenue based on how much power your system produces.
Property tax exemptions can prevent your home's assessed value from rising because of your solar system.
Sales tax exemptions reduce what you pay in tax at the time of purchase.
Net metering or net billing affects how much your utility credits you for power you send back to the grid.
Programs vary widely by state and utility. The DSIRE database is a solid starting point for checking what is available where you live. NerdWallet's solar tax credit overview and Kiplinger's guide to remaining energy tax credits both cover what is still available at the federal and state level.
What the Tax Credit Change Means for Existing Solar Owners
If you already have solar, the end of the residential credit does not change your equipment or your warranty. It does make it more important to keep your system running well, since a new purchase in 2026 no longer comes with the same federal offset.
A few things worth staying on top of:
Keep your warranty documents and installation records somewhere easy to find.
If your original installer closed, our guide on what to do if your solar company goes out of business covers your options.
Watch for inverter fault codes or drops in production, since catching issues early usually means a simpler fix.
Review your solar panel warranty coverage so you know what is still protected and for how long.
How Did the Solar Tax Credit Work Through 2025?
For a quick recap, the credit let homeowners subtract 30% of eligible solar and battery costs directly from what they owed in federal taxes. It had no dollar cap and no income limit. It was nonrefundable, meaning it could bring your tax bill to zero but not generate a payment back to you.
You can find the full technical requirements on ENERGY STAR's solar tax credit page, which lays out what qualified before the December 2025 cutoff.
Whether you are finishing up a 2025 claim or figuring out your next step for an existing system, GreenLancer's repair and battery retrofit teams are ready to help. Get in touch with our team to keep your solar investment performing the way it should.
Solar Tax Credit 2026 FAQ
Here are answers to the questions we hear most often about the current state of the solar tax credit.
Is there still a solar tax credit in 2026?
Not for new homeowner owned systems. The Section 25D credit ended for expenditures after December 31, 2025. Third party owned systems, like leases and PPAs, may still connect to a separate commercial credit.
Is the federal solar tax credit gone for good?
Under current law, homeowners cannot claim a new Section 25D credit for qualifying expenditures made after December 31, 2025. Congress could pass new legislation in the future, but nothing is scheduled or guaranteed at this time.
Can I claim the credit if I paid for solar in 2025 but installation finished in 2026?
Eligibility generally depends on when the system was completed and placed in service, not when you paid or signed. If your system was not finished by December 31, 2025, it likely does not qualify for the credit. Check with a tax professional to confirm your specific situation.
Can I carry forward my unused solar tax credit?
Yes, if you earned the credit on an eligible project before the deadline. Unused amounts can generally be applied to future tax years under current carryforward rules.
Is the solar tax credit refundable?
No. It is nonrefundable, which means it can reduce your tax bill to zero but will not generate a refund beyond your total tax liability for the year.
Do solar batteries qualify in 2026?
A homeowner owned battery installed in 2026 does not qualify for a new Section 25D credit. Batteries completed as part of an eligible 2025 project, or owned by a qualifying third party, may be treated differently.
Can I claim the credit for a solar lease or PPA?
No. In a lease or PPA, the system owner, not the homeowner, is the one eligible to claim a federal credit. Some providers reflect part of that value in your monthly payment.
Can I amend a previous tax return to claim the solar credit?
In some cases, yes, if you missed claiming an eligible credit from a prior year. A tax professional can walk you through whether an amended return makes sense for your situation.
Will the federal solar tax credit come back?
There is no current legislation scheduled to reinstate it. Industry groups continue to advocate for its return, but homeowners should plan around today's rules rather than a future possibility.
Are state solar incentives still available?
Yes. State tax credits, rebates, SRECs, and net metering programs are independent of federal law and vary by location. Checking a resource like DSIRE is a good way to see what applies in your state.
Whether you're a solar contractor looking for fast, code-compliant permit plan sets or a homeowner in need of expert solar repairs or upgrades, GreenLancer has you covered. Our U.S.-based team and nationwide network of licensed professionals deliver reliable support for every stage of your solar projects.