Federal Solar Tax Credit Expired: What Homeowners Need to Know in 2026
The 30% federal solar tax credit (25D) expired December 31, 2025. Here's exactly what changed, who can still claim it, what incentives remain, and whether solar still pays off in 2026.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) terminated the 30% federal residential solar tax credit — Section 25D — effective December 31, 2025. There was no phase-down and no grace period: a credit that had been scheduled to run through 2034 ended abruptly, mid-decade, with about six months' notice.
For homeowners, this was the single biggest change to solar economics in over a decade. A credit worth roughly $9,000 on a typical $30,000 system disappeared overnight. This guide covers exactly what expired, who can still claim something, what incentives survive in 2026, and — most importantly — whether solar still makes financial sense without federal help.
⚠️ What expired vs. what's still active (updated July 2026)
❌ 25D residential solar & battery credit (30%) — expired Dec 31, 2025 ❌ 25C heat pump, insulation & efficiency credit — expired Dec 31, 2025 ❌ 30D new EV credit ($7,500) and 25E used EV credit ($4,000) — expired Sep 30, 2025 ❌ 30C home EV charger credit (30%, up to $1,000) — expired Jun 30, 2026 ✅ 48E credit for leased solar / PPAs — installer claims it, active through 2027 ✅ HEAR / HOMES state-administered rebates — still active, income-based, varies by state ✅ State tax credits, rebates, net metering, SRECs, property & sales tax exemptions — unaffected
The Full Expiration Timeline
The OBBBA staggered the sunset dates, which caused real confusion in late 2025. Here is the complete picture:
| Credit | What it covered | Last day to qualify |
|---|---|---|
| 30D — New EV credit | Up to $7,500 on qualifying new EVs | September 30, 2025 |
| 25E — Used EV credit | Up to $4,000 on used EVs | September 30, 2025 |
| 25D — Residential Clean Energy | 30% of solar, battery, geothermal | December 31, 2025 |
| 25C — Energy Efficient Home Improvement | 30% of heat pumps, insulation, windows (capped) | December 31, 2025 |
| 30C — Alternative Fuel Refueling | 30% of home EV charger install, up to $1,000 | June 30, 2026 |
| 48E — Clean Electricity Investment (commercial) | Third-party-owned residential systems (lease/PPA) | Solar placed in service by end of 2027 |
Note the last row: 48E is the reason leased solar still carries an effective federal subsidy in 2026 — more on that below.
Who Can Still Claim the 25D Credit
Two groups have not lost anything:
1. You completed installation in 2025. If your system was installed and operational by December 31, 2025, you claim the full 30% credit on your 2025 tax return using IRS Form 5695. If your tax liability is smaller than the credit, the unused portion carries forward to future tax years — you don't lose it.
2. You lease your system or sign a PPA. Third-party ownership shifts the tax credit to the installer under Section 48E, which OBBBA left in place for solar systems placed in service through the end of 2027. The installer claims the credit and — in competitive markets — passes some of the savings through as a lower monthly payment.
ℹ️ Signed a contract in 2025 but installed in 2026?
Unfortunately, no. For Section 25D, the expenditure is treated as "made" when the installation is completed, not when you signed the contract or paid a deposit. A system finished in January 2026 gets no federal credit, even if you contracted and paid in full during 2025. (Source: IRS OBBBA FAQ.)
How the Math Changed
The credit's expiration extends payback periods by roughly 40% on the same system. Here's the national-average picture for a 10 kW system:
| Pre-2026 (with 30% credit) | 2026 (no credit) | |
|---|---|---|
| Gross cost | $30,000 | $30,000 |
| Federal credit | −$9,000 | $0 |
| Net cost | $21,000 | $30,000 |
| Annual savings† | $1,800 | $1,800 |
| Simple payback | ~11.7 years | ~16.7 years |
| 25-year net savings | ~$24,000 | ~$15,000 |
†U.S. average rate of $0.15/kWh and 10,000 kWh/year offset. Excludes state incentives and rate inflation, both of which improve the numbers.
Two things keep this from being a death blow:
Electricity rates keep rising. EIA data shows residential rates climbing well above general inflation in most states since 2022. Every rate increase shortens your payback, because solar savings scale with what you'd otherwise pay the utility.
Where you live matters more than ever. At California's ~30¢/kWh, a system pays back in 7–9 years even with zero federal help. At Washington's ~11¢/kWh, payback can stretch past 20 years. The federal credit used to flatten these differences; now state economics dominate. See our state-by-state solar rankings for where the math still works best.
What's Still Available in 2026
The federal credit is gone, but the incentive landscape is far from empty. Everything below survived OBBBA untouched:
State tax credits
A handful of states offer their own income tax credits that stack with nothing federal required:
- New York — 25% of system cost, up to $5,000
- South Carolina — 25% of system cost (capped per year, carries forward)
- Hawaii — 35% of system cost, up to $5,000
- Arizona — 25%, up to $1,000
- Massachusetts — 15%, up to $1,000
Income-based federal rebates (HEAR / HOMES)
The IRA's Home Electrification and Appliance Rebates (HEAR) and HOMES efficiency rebates were funded separately from the tax credits and were not repealed. They're administered by state energy offices, are income-qualified, and in participating states can cover thousands of dollars of heat pumps, panel upgrades, and efficiency work. Availability varies — check your state's status with our IRA Rebate Eligibility Tool.
Net metering and utility programs
Net metering — the policy that credits you for excess solar sent to the grid — is state and utility territory, completely unaffected by OBBBA. So are utility rebates, battery programs like California's SGIP, and performance incentives like SRECs in New Jersey, Maryland, Pennsylvania, and D.C., which can pay solar owners $500–1,500 per year in some markets.
Property and sales tax exemptions
Most states exempt solar equipment from sales tax, added home value from property tax reassessment, or both. On a $30,000 system in a 6% sales-tax state, that exemption alone is worth $1,800.
Every state's full list is on our state incentive pages — each one sourced from DSIRE and the state energy office.
The Lease/PPA Loophole, Explained
Because Section 48E survives through 2027 for solar, third-party-owned systems are the only way a federal subsidy still touches residential solar. The installer owns the system, claims the ~30% credit as a business, and rents you the equipment (lease) or sells you the power (PPA).
That changes the buy-vs-lease calculus that held for the past decade. Buying is still usually the better lifetime deal — you keep all the savings instead of sharing them — but the gap narrowed meaningfully in 2026, especially for homeowners with low tax liability who couldn't have used a tax credit anyway.
The trade-offs (escalator clauses, home-sale complications, no ownership of SRECs) haven't changed. We break them down in detail in our lease vs. PPA vs. buying guide.
Five Strategies for Going Solar in 2026
- Get more quotes than you would have in 2025. Installer demand dropped sharply after the credit expired, and many are pricing aggressively to keep crews busy. National average pricing has drifted down toward $2.60–2.80/W; competitive bids matter more than any remaining incentive.
- Size the system to your actual usage. Oversizing was forgivable when the government paid 30% of the excess. In 2026, every wasted watt is fully your money. Use 12 months of bills, not an installer's estimate.
- Stack every state and utility incentive. With the federal layer gone, a $1,000 utility rebate or a state tax credit is now the difference-maker. Check DSIRE and your state's page before signing.
- Run the lease math honestly. If your federal tax liability is low, a well-structured lease backed by the installer's 48E credit may genuinely beat a cash purchase. Compare 25-year totals, not monthly payments.
- Don't automatically add a battery. Batteries also lost their 25D credit. They still make sense for outage-prone areas and unfavorable net-metering regimes (like California's NEM 3.0), but as a pure investment they now need a state program like SGIP to pencil out.
The Bottom Line
Solar in 2026 is a regional decision, not a national one. In high-rate states with strong net metering — California, Massachusetts, New York, Connecticut, Hawaii — payback periods of 7–11 years survive the credit's loss, and a 25-year return well into five figures is still realistic. In cheap-electricity states, the math has genuinely gotten hard, and leasing or waiting may beat buying.
The one universal truth: generic national averages are now nearly useless. The spread between the best and worst state economics has never been wider.
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Use Calculator →Sources: IRS OBBBA FAQ (irs.gov), SEIA policy briefs, DSIRE incentive database, EIA Electric Power Monthly. This article is for information only — not tax advice. Consult a tax professional about your situation.
About the Author
CleanEnergyCalc Editorial Team
Energy Policy Analysts
We track federal and state clean energy incentives using IRS, DOE, and NREL data.