Update for 2026: The federal residential solar tax credit most homeowners used for years, Section 25D, the 30% credit, ended for new purchases on December 31, 2025. If you own your solar system and install it from January 1, 2026 onward, you can no longer claim this credit on your federal taxes.
That doesn’t mean every federal solar incentive is gone. Here’s what actually changed, and what’s still on the table.
What Happened to the 25D Solar Tax Credit
The One Big Beautiful Bill Act, signed into law on July 4, 2025, eliminated the Section 25D Residential Clean Energy Credit for systems installed after December 31, 2025. For over a decade, this credit let homeowners who purchased a solar system, with cash or a loan, deduct 30% of the cost from their federal taxes, with no cap and no income limit.
If you installed and placed your system in service on or before December 31, 2025, you can still claim the 30% credit on that year’s tax return using IRS Form 5695. The law did not retroactively take away credits already claimed or earned before the cutoff.
Starting January 1, 2026, that path is closed for new residential purchases, whether paid in cash or financed with a loan.
What’s Still Available
Leases and power purchase agreements (PPAs). If a solar company owns the system installed on your roof and you lease it or buy the power through a PPA, that company can still claim a federal credit under Section 48E and typically passes some of that value to you through a lower monthly payment or a buyout discount. This credit for third party owned systems, including qualifying battery storage, remains available through the end of 2027.
State and utility incentives. State tax credits, rebates, and net metering programs are separate from the federal credit, and most were not affected by this change. What’s available depends entirely on where you live, so it’s worth checking your state energy office or utility website before assuming solar no longer pencils out.
Battery storage. A standalone home battery purchase lost the same 25D credit on the same date. A battery added through a qualifying lease or PPA may still qualify under the Section 48E path described above.
How This Changes the Math
Losing the 30% credit stretches out the payback period on a purchased system. A project that used to pay for itself in 8 to 10 years now more realistically takes 10 to 13 years, depending on your electricity rates and system cost. That’s a real change, not a reason to assume solar doesn’t make sense anymore, especially if your state offers its own incentives or if a lease or PPA fits your situation better than a purchase.
What to Do Next
- If you already installed and had your system placed in service by December 31, 2025, file IRS Form 5695 with this year’s taxes and claim your 30% credit.
- If you’re still deciding, get quotes for both a purchase and a lease or PPA so you can compare real numbers for your situation.
- Check your state’s current solar incentives before you assume the math doesn’t work without the federal credit.
Want to See What a System Costs Today
ShopSolarKits has current pricing on complete off grid and backup kits, with or without the old tax credit factored in.
