Federal Solar Tax Credit in 2026: What Changed & What Qualifies

The short answer for 2026

Why Section 25D ended

Under the original Inflation Reduction Act of 2022, Internal Revenue Code (IRC) Section 25D—the Residential Clean Energy Credit—was scheduled to provide a 30% tax credit through 2032 before stepping down to 26% in 2033 and 22% in 2034.

However, Public Law 119-21 (commonly referred to as the One, Big, Beautiful Bill Act, enacted July 4, 2025) accelerated the expiration date. Specifically, Congress amended Section 25D to disallow credit claims for "any expenditures made after December 31, 2025."

As a result, homeowner-purchased solar panels, solar roofing shingles, and residential battery storage systems completed after December 31, 2025 are ineligible for the Section 25D credit.

Signed in 2025 vs. installed in 2026: Which date controls?

A frequent question from homeowners caught in utility interconnection backlogs is whether signing an installation agreement or paying a deposit in 2025 preserves eligibility for the 30% credit.

The statutory language and IRS guidelines are unequivocal: the completion date of original installation is the controlling event.

IRS guidance published for Public Law 119-21 (FAQ 7) clarifies that if a taxpayer paid 100% of contract costs in November 2025, but the solar company did not complete installation and pass municipal inspection until January 2026, the expenditure is treated under federal tax law as occurring in 2026. Because Section 25D does not apply to 2026 expenditures, that homeowner cannot claim the 30% credit.

The §48E lease and PPA exception

While Section 25D for homeowners ended, Congress left the commercial clean energy provisions in place with distinct deadlines. Under IRC Section 48E (Clean Electricity Investment Credit), businesses that own clean energy facilities can still claim an investment tax credit of up to 30%.

In a residential solar lease or Power Purchase Agreement (PPA), the homeowner does not own the panels. Instead, a third-party solar provider (such as Sunrun, Sunnova, or a regional financing entity) owns the equipment and maintains it on your roof.

Because the equipment is business property owned by a commercial entity, the provider claims the Section 48E tax credit on its corporate tax return. In turn, providers frequently structure customer contracts with lower monthly payments or lower per-kWh rates than would otherwise be viable.

Note: Under IRS Notice 2025-42, commercial solar facilities qualify under Section 48E if construction begins on or before July 4, 2026, or if the system is placed in service before December 31, 2027. Review our detailed Solar Lease vs. Buy Guide to weigh the pros and cons of third-party ownership.

Battery storage and EV charger rules in 2026

Home Batteries

The Inflation Reduction Act previously enabled standalone home batteries with at least 3 kWh capacity to claim the 30% credit under Section 25D(a)(6), even without rooftop solar. Because Section 25D has expired, batteries purchased directly by homeowners in 2026 also receive a 0% federal credit.

EV Charging Equipment (§30C)

The federal tax credit for home electric vehicle charging equipment under IRC Section 30C (up to 30% of cost capped at $1,000 in eligible census tracts) terminates for equipment placed in service after June 30, 2026. Homeowners pairing solar with level-2 chargers should ensure installation occurs before this cutoff.

Unused credits from prior years: Do carryforwards expire?

The Section 25D credit is a non-refundable tax credit. That means it can reduce your tax liability to zero, but the IRS does not issue a refund check for any excess credit that exceeds your tax bill.

Under Section 25D(c), taxpayers who installed a qualified solar or battery system on or before December 31, 2025 and possessed unused credit amounts can carry forward that remaining balance to future tax years. The repeal of new expenditures under Public Law 119-21 did not invalidate previously established carryforwards. You continue reporting carried-forward balances on IRS Form 5695 until exhausted.

State and utility incentives replacing the federal credit

With the federal residential credit at 0%, state-level programs, utility rebates, and performance payments now represent the primary mechanism for lowering upfront capital costs.

To see exact programs, property tax exemptions, and sales tax rules for your location, view our complete Solar by State hub.