What Happened to the 30% Federal Solar Tax Credit? The 2026 Rules

The 30% federal tax credit for homeowner-owned solar is gone. Under Section 25D, as amended by the One Big Beautiful Bill Act in July 2025, the credit does not apply to any expenditure made after December 31, 2025, and an expenditure is “made” when the original installation is completed. If you buy a system with cash or a loan and it is installed in 2026, your federal credit is $0. Lease and PPA companies can still claim a 30% credit under a different section, which is why the sales pitch you hear in 2026 has changed.

What the law says, exactly

The key sentence is in 26 U.S.C. §25D(h): “The credit allowed under this section shall not apply with respect to any expenditures made after December 31, 2025.”

The timing rule is in §25D(e)(8)(A). An expenditure “shall be treated as made when the original installation of the item is completed.” For a new home, it is made when you first start using the home.

The IRS confirmed this in its OBBB FAQ (August 2025): paying by December 31, 2025 is not enough. “If installation is completed after December 31, 2025, the expenditure will be treated as made after December 31, 2025, which will prevent the taxpayer from claiming the section 25D credit.”

A few details people get wrong:

• There was no phase-down. The rate was 30% through 2025, then nothing.
• The test is installation, not permission to operate (PTO). A system that was fully installed in 2025 and only waiting on the utility’s approval may still qualify, depending on the facts. Ask a tax professional if that is your situation.
• A signed contract or deposit did not lock anything in. Plenty of homeowners who signed in late 2025 missed the deadline because of installation delays.
• Owned home batteries lost the credit on the same date.

If you installed in 2025 or earlier: carryforward still works

The 25D credit was never refundable. It could only reduce the federal income tax you owed. If your credit was larger than your tax bill, the unused part carried forward to the next year.

That still works. Unused 25D credit from a system installed in 2025 or earlier can be carried forward to your 2026 return and beyond, using IRS Form 5695. Ending the credit stopped new claims. It did not cancel credits already earned.

If a salesperson told you the credit would come back to you as a “rebate check,” it would not. You only got value from it to the extent you owed federal income tax. This was a common problem for retirees and low-tax households. See solar for retirees.

Leases and PPAs: Section 48E still pays the company

Third-party-owned systems are a different story. When a company owns the panels on your roof and you lease them or buy the power (a PPA), the company can claim the Section 48E investment credit. Solar electric systems and batteries remain eligible for leasing arrangements under §48E.

How it works as of October 2026:

• Rate: 30% for small facilities like home systems, plus possible bonus points for an energy community (+10) or domestic content (+10).
• Deadline for solar: if construction began after July 4, 2026, the system must be placed in service by December 31, 2027. Projects that began construction by July 4, 2026 can generally rely on a four-year continuity safe harbor.
• Batteries: the storage credit runs longer, at full value for construction starting through 2033, then phasing down.
• Foreign-sourcing rules (FEOC): for construction beginning after 2025, a minimum share of the system’s cost must come from suppliers that are not “prohibited foreign entities.” For 2026 starts, that share is 40% for solar and 55% for storage, rising each year. IRS Notice 2026-15 set interim rules.

Who gets the benefit

The company does. You do not file anything or receive any credit. You benefit only if competition forces the company to share that credit through a lower monthly payment, a lower PPA rate, or a lower prepaid lease price.

Some do. EnergySage’s H1 2026 report found prepaid leases about 39% cheaper per kWh than buying with cash, and prepaid PPAs about 57% cheaper. But regular PPAs without prepayment were about 33% more expensive per kWh than cash. The credit is real; whether you see it depends on the deal.

Why salespeople now push leases

In six months, the share of EnergySage marketplace installers quoting leases or PPAs rose from about 14% to about 41%. LBNL data shows third-party ownership at about 40% of residential installs in 2025, up from 23% in 2023.

The reasons are simple:

• The company keeps 30% of the system’s value as a tax credit, plus any bonus points.
• A $0-down lease is easier to sell than a $24,000 purchase with no credit.
• Leases create long contracts with predictable payments, often with yearly escalators.
• The 48E deadlines create urgency. “Sign before the deadline” helps the company meet its credit timeline. It is not a deadline that protects you.

A lease is not automatically bad. For a homeowner who cannot use a large upfront payment, a well-priced prepaid lease or a flat-rate PPA can beat buying. But it shifts risk: escalators, transfers when you sell, and depending on a company that may not last 25 years. Sunnova, PosiGen and the original SunPower all went through bankruptcy in 2024 and 2025. Read is a solar lease a bad idea and solar escalator clauses, and run both options through the lease vs buy tool.

Red flag: a 2026 quote that subtracts 30%

Watch out: If a 2026 quote for a system you would own (cash or loan) shows a “net cost after federal tax credit” or subtracts 30%, the quote is wrong. Ask for a corrected quote in writing, or walk away.

This shows up in a few ways:

• A “net price” line that is 70% of the contract price.
• A loan built around a 30% lump-sum paydown around month 18. Many older solar loans assumed you would use your tax refund to prepay about 30% of the balance. If you do not, the payment jumps. The CFPB flagged this re-amortization trap in 2024. With no 25D credit, there is no refund to make that paydown.
• Payback or savings charts that start from the after-credit price.
• Stale online calculators and cost pages that still subtract the credit.

Here is how much it distorts a quote. On a $24,000 system saving $2,000 a year, the honest simple payback is 12 years. Subtract a nonexistent 30% credit and it looks like 8.4 years. Add the usual 5%-a-year rate assumption and no panel degradation, and the pitch shows about 7 years. Our payback guide walks through the math.

See the full red flag: claims of a 30% tax credit. You can check any claim with our sales claim checker. If you were misled, you can report it to the FTC and your state attorney general.

Will the credit come back?

Maybe someday, but do not plan on it. S. 3722, the “Lowering Home Energy Costs Act,” would extend Section 25D through December 31, 2032. The bill text is real. As of October 2026, we found no report of committee or floor action on it.

Any bill can change before passage, and a restored credit might not be retroactive. Buying or delaying a purchase based on a pending bill is a gamble. If solar only makes sense with a 30% credit, wait. If it makes sense without one, the bill is a possible bonus, not a reason to rush.

Other incentives that still exist

The federal credit was the biggest incentive, but not the only one. As of October 2026, our state research shows:

State	Incentive	Notes
New York	25% state credit up to $5,000	5-year carryforward
South Carolina	25% state credit	Limited to $3,500 a year or 50% of tax owed; 10-year carryforward
Hawaii	35% state credit up to $5,000	Refundable option at reduced value
Arizona	25% state credit up to $1,000	Unused credit carries forward up to 5 years
Massachusetts	15% state credit up to $1,000	Plus the SMART 3.0 production incentive

State tax credits generally only help if you owe state income tax. Many states also exempt solar from sales tax or from property tax increases. Check your state page and the incentives page for current programs. Utility rebates and battery programs, like ConnectedSolutions in parts of New England, can also help.

The EPA’s $7 billion Solar for All program, which funds low-income solar through states, was terminated in 2025. Two federal courts ruled the termination unlawful in September 2026, but that does not automatically release the money. If someone calls about a “government solar program,” be skeptical. See free solar government program.

What this means for your decision

• Owned systems in 2026 must pay for themselves. Use 2026 prices with no federal credit. Our calculator does this by default.
• Compare a lease or PPA honestly. Ask whether the price depends on the company’s tax credit, what the escalator is, and what happens when you sell.
• Do not let a deadline rush you. The 48E deadlines matter to the company, not to you.
• Get the cash price in writing, even if you plan to finance. It is the only way to see the dealer fee.

For the full decision framework, start with is solar worth it in 2026.