The Federal Solar Tax Credit Expired January 1, 2026: What That Actually Means for You

If you've been putting off a solar quote because "the 30% credit isn't going anywhere," it's time for an update: it already went somewhere. The Residential Clean Energy Credit — the federal 30% credit that covered solar panels, battery storage, and geothermal heat pumps — was repealed seven years ahead of schedule by the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. It no longer applies to systems installed starting in 2026.

This isn't a rumor or a proposal still working through Congress. It's enacted law, and the IRS has already issued guidance confirming how it applies. Here's exactly what changed, who's still covered, and what your options are now.

What actually happened

Before OBBBA, the federal solar credit (IRS Section 25D) was scheduled to run at 30% through 2032, step down to 26% in 2033 and 22% in 2034, then expire in 2035. OBBBA scrapped that entire schedule.

| | Old law (Inflation Reduction Act) | Current law (after OBBBA) | |---|---|---| | Credit rate | 30% through 2032, then phasing down | 30% through 2025, then 0% | | Expiration | December 31, 2034 | December 31, 2025 | | What's covered | Solar PV, solar water heating, battery storage (3 kWh+), geothermal heat pumps, small wind | Same list, but only for installs completed by end of 2025 | | Carryforward if unused | Yes | Still yes, for pre-2026 installs — unaffected by the repeal |

The same law also killed the separate Energy Efficient Home Improvement Credit (heat pumps, insulation, windows) on the same date, and ended the EV charger credit and EV purchase credits on their own, earlier schedules. If you want the full picture across all of these, our federal energy tax credit status tracker lays out every program side by side.

The date that actually matters: "placed in service," not "signed a contract"

The credit didn't expire based on when you signed a contract, paid a deposit, or even purchased the equipment. It's based on when the system was fully installed and operational — what the tax code calls "placed in service."

Under Section 25D(e)(8)(A), an expenditure is treated as made when the original installation of the item is completed — not when you signed the contract or paid a deposit. If your installation wrapped up on or before December 31, 2025, you're still eligible. If it was completed on or after January 1, 2026 — even if you signed and paid a deposit back in October — you are not.

This has already caught out a real number of homeowners whose installers hit permitting delays, inspection backlogs, or utility interconnection queues that pushed completion past the New Year. We cover exactly how that plays out, with real timing scenarios, in our deep dive on placed-in-service deadline mistakes.

If you installed before the deadline: you're grandfathered in, including carryforward

The repeal did not change the credit's carryforward rules — only the eligibility window for new installations. If your solar or battery system was completed in 2025 or earlier and your credit was bigger than your tax bill that year, the unused portion still carries forward to future tax years exactly as it always did.

Example: A household completed a $28,000 solar-plus-battery installation in November 2025. Their credit is $8,400 (30% of $28,000). Their federal tax liability that year was $5,200, so they used $5,200 of the credit and carried forward the remaining $3,200 to 2026 — and can keep carrying forward any unused balance in future years, even though the credit no longer exists for new 2026 installs. Our carryforward guide walks through the multi-year math in detail.

If you're installing in 2026: what's actually still available

The federal 30% credit is gone for new residential installs, full stop. But it wasn't the only thing that made solar economics work in most markets, and it's worth checking what's left before assuming a 2026 project doesn't pencil out at all.

| Still available in 2026? | Program | Notes | |---|---|---| | Yes | State solar tax credits and rebates | Vary significantly by state — some states have their own uncapped or capped credits independent of federal law | | Yes | Utility rebates | Many utilities offer per-watt or fixed rebates for solar and battery installs, unrelated to federal tax credit status | | Yes | Net metering / net billing | Utility compensation for exported solar power continues under state-regulated programs, separate from OBBBA | | Yes | SREC markets (where they exist) | Solar Renewable Energy Certificate markets in states that have them are unaffected by the federal repeal | | Sometimes | Commercial/business solar credit (Section 48E) | If you run a business from home and the system serves business use, a separate and still-active commercial credit may apply — this requires real business use, not just a home office deduction, so get this reviewed by a tax professional | | No | The 30% federal residential credit (25D) | Repealed for expenditures made after Dec. 31, 2025 |

Run the numbers for your specific location with our Solar Savings Calculator and Payback Period Comparison tool — both let you model a project with the federal credit set to zero, which is now the correct default for 2026 installs.

FAQ

I signed a contract in November 2025 but installation won't finish until February 2026. Do I qualify? Based on current IRS guidance, no — the expenditure is treated as made when installation is completed, not when the contract was signed or a deposit paid. A February 2026 completion falls after the December 31, 2025 cutoff. Confirm your exact situation with a tax professional, since edge cases around inspection and utility sign-off can matter.

Could Congress bring the credit back? Tax law changes with legislation, and it's possible a future bill could reinstate or modify residential energy credits. As of this writing there's no enacted law doing so — treat any credit that isn't currently in the tax code as unavailable rather than pending, and check back for updates if you're timing a purchase around potential future incentives.

Does this affect solar leases or power purchase agreements (PPAs)? Indirectly. Under a lease or PPA, the company that owns the system — not the homeowner — was the one claiming the 25D credit anyway, so this repeal removes an incentive that installers and financiers may have been passing through as a lower monthly payment. Ask any 2026 lease or PPA quote whether its pricing assumed a tax credit that no longer exists.

Is there still a federal credit for anything related to home solar? Not for typical residential-owned systems. The commercial/business credit (Section 48E) is a separate program with its own eligibility rules and is not a substitute for most homeowners — see the table above.

Fact-checked by Priya Nadar, P.E. This article explains general tax rules and is not personalized tax advice — consult a tax professional for your specific situation. Found an error? See our Corrections Policy.