The federal government’s 30% residential solar tax credit has ended. Section 25D, which let homeowners deduct 30% of their solar installation costs from their federal taxes, expired on December 31, 2025. The One Big Beautiful Bill, signed in July 2025, terminated the credit early. It had originally been extended through 2034 under the Inflation Reduction Act.
Homeowners who installed systems before the deadline can still claim the credit on their tax returns using IRS Form 5695. But anyone who installed a system on January 1, 2026, or later doesn’t qualify. The system had to be new and placed in service at a U.S. residence before the cutoff date.
The credit had a long history. It offered 30% from 2017 through 2019, dropped to 26% for 2020 and 2021, then returned to 30% for 2022 through 2025. It covered solar panels, solar water heaters, and battery storage systems. Houses, mobile homes, houseboats, condos, and manufactured homes all qualified. Rental properties didn’t. Homeowners had to own the system outright or finance it. Leased systems and power purchase agreements weren’t eligible under 25D. To qualify, solar water heaters and panels had to be certified by the SRCC or a government-endorsed certification entity.
The financial impact is significant. In California, homeowners could expect a payback period of about 7 years with the credit. Without it, that stretches to roughly 9 years. In states like Georgia and Tennessee, payback timelines with the credit ran 13 to 19 years. Because the credit was non-refundable, homeowners whose tax liability was less than their credit amount could roll over unused credits to future tax years.
Systems installed in 2026 and beyond now cost homeowners considerably more upfront. Rising electricity prices under new legislation may help offset some of those costs in states with higher rates. Meanwhile, battery storage costs are anticipated to decrease by 52% by 2030, which could gradually reduce overall system expenses for homeowners who choose to install storage alongside solar panels.
There’s one remaining option that involves third-party ownership. The 48E tax credit for residential solar leases and power purchase agreements remains available through the end of 2027. Under this program, installation companies claim the 30% credit themselves. They then pass the savings to homeowners through lower monthly payments. Homeowners don’t file for the credit directly.
The solar market for American homeowners looks different now. The largest federal incentive for residential solar ownership is gone. What remains is a narrower path through leasing arrangements that expires in less than three years.
References
- https://turbotax.intuit.com/tax-tips/going-green/federal-tax-credit-for-solar-energy/L7s9ZiB4D
- https://www.paradisesolarenergy.com/blog/how-does-the-solar-tax-credit-work/
- https://www.energystar.gov/about/federal-tax-credits/solar-energy-systems
- https://www.solar.com/learn/trump-and-the-fate-of-the-30-solar-tax-credit/
- https://enphase.com/blog/homeowners/solar-tax-credit-updates-obbb
- https://www.irs.gov/credits-deductions/residential-clean-energy-credit
- https://www.stephanoslack.com/2026/02/05/clean-energy-tax-credits-in-2026-what-remains-whats-ending-and-why-timing-matters/
- https://www.kcgreenenergy.com/blog/solar-tax-credit-ending/
- https://www.solarreviews.com/blog/are-solar-panels-worth-it-2026
