Estimate your 2026 system cost free →
For years, the federal Residential Clean Energy Credit (Section 25D) let homeowners deduct 30% of a purchased solar system's total cost from their federal income taxes. On a $24,000 system, that was about $7,200 back. It applied to systems you owned (cash or loan), including equipment, labor, and battery storage.
Under the 2025 federal budget law (the "One Big Beautiful Bill," signed July 2025), the residential 25D credit was terminated for any system not installed and operational by December 31, 2025. There is no phase-down for homeowners — it simply ended. So starting in 2026, a homeowner who buys solar receives no federal tax credit.
| Your situation | 30% federal credit? |
|---|---|
| System installed & operational by Dec. 31, 2025 | Yes — claim it on your 2025 return |
| You buy and install in 2026 or later | No — the credit has ended |
| You lease or sign a PPA in 2026 | Not directly — see below |
If your system was installed and operational by December 31, 2025, you can still claim the 30% credit on your 2025 tax return (file IRS Form 5695). And a separate business tax credit (Section 48E) still applies to third-party-owned leases and PPAs through 2027 — that credit goes to the solar provider, not you, though it can help keep your lease payments lower.
Timing for leases/PPAs: the 48E credit required the provider to have begun construction by July 4, 2026, or the system must be placed in service by Dec. 31, 2027. If you're considering a 2026 lease or PPA, ask the installer whether their specific project still qualifies.
The federal discount is gone, but solar can still pay off thanks to:
(General information, not tax advice. Incentives change — confirm with your state energy office, utility, and a tax professional.)
Only if your system was installed and operational by December 31, 2025 (claimed on your 2025 return). For systems bought and installed in 2026 or later, the credit has ended.
The 2025 federal budget law terminated the residential Section 25D credit after December 31, 2025, ahead of its previous 2034 schedule.
The provider that owns the system can claim a business credit (48E) through 2027 — not the homeowner — but it may translate into lower payments for you. To qualify, the provider had to begin construction by July 4, 2026, or place the system in service by Dec. 31, 2027 — ask installers whether their project still qualifies.
Often yes, especially with high electricity rates, strong sun, and state/local incentives. Payback is just longer — typically 9–15 years now. Run your numbers to see.
Solar Cost Advisor is a free, neutral tool — we don't sell panels. We help homeowners understand solar costs and incentives and, if they choose, connect with vetted local installers. Get your free estimate →
