Federal Solar Tax Credit 2026: What Homeowners Need to Know After the Expiration

Important Update: The Residential Solar Tax Credit Has Expired

As of December 31, 2025, the federal residential solar Investment Tax Credit (Section 25D) has expired and is no longer available to homeowners who install new solar systems in 2026. This is a significant change from prior years, when homeowners could deduct 30% of their solar system cost from their federal taxes. The expiration was confirmed following the passage of the Big Beautiful Bill Act in July 2025. Homeowners who installed solar before December 31, 2025 and have not yet filed their 2025 taxes may still be able to claim the credit for that installation.

What Incentives Are Still Available in 2026?

While the federal residential credit is gone, several other incentives remain available to homeowners in 2026:

• State tax credits: Many states — including California, New York, Arizona, Hawaii, and others — still offer their own solar tax credits ranging from 10–35% of system cost.
• Utility rebates: Many local utilities offer cash rebates for solar installations, typically $200–$1,000 per system.
• SREC programs: States like New Jersey, Massachusetts, and Maryland have Solar Renewable Energy Certificate programs that pay you ongoing income for the electricity your panels produce.
• Net metering: Most states still require utilities to credit you for excess solar power sent to the grid, reducing your monthly bill.
• Property tax exemptions: Many states exempt the added home value from solar from property tax assessments.
• Commercial ITC (Section 48): If you own a business, the commercial solar tax credit remains available through 2027. Ask your accountant about commercial solar options.

Does Solar Still Make Financial Sense Without the Federal Credit?

Yes — for most homeowners with monthly bills over $100, solar still delivers strong returns in 2026 even without the federal credit. The payback period is longer (typically 9–12 years vs. 7–9 years with the credit), but 25-year returns remain substantial. Falling panel prices, rising electricity rates, and state-level incentives continue to make solar a sound investment in most markets. Use our free calculator to see your personalized numbers.

If You Installed Solar in 2025, You May Still Qualify

If your solar system was installed and operational before December 31, 2025, you can still claim the 30% credit on your 2025 federal tax return (filed in spring 2026). File IRS Form 5695 with your 2025 return. If your credit exceeds your 2025 tax liability, you can carry the unused portion forward to your 2026 return. Consult a tax professional to confirm your eligibility.