The Current Situation (2026)
The 30% residential solar tax credit (Section 25D) ended December 31, 2025.If you're a homeowner buying solar in 2026, there is no federal tax credit available for your purchase.
However, the commercial/third-party credit (Section 48E) continues through 2027. This means PPA and lease customers can still benefit from the 30% credit indirectly.
What Ended December 31, 2025
Section 25D - Residential Energy Credit
- What it was: 30% tax credit for homeowner-purchased solar systems
- Who qualified: Homeowners who bought (cash or loan) and owned the system
- How it worked: Reduced your federal tax bill by 30% of system cost
- Status: ENDED for systems installed after 12/31/2025
What This Means
If you buy a $25,000 solar system in 2026:
- Before 2026: You would have received a $7,500 tax credit
- In 2026: You receive $0 federal tax credit
Already Installed Before 2026?
If you installed solar in 2025 or earlier:
- Good news: You can still claim the credit on your 2025 (or earlier) taxes
- No retroactive repeal: Existing installations are protected
- Carryover: If you couldn't use the full credit in one year, you can carry it forward
What's Still Available in 2026
Section 48E - Commercial/Third-Party Credit
The 30% commercial credit (48E) continues through December 31, 2027. This benefits you indirectly if you use a PPA or lease:
| Financing Type | Federal Credit Available | Who Benefits |
|---|---|---|
| Cash purchase | No (25D ended) | — |
| Solar loan | No (25D ended) | — |
| PPA (Power Purchase Agreement) | Yes (30% via 48E) | Solar company claims it, lower rates for you |
| Solar lease | Yes (30% via 48E) | Solar company claims it, lower payments for you |
How PPA/Lease Benefits Work
The Math
When a solar company claims the 30% credit:
- System cost to company: $25,000
- 48E credit claimed: -$7,500
- Net cost to company: $17,500
- Result: They can offer you lower rates than a company without the credit
What You Pay
With a PPA or lease in 2026:
- $0 upfront cost
- Monthly payments or $/kWh rate lower than utility
- No tax liability required (unlike when you claimed 25D)
- Company handles maintenance and monitoring
Comparing 2025 vs 2026
| Scenario | 2025 | 2026 |
|---|---|---|
| Cash purchase: Credit? | Yes, 30% | No |
| Loan purchase: Credit? | Yes, 30% | No |
| PPA: Credit benefit? | Yes (indirect) | Yes (indirect) |
| Lease: Credit benefit? | Yes (indirect) | Yes (indirect) |
State and Local Incentives
The federal credit ending doesn't affect state and local incentives:
Still Available by State
| Incentive Type | States/Examples | Value |
|---|---|---|
| State tax credits | NY (25%), AZ (25%), SC (25%) | Varies, often $1,000-$5,000 |
| SRECs/Production payments | IL, MA, NJ, MD, DC, OH | Can be $3,000-$15,000+ |
| Rebates | Various utility programs | $0.10-$0.50/W |
| Property tax exemption | Most states | Solar doesn't increase property tax |
| Sales tax exemption | Many states | 5-10% savings on equipment |
SREC States
These states have significant SREC or production-based incentives that can substantially improve economics even without the federal credit:
- Illinois: Illinois Shines can provide $10,000-$20,000 for typical systems
- Massachusetts: SMART program pays $0.06-$0.12/kWh for 10 years
- New Jersey: SREC-II program provides ongoing payments
- Maryland: SRECs tradeable for income
Frequently Asked Questions
I installed solar in 2025 but haven't filed taxes yet. Can I claim the credit?
Yes. If your system was installed and operational by December 31, 2025, you can claim the 30% credit on your 2025 tax return.
Will the federal credit come back?
Unknown. Policy depends on future Congress and administration. The current law ended 25D. There's no scheduled restoration. Don't wait for something that may not happen.
Is solar still worth it without the tax credit?
For many people, yes. The credit shortened payback by 2-3 years. Without it, payback is longer but still positive in most cases. State incentives and high utility rates can compensate. PPA/lease options still benefit from 48E.
Should I use a PPA/lease now instead of buying?
It's more competitive than before. If you couldn't have used the 25D credit anyway (not enough tax liability), PPA/lease was already your best option. If you would have had tax liability, now the choice is closer.
What happens to the 48E credit after 2027?
Under current law, 48E continues but may change. If policy shifts again, third-party solar rates could increase. Consider locking in a PPA while the credit is still available.
Questions About Solar Incentives?
The incentive landscape has changed. Let us help you understand what's available in your state and the best path forward.
Ask About Incentives