The 30% federal residential solar tax credit is gone for 2026 systems. Section 25D expired December 31, 2025 under H.R.1, signed July 4, 2025. Here is exactly what happened, what survives, and what it means for a homeowner deciding right now.
By Solar Installers Near Me Research Team • Published
Direct answer
The Section 25D Residential Clean Energy Credit was terminated by the One Big Beautiful Bill Act (H.R.1, Public Law 119-21), signed July 4, 2025. For any solar system placed in service on or after January 1, 2026, the federal residential solar credit is zero. There is no phase-down and no grandfathering for contracts signed before the deadline. The commercial credit under Section 48E survives, as do all state incentive programs. Source: IRS.gov FAQs for Public Law 119-21.
What changed on January 1, 2026
Section 25D residential solar credit: ENDED. Zero credit for 2026 system purchases.
Section 25C efficiency credit (heat pumps, insulation): ENDED.
Section 48E commercial credit: still active. Construction deadline July 4, 2026.
All state solar incentive programs: UNAFFECTED by H.R.1.
Pre-2026 Section 25D carryforwards: still valid on IRS Form 5695.
The 2026 reality
The federal residential solar credit has existed since 2006. At its peak between 2020 and 2022, it covered 26 percent of a system's installed cost. The Inflation Reduction Act of 2022 expanded it to 30 percent with a scheduled step-down to 26 percent in 2033 and 22 percent in 2034.
The One Big Beautiful Bill Act changed that plan entirely. Signed July 4, 2025 (Public Law 119-21), the legislation terminated Section 25D for systems placed in service on or after January 1, 2026. No phase-down. No grandfathering. A system installed in February 2026 -- regardless of when the contract was signed -- receives zero federal residential credit.
Pre-2026 carryforwards remain valid. If you claimed a partial Section 25D credit on a system installed before December 31, 2025 and your federal tax liability was lower than the credit amount, the unused portion carries forward to future tax years. File IRS Form 5695.
The same law ended Section 25C, which covered heat pumps, heat pump water heaters, insulation, windows, and electrical panel upgrades. A residential heat pump installed in 2026 receives no $2,000 federal credit. State and utility efficiency rebate programs are separate and unaffected.
Changed vs unchanged
| Program | Status in 2026 | What it means |
|---|---|---|
| Section 25D (residential) | ENDED | Ended January 1, 2026. No residential solar credit for 2026 systems. |
| Section 25C (efficiency) | ENDED | Heat pump, insulation, window credits ended January 1, 2026. |
| Section 48E (commercial) | ACTIVE | Still active. Construction must begin by July 4, 2026 for full placed-in-service window. |
| State solar incentives | UNAFFECTED | All state programs (SMART, Illinois Shines, SuSI, NY-Sun, etc.) are unaffected. |
| Pre-2026 carryforwards | VALID | Unused credits from pre-2026 systems carry forward on IRS Form 5695. |
| Section 30C (EV charger) | EXPIRES JUNE 30, 2026 | In qualifying census tracts only. Expires June 30, 2026. |
The one remaining path
This is the only mechanism by which a homeowner installing solar in 2026 can benefit indirectly from a federal solar tax program. It requires construction to begin before July 4, 2026.
Commercial solar projects must begin construction by July 4, 2026 to qualify for the 30 percent Section 48E federal tax credit. After that date, the system must be placed in service by December 31, 2027.
Ask About Lease and PPA OptionsWhen you sign a solar lease or PPA, the solar company installs the equipment on your roof and retains ownership. You pay for the use of the equipment (lease) or the electricity it generates (PPA).
Since the company owns the system, it is the entity placing the equipment in service. It claims the 30 percent Section 48E commercial credit -- not you. Construction must begin by July 4, 2026 for the full placed-in-service window through December 31, 2030.
The company received $9,000 from the federal government on a $30,000 system. It may factor that into a lower lease rate or PPA per-kWh price. You do not receive a tax credit. The pass-through shows up as a lower monthly payment. Whether the company passes through most, some, or little of that value depends on their pricing model -- which is why you need to ask.
A market problem worth naming
Some solar companies are still quoting 2025-era payback calculations that assume a 30 percent federal residential credit for 2026 system purchases. On a $30,000 system, that credit would have been worth $9,000 and would have reduced the quoted net cost to $21,000. It would have shortened the payback period by 2 to 4 years.
A proposal that assumes the federal residential credit for a 2026 system is wrong. It might be an honest mistake. It might not be. Either way, it gives you a significantly more optimistic picture than 2026 reality supports. Ask the installer to run the payback with zero federal residential credit. That number is what 2026 looks like.
Red flag to watch for
"Net cost after 30% federal credit" on a 2026 proposal
Section 25D ended December 31, 2025. Any proposal that subtracts a 30 percent federal credit from a 2026 residential system cost is using an expired program.
Ask: "What is the payback period with zero federal residential credit?" That is the question that separates accurate 2026 analysis from outdated marketing math.
Get the numbers that actually apply to your address, utility, and 2026 situation.
A free in-home assessment covers your specific utility's net-metering rules, every state incentive at your address, and a payback model that uses zero federal residential credit. No shared lead. No commission.
Q and A
A free in-home assessment takes about 90 minutes. An independent advisor reviews your utility bills, your roof, your state incentives, and your utility's specific net-metering rules -- and gives you a payback estimate with zero federal residential credit factored in. No door-knockers. No commissions. No shared leads.
