Solar Tax Credit Ended in 2026: What Still Qualifies
The 30% solar tax credit ended December 31, 2025. See what the OBBBA killed, what still qualifies in 2026, and how to claim a 2025 install or carry it forward.
Quick Answer: Is the Solar Tax Credit Still Available in 2026?
No. A homeowner who buys and installs a solar system in 2026 gets $0 in federal tax credit. The One Big Beautiful Bill Act (P.L. 119-21), signed July 4, 2025, terminated the Section 25D Residential Clean Energy Credit for expenditures made after December 31, 2025. No phase-down, no transition relief.
Three things survived, and they are what the rest of this article covers. You can still claim a 2025 install on the return you file this year. A carryforward balance from a credit that outran your 2025 tax bill is still usable. And there may still be indirect value in a lease or PPA, plus whatever your state offers.
What the OBBBA Ended: Sections 25D and 25C
Two separate residential energy credits died on the same date. People mix them up constantly, and their rules were different, so start by pulling them apart.
The Inflation Reduction Act had scheduled Section 25C to run through 2032 and Section 25D through 2034, with a step-down to 26% in 2033 and 22% in 2034. The OBBBA ended 25C seven years early and 25D nine years early.
Section 25D: the Residential Clean Energy Credit
This was the big one: 30% of the cost of qualifying new clean energy property installed at a home, with no dollar cap for most categories. It covered:
- Solar electric (rooftop and ground-mount PV)
- Solar water heating
- Geothermal heat pumps
- Small residential wind turbines
- Fuel cells (limited to $500 per half kilowatt of capacity)
- Battery storage with capacity of at least 3 kWh
Used equipment never qualified. Neither did leased systems, which matters later.
Section 25C: the Energy Efficient Home Improvement Credit
The smaller sibling. It covered heat pumps, heat pump water heaters, biomass stoves, insulation, air sealing, exterior windows and doors, upgraded electrical panels, and home energy audits. Its 2025 limits were a $1,200 general annual cap plus a separate $2,000 cap for heat pumps, heat pump water heaters, and biomass.
Side by side
| Section 25D | Section 25C | |
|---|---|---|
| Credit rate | 30% of cost | 30% of cost, subject to caps |
| Annual cap | None (except fuel cells) | $1,200 general / $2,000 heat pump |
| Termination trigger | Expenditures made after Dec 31, 2025 | Property placed in service after Dec 31, 2025 |
| Carryforward | Yes, indefinite | No, unused amount is lost |
| Where claimed | Form 5695, Part I | Form 5695, Part II |
That third row is the one most articles get wrong, so it gets its own section.
The Deadline Test: “Installation Completed,” Not “Paid For”
Search results are full of pages saying the 25D test is “placed in service.” That is the 25C test. Section 25D runs on a different one, and for a job that straddled New Year’s it is the difference between a five-figure credit and nothing.
For Section 25D, the statute terminates the credit for expenditures made after December 31, 2025, and IRC §25D(e)(8)(A) says an expenditure is treated as made when the original installation of the item is completed. The IRS OBBB FAQ states it plainly: paying for a system in 2025 does not qualify if the installation finishes in 2026.
How that plays out in real situations:
| Scenario | Result |
|---|---|
| Contract signed November 2025, install finished January 2026 | No credit |
| $10,000 deposit paid December 2025, install finished March 2026 | No credit |
| Panels delivered to the property December 2025, install finished February 2026 | No credit |
| Permits pulled and racking mounted in 2025, system finished in 2026 | No credit |
| Installation completed December 28, 2025, utility permission to operate granted February 2026 | Credit allowed |
That last row surprises people. Utility interconnection and permission to operate have nothing to do with the 25D trigger; installation completion is the whole test. If your installer finished the job in December and the utility took two months to flip the switch, the expenditure was still made in 2025.
So dig out the installer’s completion certificate or the final inspection sign-off rather than the invoice. That is the document that supports your timing.
Still Claiming a 2025 Install? Here Is How
The 2025 return you file in 2026 is the last normal filing season for these credits. Both are claimed on Form 5695: Part I for the Section 25D residential clean energy credit, Part II for the Section 25C energy efficient home improvement credit. The result flows to Schedule 3 and then to your Form 1040.
A lot of households are in this position. For tax year 2023, about 1.2 million households claimed the residential clean energy credit for a total of $6.3 billion, an average of $5,084 per household, with roughly 752,000 of those claims tied to rooftop solar. Another 2.3 million families claimed 25C.
Keep these records
- The final contract and itemized invoice showing equipment and labor costs
- Proof of the installation completion date (inspection sign-off, completion certificate)
- Manufacturer certification statements for the equipment
- Documentation that the home is your residence in the United States
If you already filed and left it off
This happens more than you would think, especially when a system was finished late in December. The fix is Form 1040-X: amend the 2025 return and attach Form 5695. Amended returns are generally accepted within three years of the original filing date, so there is no need to panic. Our walkthrough of filing an amended return for 2026 covers the process step by step.
The Carryforward: The Part Almost Nobody Explains
The credit terminated. The carryforward rules did not change. If your 2025 system cost more than your tax bill could absorb, this is the part worth reading twice.
Section 25D is nonrefundable. It can knock your federal income tax down to zero, but it cannot generate a refund by itself. The unused portion instead rolls into future years, indefinitely, until the whole credit is used up. The Congressional Research Service confirmed that the repeal left this mechanic intact.
A worked example
Say a homeowner completed a $30,000 solar install in December 2025:
- Credit earned: 30% of $30,000 = $9,000
- 2025 federal tax liability: $4,200
- Credit used in 2025: $4,200 (liability drops to $0)
- Carried forward into 2026: $4,800
In 2026, that same filer applies the $4,800 against whatever their 2026 liability turns out to be. If 2026 liability is $3,900, they use $3,900 and carry $900 into 2027. The balance keeps rolling until it is exhausted.
More than half of claimants carry something forward
The Congressional Research Service looked at a fuller cut of the same tax year, roughly 1.4 million recipients of the residential clean energy credit for 2023, and found the split was almost even:
- 645,000 (46.5%) used the entire credit in the year they claimed it
- 601,000 (43.3%) used part of it and carried the rest forward
- 142,000 (10.2%) carried the entire credit forward, using none of it in-year
That is more than half of all claimants sitting on a live carryforward balance right now. If you are one of them, the credit is still a line item on your 2026 return.
25C had no carryforward
Worth repeating, because the two credits get merged constantly: the energy efficient home improvement credit never allowed a carryforward. If your 25C credit exceeded your 2025 liability, the excess is simply gone. Only 25D rolls forward. If the difference between credits and deductions is still fuzzy, our explainer on tax credits vs. tax deductions covers the mechanics.
What Still Qualifies in 2026: Leases, PPAs, and State Programs
There is no version of 2026 where a homeowner buys panels and gets 30% back from the IRS. What remains is indirect.
Third-party ownership under Section 48E
Leases and power purchase agreements get described as “an exception to 25D,” which has the history backwards. Section 25D always required ownership, so a leased system never qualified for it in the first place.
What happens instead is that the leasing company or financier owns the system and claims the Section 48E business investment tax credit. Whether any of that reaches you depends on how they price the lease. It is their pricing decision, not a credit you claim.
Three constraints matter here, and most articles written in 2025 miss them:
- The safe harbor has closed. Section 48E terminates for solar and wind facilities placed in service after December 31, 2027, unless construction began within 12 months of enactment, meaning by July 4, 2026. That date is now in the past.
- Two categories were carved out. Leased residential solar water heating and small wind property are excluded from 48E for tax years beginning after July 4, 2025. Leased solar PV is still eligible.
- You own nothing. No equipment, no depreciation, no credit, and usually a long-term escalating payment obligation attached to your home.
State and utility programs
State incentives were untouched by the federal change. What is available depends heavily on where you live:
- State income tax credits, such as New York’s 25% residential solar credit capped at $5,000
- Solar Renewable Energy Certificates (SRECs) in markets including New Jersey, Maryland, Delaware, DC, Pennsylvania, and Ohio, which pay per megawatt-hour generated
- Performance and production programs such as Massachusetts SMART and Illinois Shines
- IRA Home Energy Rebates (the HOMES and HEAR programs), which are administered by individual states and are rebates rather than tax credits
Check your state energy office and your utility directly. These programs change on their own schedules and often run until the funding is gone rather than to a fixed date.
Estimate Your 2026 Tax Before You Count on a Carryforward
A nonrefundable credit is only ever worth what your liability can absorb. A $4,800 carryforward against a $1,500 tax bill uses $1,500 this year. So the number to pin down first is your 2026 liability, not the size of the balance you are carrying.
A few things move that number more than people expect. A year with lower income, a bigger standard deduction, or a jump in other credits all shrink the liability your carryforward can eat into. Our breakdown of itemized vs. standard deduction for 2026 and the 2026 bracket tables are useful starting points.
To run the actual math:
- Tax Refund Estimator for a full-picture estimate of where you land
- Tax Bracket Calculator to see your marginal rate and tax before credits
- Effective Tax Rate Calculator to sanity-check your total burden
If you would rather build the whole return and watch the number move, Tax47 assembles a 2026 estimate from your actual W-2, 1099, and Schedule C figures, applies the OBBBA changes, and shows in its summary how much of your tax liability each credit is absorbing. That absorption view is the question a carryforward filer is trying to answer. You can get the app here.
Two more OBBBA reads if you are mapping out 2026: what replaced the EV tax credit follows the same pattern of a credit ending and value moving elsewhere, and the new deductions under the One Big Beautiful Bill covers what the law added rather than what it cut.
Sources & References
- IRS: FAQs for modification of sections 25C, 25D and others under P.L. 119-21 (OBBB) — Official IRS guidance on the termination dates and the “installation completed” test.
- IRS: Residential Clean Energy Credit — Credit rate, covered property, nonrefundability, and carryforward.
- IRS: Energy Efficient Home Improvement Credit — 25C caps and the absence of a carryforward.
- IRS: Instructions for Form 5695 — How to claim both credits on the 2025 return.
- Congressional Research Service IN12611: Expiration and Carryforward Rules for the Residential Clean Energy Credit — Carryforward survival and the TY2023 usage split.
- IRS: Treasury and IRS release Inflation Reduction Act clean energy statistics — TY2023 claim counts and dollar totals.
- 26 U.S. Code § 25D — Statutory text, including §25D(e)(8)(A) on when an expenditure is treated as made.
- One Big Beautiful Bill Act (P.L. 119-21) — The legislation that terminated both credits.
- Grant Thornton: Energy incentives under OBBBA — Section 48E timing rules and the begin-construction safe harbor.
- Novogradac: The final One Big Beautiful Bill Act and clean energy tax credits — Leased solar water heating and small wind exclusions.
This article is for educational purposes only and is not tax, legal, or financial advice. All figures are estimates. Tax rules change periodically, always check current IRS guidance or consult a qualified tax professional.
Frequently Asked Questions
Is the 30% solar tax credit gone in 2026?
Yes. The One Big Beautiful Bill Act terminated the Section 25D Residential Clean Energy Credit for expenditures made after December 31, 2025. A system a homeowner buys and installs in 2026 gets $0 in federal credit.
I signed a solar contract in 2025 but the install finished in January 2026. Do I get the credit?
No. The IRS treats the expenditure as made when the original installation is completed. A signed contract, a deposit, or delivered equipment in 2025 does not qualify if installation finished in 2026.
Can I still claim the solar credit on my 2025 tax return?
Yes. If installation was completed on or before December 31, 2025, claim 30% on Form 5695, Part I, with the 2025 Form 1040 filed in 2026.
What if my solar credit is bigger than the tax I owe?
The credit is nonrefundable, so it cannot create a refund on its own, but any unused amount carries forward indefinitely to future tax years. Roughly half of 2023 claimants carried at least part of their credit forward.
Does the Energy Efficient Home Improvement Credit (25C) still exist?
No. It ended for property placed in service after December 31, 2025. Unlike 25D, it never allowed a carryforward, so unused 25C amounts are lost.
Can I still get 30% through a solar lease or PPA?
Not directly. The leasing company owns the system and claims the Section 48E business credit, and any benefit reaches you only as a lower lease rate. Section 48E ends for solar placed in service after December 31, 2027, and the begin-construction safe harbor closed on July 4, 2026.
Does battery storage still qualify for a federal tax credit in 2026?
Not for homeowner-owned systems. Battery storage was covered by Section 25D, which ended with the rest of the credit on December 31, 2025.
I already filed my 2025 return and forgot the solar credit. Can I fix it?
Yes. File Form 1040-X to amend the 2025 return and attach Form 5695. Amended returns are generally accepted within three years of the original filing date.