Quick answer: Yes, for homeowners who buy. The 30% federal solar tax credit (Section 25D) ended for any system whose installation was completed after December 31, 2025, under the One Big Beautiful Bill Act (P.L. 119-21), signed July 4, 2025. If your system was finished in 2025, you claim 30% on your 2025 return and carry any unused amount forward. In 2026, only companies that own leased or PPA systems can still claim a federal credit, under Section 48E.
This page used to carry a headline about Congress moving to kill the solar tax credit. Congress did it. We rewrote it as the complete reference because California homeowners are still being shown 2026 quotes with a 30% credit subtracted from the price, and that number is wrong for any system you buy and own today.
Below: the numbers behind the credit, the exact timeline, who can still claim it, how leases fit in, and what the repeal does to real California prices and payback.
The federal solar tax credit by the numbers
The 25D credit was one of the most-used clean energy tax breaks in the country, and ending it removed about $8,200 from the average solar buyer’s bottom line. These are the figures that matter for a homeowner in 2026.
| Metric | Figure | Source |
|---|---|---|
| Credit for a system you buy, installed in 2026 | 0% (was 30%) | IRS FS-2025-05 |
| Tax returns claiming 25D, tax year 2023 | about 1.3 million | IRS SOI Form 5695 tables, via NAHB |
| Returns claiming it for solar electric | 752,300 | IRS SOI, via NAHB |
| Average solar cost claimed, 2023 | $27,355 (about $8,200 credit) | IRS SOI, via NAHB |
| Total 25D credits claimed, 2023 | more than $6 billion | U.S. Treasury |
| Share of California returns claiming 25D, 2023 | 1.6%, among the top five states | IRS SOI, via NAHB |
| Federal revenue gained by repealing 25D, 2025-2034 | $77.4 billion ($77,361 million) | JCT, JCX-35-25; CRS IN12625 |
| U.S. residential solar installed, Q2 2026 | 995 MWdc, down 12% year over year | SEIA/Wood Mackenzie Q3 2026 |
| Forecast change in U.S. residential solar, 2026 | down 23% | SEIA/Wood Mackenzie Q3 2026 |
| National residential system price, Q2 2026 | $3.36 per watt, down 1.4% | SEIA/Wood Mackenzie Q3 2026 |
| California solar systems installed with a battery, 2024 | 57% | Lawrence Berkeley National Laboratory |
| Last year a leasing company’s battery keeps the full 48E credit | construction starting through 2033 | 26 USC 48E |
Two things stand out. First, prices barely moved: the credit disappeared but national system prices fell only 1.4%, so for a buyer the net cost of the same system rose by about 40% overnight (paying 100% of the price instead of 70%). Second, SEIA reports that its interconnection data “now reflects the impact of the Section 25D tax credit elimination for customer-owned systems,” with installers citing longer sales cycles. Fewer people are buying, and more are being steered toward leases.
When did the federal solar tax credit end? The full timeline
The homeowner credit ended on December 31, 2025, after 20 years. It went from a scheduled 30% through 2032 to a hard stop in under six months.
| Date | What happened |
|---|---|
| Dec 31, 2027 | Leased or PPA solar that began construction after July 4, 2026 must be placed in service by this date to earn 48E |
| July 4, 2026 | Construction-start deadline for leased and PPA solar to avoid the 2027 placed-in-service cutoff |
| June 6, 2026 | Federal court in D.C. vacates IRS Notice 2025-42, restoring the 5% cost safe harbor for starting construction |
| Feb 12, 2026 | IRS Notice 2026-15 gives interim guidance on the prohibited foreign entity (FEOC) sourcing rules |
| Jan 1, 2026 | Homeowner purchases get no federal credit; FEOC rules apply to 48E projects that begin construction from this date |
| Dec 31, 2025 | Last day a homeowner’s installation could be completed and still qualify for 25D |
| Aug 21, 2025 | IRS FAQ FS-2025-05: an expenditure is “made” when installation is completed |
| Aug 15, 2025 | IRS Notice 2025-42 tightens the rules for when wind and solar projects “begin construction” |
| July 4, 2025 | One Big Beautiful Bill Act signed (H.R. 1, P.L. 119-21). Sec. 70506 ends 25D; Sec. 70513 cuts off 48E for solar |
| Jan 1, 2023 | Standalone batteries of 3 kWh or more become eligible for 25D |
| Aug 16, 2022 | Inflation Reduction Act restores 30% for 2022 through 2032, stepping down to 26% in 2033 and 22% in 2034 |
| Dec 2020 | Congress extends the credit at 26% through 2022 |
| Dec 2015 | Congress extends 30% through 2019, with a step-down to 26% and 22% after |
| 2009 | The $2,000 cap on solar electric is removed; 30% of the full cost applies |
| Jan 1, 2006 | Section 25D takes effect under the Energy Policy Act of 2005, at 30% with a $2,000 cap |
Sources: IRS FS-2025-05, congress.gov H.R. 1, 26 USC 25D, 26 USC 48E, IRS Notice 2026-15 release.
What does “made” mean for the December 31, 2025 cutoff?
An expenditure is made when the original installation is completed. The contract date does not count, and neither does the payment date. The IRS was explicit: if installation is completed after December 31, 2025, the taxpayer cannot claim the 25D credit. A homeowner who signed and paid in November 2025 but whose crew finished in January 2026 gets nothing.
Who can still claim the federal solar tax credit?
Three groups still get federal value in 2026: homeowners whose installation was completed by December 31, 2025, anyone carrying forward unused 25D credit from an earlier year, and companies that own leased or PPA systems. Everyone else who buys in 2026 gets $0.
| Your situation | Federal credit | How it works |
|---|---|---|
| Installed and completed in 2025 or earlier | 30% of qualified cost | Claim on the return for the year of completion, using Form 5695 |
| Unused credit from a 2025 or earlier system | Carries forward | Applies against tax in 2026 and later years |
| Signed or paid in 2025, installed in 2026 | $0 | Completion date controls, not contract or payment |
| Buy with cash or a loan in 2026 | $0 | 25D no longer applies to expenditures after Dec 31, 2025 |
| Lease or PPA in 2026 | $0 to you directly | The system owner may claim 48E and price it into your payment |
What if my system was installed in late 2025?
If installation was completed on or before December 31, 2025, you qualify for the full 30%. The IRS says to claim it for the year the property is installed, not the year you bought it. On a $30,000 system, that is a $9,000 credit.
- Pin down your completion date. Keep your installer’s completion paperwork and the city’s final inspection sign-off. The IRS does not define “completed” as permission to operate, so if the crew finished in December but utility approval came in January, ask your tax preparer before filing.
- Count qualified costs only. Panels, inverters, racking, wiring, installation labor and batteries of 3 kWh or more count. A roof replacement generally does not, except for parts that are part of the solar system itself.
- Subtract rebates that lowered your cost. A utility rebate that reduced what you paid for the system reduces the cost basis for the credit.
- Amend if you missed it. If you already filed 2025 without Form 5695, you can file an amended return.
How does the carryforward work after the repeal?
The repeal did not touch the carryforward rule. The IRS says you can carry forward any unused credit to reduce tax in future years, and the Congressional Research Service reached the same conclusion in its September 2025 analysis (IN12611).
Example: you finished a $30,000 system in November 2025 and earned a $9,000 credit. Your 2025 federal income tax is $5,000. The credit wipes out that $5,000, and the remaining $4,000 carries into 2026. If your 2026 tax is $6,000, you use the $4,000 and owe $2,000.
Is the credit refundable?
No. The 25D credit is nonrefundable: it can reduce your federal income tax to zero, but the IRS will not send you the excess. Unused credit carries forward instead. We walk through a real return in is the solar tax credit refundable?
Do batteries still qualify?
Only if installation was completed by December 31, 2025 and the battery holds at least 3 kWh; standalone batteries qualified from 2023. A Powerwall 3 you buy in 2026 gets no federal credit. See current solar battery costs for what a purchased battery runs without it.
Can a lease or PPA still get the federal credit in 2026?
Yes, but the credit goes to the system owner, not to you. The company that owns a leased or PPA system on your roof can claim the Section 48E investment credit if the project began construction by July 4, 2026, or is placed in service by December 31, 2027. The 2025 law’s lease ban covers only solar water heating and small wind, per 26 USC 48E(i), so rooftop panels still qualify.
| Third-party-owned equipment | 48E status | Deadline |
|---|---|---|
| Rooftop solar panels | Eligible | Construction begun by July 4, 2026, or placed in service by Dec 31, 2027 |
| Batteries | Eligible, full credit | Construction beginning through 2033; 75% in 2034, 50% in 2035, 0 after |
| Solar water heating, small wind | Not eligible when leased to a homeowner | Barred for tax years beginning after July 4, 2025 |
Battery phase-down per 48E(e)(2) as summarized by Kirkland & Ellis.
Does the 48E credit reach the homeowner?
Only through pricing. There is no rule forcing a lessor to pass the credit through. If a provider says its lease “includes the tax credit,” get these answers in writing:
- Does your rate assume the 48E credit, and by how much does it lower my payment?
- Has this project been safe-harbored, and on what date did construction begin?
- What happens to my payment if the credit is disallowed under the foreign-entity sourcing rules in IRS Notice 2026-15?
- What is the annual escalator, and what does year 20 cost?
What are the FEOC rules?
48E projects that begin construction after December 31, 2025 must limit “material assistance” from prohibited foreign entities, meaning components and supply chains tied to certain foreign governments. The IRS published interim guidance in Notice 2026-15 on February 12, 2026. For a homeowner, the practical point is that the lessor, not you, carries this risk, and a well-written contract should say so.
The cutoff dates are why solar leases are likely to become scarcer and more expensive after 2027, while battery leases and battery virtual power plant offers stay available longer. Our guide to prepaid solar leases and PPAs covers the contract terms that matter.
How much more does solar cost without the tax credit?
On a typical 7.2 kW California system, losing the credit adds $5,200 to $7,000 to the net price and about 2 to 3 years to simple payback. Here is the same system bought in 2025 and in 2026, at our California price range of $2.40 to $3.25 per watt.
| 7.2 kW solar-only system in California | Completed in 2025 (30% credit) | Completed in 2026 (no credit) |
|---|---|---|
| Installed price | $17,280 to $23,400 | $17,280 to $23,400 |
| Federal credit | $5,184 to $7,020 | $0 |
| Net cost | $12,096 to $16,380 | $17,280 to $23,400 |
| First-year bill savings | about $2,330 | about $2,330 |
| Simple payback | 5.2 to 7.0 years | 7.4 to 10.0 years |
| 7.2 kW solar plus one Powerwall 3 | Completed in 2025 (30% credit) | Completed in 2026 (no credit) |
|---|---|---|
| Installed price | $31,780 to $41,900 | $31,780 to $41,900 |
| Net cost | $22,246 to $29,330 | $31,780 to $41,900 |
| First-year bill savings | about $3,120 | about $3,120 |
| Simple payback | 7.1 to 9.4 years | 10.2 to 13.4 years |
Assumptions: 1,600 kWh per kW per year (11,520 kWh), an estimate not yet checked in PVWatts. Solar-only: 50% of output used at home at PG&E and SCE’s 34-cent average (Cal Advocates, Q2 2026), 50% exported at about 6.5 cents under NEM 3.0 (CPUC). With a battery: 75% used at home. Powerwall 3 installed at $14,500 to $18,500. No utility rate increases assumed.
Nationally, the math is the same shape. At SEIA’s $3.36 per watt, a 7.2 kW system costs $24,192; in 2025 the credit would have cut that by $7,258.
Solar still pays for itself well inside a 25-year panel life in California, because our rates are about double the national average. The difference is that the margin is thinner, so the quality of the savings estimate matters more. Any quote that still subtracts 30% from a 2026 purchase understates your real cost by 30% and makes payback look about 30% shorter than it is. Compare yours with what solar panels cost in California.
What solar incentives are left for California homeowners?
The most valuable one left is the property tax exclusion, and it also expires: your system must be completed before January 1, 2027. There is no state solar tax credit in California.
| Program | Who qualifies | Value | Status, September 2026 |
|---|---|---|---|
| Property tax exclusion (Rev. & Tax. Code sec. 73) | Any owner whose system is completed before Jan 1, 2027 | Solar value kept off your assessment | Open until Dec 31, 2026; the 2026 extension bill AB 2389 stalled |
| DAC-SASH | Low-income homeowners in PG&E, SCE or SDG&E disadvantaged communities | $3.00 per watt | Open through 2030, run by GRID Alternatives |
| SGIP battery rebate | Mostly low-income solar-plus-storage households | $3.10 per watt solar, $1.10 per Wh storage | Effectively closed for most homeowners |
| SMUD battery incentive | SMUD customers | $300 per kWh, up to $6,000 | Open; cut from $500 per kWh on Sept 23, 2026 |
| CARE and FERA | Income-qualified customers | 30-35% (CARE) or 18% (FERA) off electric bills | Open |
We track every program, with amounts and links to the official pages, on our California solar incentives hub.