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As of January 1, 2026, the 30% Federal Residential Clean Energy Tax Credit (Section 25D) has expired for homeowners purchasing solar systems outright. Originally intended to last until 2032, recent legislative changes—specifically the One Big Beautiful Bill Act (OBBBA) passed in mid-2025—accelerated the sunset of this credit, making systems installed after December 31, 2025, ineligible for the 30% deduction.
The federal solar tax credit helped millions of American homeowners offset the cost of going solar with a dollar-for-dollar reduction on their federal tax bill. Since 2006, that credit made residential solar more affordable across every income bracket. In 2026, the rules changed, and homeowners across the country are now asking what that means for them.
Strive Solar serves homeowners across the southern United States with full-service solar installation, energy storage, and system maintenance. If you have questions about going solar in 2026, contact us today for a free consultation.
The federal solar tax credit, formally known as the Residential Clean Energy Credit under Section 25D of the U.S. Tax Code, allowed homeowners to claim 30% of their solar system costs as a dollar-for-dollar reduction on their federal income taxes. A $20,000 system, for example, earned a $6,000 credit with no income limit and no cap on the total amount.
The credit covered the full installed cost of a qualifying system, including panels, inverters, mounting hardware, wiring, labor, and battery storage with a capacity of at least 3 kWh. It was nonrefundable, meaning it could reduce your federal tax bill to zero but would not generate a cash refund. Unused credit carried forward to offset taxes in future years.
You had to own the system outright, either through a cash purchase or a financed loan. Leased systems and power purchase agreements did not qualify for the homeowner credit because the homeowner did not own the equipment. The leasing company claimed the credit on its own taxes and sometimes passed savings along through lower monthly rates.
Yes, the residential federal solar tax credit expired on December 31, 2025, following the passage of the One Big Beautiful Bill. The sections below break down exactly what changed, who is still affected, and what options remain for homeowners in 2026.
The residential Section 25D solar tax credit expired for homeowner-purchased systems installed after December 31, 2025, following passage of the One Big Beautiful Bill in 2025. Homeowners who placed their system into service before that deadline and own it outright can still claim the full 30% credit on their 2025 federal tax return.
The Inflation Reduction Act of 2022 had originally extended the 30% credit through 2032. That extension was reversed by the One Big Beautiful Bill, which moved the residential credit’s expiration to the end of 2025. The credit did not phase down gradually. It ended for new qualifying installations after December 31, 2025.
Third-party-owned systems, including solar leases and prepaid power purchase agreements, may still benefit from the commercial Section 48E tax credit through 2027. Homeowners do not claim this credit directly. The leasing company receives it and may pass a portion of the savings through in the form of lower contract rates.
If you installed solar in 2025, you still qualify. File IRS Form 5695 (Residential Energy Credits) with your federal tax return for the 2025 tax year. A qualified tax professional can confirm your eligibility and help you calculate the exact credit amount.
Homeowners who installed solar in 2025 need to file IRS Form 5695 with their federal tax return to claim the Residential Clean Energy Credit. The form calculates your 30% credit based on total eligible system costs and applies it against your tax liability, with any unused portion carrying forward to future tax years.
Follow these steps to claim the credit:
Total your qualified system costs, including panels, inverter, labor, mounting hardware, wiring, and battery storage.Keep all contracts, itemized invoices, and installation permits on file. The IRS may request documentation to verify your claim. Your installer should provide a detailed invoice that breaks out all qualified components separately. Share complete cost documentation with your tax professional before filing.
The federal residential solar tax credit may have expired, but homeowners in 2026 still have access to state-level credits, utility rebates, and net metering programs. In many of Strive Solar’s service states, the combined value of these programs continues to make solar a financially sound decision.
State programs vary significantly. In Strive Solar’s service area, some of the more notable incentives include:
For a full breakdown by state, visit the Solar Incentives by State page.
Solar still delivers strong long-term financial returns in 2026, even without the federal residential credit. The primary source of solar savings has always been reduced electricity bills over the life of the system, and that math has not changed.
A well-designed residential system produces savings across a 25 to 30 year lifespan. Electricity rates in the southern United States have risen steadily over the past decade, and solar locks in your effective energy cost by generating your own power.
Without the 30% federal credit, the payback period increases. That is a real factor in any decision. However, state incentives, declining equipment costs, and stronger net metering policies partially offset that shift. According to the National Renewable Energy Laboratory (NREL), solar module prices have dropped more than 85% since 2010, meaning the core economics are far stronger than they were when the federal credit first launched.
A residential solar installation makes the most sense when it is sized correctly for your actual energy usage and roof conditions. A solar system design and consultation gives you a clear projection of savings, payback period, and applicable local incentives before you commit to anything.
The best approach in 2026 is to start with a site assessment, confirm which state incentives apply to your area, and size your system around your actual electricity usage. The end of the federal residential tax credit changes part of the calculation, but it does not change the long-term value of owning your own photovoltaic system.
Strive Solar helps homeowners across the southern United States make well-informed solar decisions backed by licensed technicians, a 100% satisfaction guarantee, and system designs built around your actual home and energy needs.
Call us today at (866) 945-9572 to schedule your free consultation and find out exactly what incentives still apply in your area.
Homeowners who installed and placed their solar system into service before December 31, 2025 can claim the 30% federal Residential Clean Energy Credit on their 2025 tax return using IRS Form 5695. Systems installed in 2026 or later do not qualify for the Section 25D residential credit.
IRS Form 5695 (Residential Energy Credits) is the form used to calculate and claim the Residential Clean Energy Credit. You attach it to your federal tax return for the year your system was placed in service. The form guides you through qualifying costs and computes your credit at the 30% rate.
There is no direct federal replacement for the residential Section 25D solar tax credit in 2026. Homeowners can still access state-level credits, utility rebates, and net metering programs. Third-party solar products like prepaid leases and PPAs may also pass through a portion of savings from the commercial Section 48E credit, which continues through 2027.
For systems installed through December 31, 2025, standalone battery storage with a capacity of at least 3 kWh qualifies for the 30% credit under Section 25D. You do not need solar panels installed to claim the battery storage credit, as long as the system met eligibility requirements and was placed in service before the deadline.
For most homeowners, yes. Solar’s primary financial benefit comes from reduced electricity bills over 25 to 30 years. State incentives, net metering credits, and declining equipment costs continue to support strong long-term savings even without the federal residential credit.
Section 25D is the residential tax credit for homeowners who own their solar systems outright. Section 48E is the commercial investment tax credit that applies to businesses and third-party system owners such as solar leasing companies. In 2026, Section 25D has expired for new residential installations, while Section 48E continues through 2027 for eligible commercial projects.
Yes. If your 2025 solar tax credit exceeds your federal tax liability for that year, the unused portion carries forward and can offset taxes in future years. This carryforward provision applies to the Section 25D credit claimed on systems placed in service through December 31, 2025.
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