Solar Tax Credit Update 2026: The Federal ITC Has Expired

The Federal Solar Tax Credit Expired at the End of 2025

If you have read older guides promising "30% back" on your solar installation, here is the important update: the federal residential solar tax credit — officially the Residential Clean Energy Credit under Section 25D of the tax code — expired on December 31, 2025. Systems placed in service in 2026 and beyond no longer qualify for this federal credit.

For most of the past two decades, this credit let homeowners deduct a percentage of their solar installation cost directly from the federal income taxes they owed. It was set at 30% under the Inflation Reduction Act of 2022, and many sources expected that rate to run through 2032. That schedule changed: the residential credit was ended early, and as of January 1, 2026, homeowners installing solar cannot claim it.

We have left this page up because so many homeowners are still searching for "the 30% credit" and deserve an accurate answer. The short version: do not count on a 30% federal credit for a 2026 install. Confirm your own eligibility with a tax professional before making any financial assumptions.

What This Means for Your Numbers

The practical effect is simple but significant: the full installed cost of a system is what you pay. There is no longer a federal credit to subtract from it. On a $25,000 system, the homeowner who installed in 2025 might have reduced their federal tax bill by up to $7,500; a homeowner installing the same system in 2026 should plan for the full $25,000 with no federal offset.

Because the credit was so commonly factored into payback math, any payback estimate or "net cost after credit" figure you read in older material will be too optimistic for a 2026 install. Recalculate using the full system price.

State and Utility Incentives May Still Apply

Losing the federal credit does not mean there are no incentives left. Many states and utilities run their own programs that are unaffected by the federal expiration. Depending on where you live, you may still benefit from:

• State income tax credits — for example, New York (25% of cost, up to $5,000), Arizona (25%, up to $1,000), and Massachusetts (15%, up to $1,000).
• Property tax exemptions — many states exclude the added home value from solar when assessing property taxes.
• Sales tax exemptions — some states waive sales tax on solar equipment.
• Utility rebates and performance programs — cash rebates or per-kWh payments offered by individual utilities (e.g. NY-Sun, California SGIP, SMART in Massachusetts).

These programs vary widely by location and change frequently. Check your state energy office and your utility's website, and confirm current eligibility with a tax professional — do not assume any program is active without verifying.

Leasing vs. Buying After the Credit

For years, one of the strongest arguments for buying rather than leasing was that only the owner of the system could claim the federal credit. With the residential credit gone, that specific advantage no longer applies in 2026. Buying still tends to deliver more lifetime value than leasing — you build equity and avoid escalating lease payments — but the decision should now be made on the financing terms in front of you, not on a federal credit.

Is Solar Still Worth It in 2026?

For many homeowners, yes — but the case now rests on electricity rates rather than a federal subsidy. Utility rates have risen roughly 4–6% annually in most markets over the past five years, and that trend shows no sign of reversing. If your monthly solar payment beats your current electric bill, you can still be cash-flow positive from day one.

The smart move is to compare quotes from multiple installers using current pricing with no federal credit baked in, then weigh the monthly payment against your electric bill and any state or utility incentives you actually qualify for.

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