Here's the news that changes the whole math: the 30% federal solar tax credit for homeowners is gone. The Residential Clean Energy Credit (Section 25D) ended on December 31, 2025, terminated by the One Big Beautiful Bill Act. If you buy and own a system in 2026, you get nothing back from the IRS. That's a decade earlier than the old law promised, and most incentive articles still online haven't caught up. For system costs and sizing, see our residential solar systems complete guide.
TL;DR: For homeowners who buy their own system, the federal solar credit is 0% in 2026, killed by the OBBBA (signed July 4, 2025) with no phase-down. The one remaining federal route is a lease or PPA, where the developer claims the commercial credit (Section 48E) and passes value through, and even that needs the project to begin construction by July 4, 2026. What survives for owners: state tax credits (New York 25% capped at $5,000, Massachusetts 15%), SREC income in eight markets, and property and sales-tax exemptions. Use DSIRE (dsireusa.org) to find what's left at your address.
Did the pitch just get worse? For cash and loan buyers, yes. Installed prices barely moved, so losing the 30% offset means the net cost of owning solar jumped by nearly a third overnight. That's the honest headline, and any calculator still applying a 30% credit to a 2026 purchase is now wrong.
What Happened to the Federal Solar Tax Credit in 2026?
The Residential Clean Energy Credit let homeowners claim 30% of a solar system's cost against federal income taxes. It's over for owners. The One Big Beautiful Bill Act, signed July 4, 2025, terminated Section 25D effective December 31, 2025, roughly ten years ahead of the Inflation Reduction Act schedule that had locked 30% through 2032 (SEIA, 2025; EnergySage, 2026).
One important exception. If your system was placed in service, meaning installed, inspected, and granted permission to operate, on or before December 31, 2025, you still claim the 30% credit on the return covering that year. I filed IRS Form 5695 for my own 2023 install and rolled about 18 percent of the credit into year two, which the form handles automatically. That still works for pre-2026 installs. It just isn't available for anything a homeowner buys new this year.
Is There Any Federal Solar Incentive Left?
Yes, but only through third-party ownership: a solar lease or a power purchase agreement (PPA). Because a developer owns that system, the developer claims the commercial credit under Section 48E and, in principle, hands part of that value back to you as a lower monthly payment or electricity rate. Our solar PPA guide walks through whether that trade actually pays off for you.
Two things to know before you assume a lease saves the day. First, the commercial credit has its own cliff: the project generally must begin construction by July 4, 2026 to qualify, so this window is closing too. Second, a lease or PPA transfers ownership, and with it the long-term savings, to the developer. It's a way to access a federal incentive you can no longer claim yourself, not free money. Predictably, third-party ownership has jumped to roughly 45% of the residential market as buyers chase the only credit left.
Which States Still Offer Solar Tax Credits?
This is where the value now concentrates. State incentives survived the federal cut untouched, and for an owner in 2026 they're the main event rather than a bonus on top. The DSIRE database (dsireusa.org) from NC State University covers all 50 states and is the source to check for your utility territory before modeling anything.
Reading from Europe? The landscape there is different, with several countries subsidizing plug-in systems for renters; our EU balcony solar rules guide breaks it down. Still weighing a purchase? Our guide on is solar energy easy walks through quote to installation.
States with the strongest incentive stacks (2026):
| State | Tax credit | Property tax exemption | Sales tax exemption | Notes |
|---|---|---|---|---|
| New York | 25% (capped $5,000) | Yes | Yes (4% state sales tax) | NY-Sun rebates also available through NYSERDA |
| Massachusetts | 15% (no cap) | Yes | Yes | SMART program adds production-based payments |
| Maryland | No income tax credit | Yes | Yes | SREC market adds income; battery grants available |
| New Jersey | No income tax credit | Yes | Yes (7% sales tax) | Strong SREC market; SuSI incentive program |
| California | No state income tax credit | Yes | Partial | NEM 3.0 changes billing; SGIP for batteries |
Source: DSIRE database, state-specific program documentation, 2026
What Is New York's Solar Tax Credit?
New York still adds a 25% state credit capped at $5,000. On a $20,000 system, that's a $5,000 state credit, and with the federal credit gone for owners it's now the single largest tax incentive most New Yorkers will see on a purchase. NYSERDA's NY-Sun program adds upfront rebates of $0.20-$0.50 per watt, tiered by income and utility territory.
What Are SRECs and How Much Are They Worth?
Solar Renewable Energy Certificates (SRECs) are a separate income stream in states with solar carve-outs in their Renewable Portfolio Standards: New Jersey, Massachusetts, Maryland, Ohio, Pennsylvania, Delaware, and Washington DC. Each SREC represents 1 megawatt-hour generated. Utilities must buy SRECs to prove compliance or pay a penalty (the Solar Alternative Compliance Payment). A typical 6 kW system producing 7,500 kWh/year earns 7-8 SRECs. New Jersey SRECs traded $200-$250 in 2024-2025; DC SRECs have topped $400, making a 7-8 SREC/year stream worth $2,800-$3,200 annually at DC prices (SREC Trade, 2025).
Prices swing with supply and RPS strictness. New Jersey's market stays strong because the state keeps tightening its carve-out. Massachusetts replaced SREC II with the SMART program in 2020, paying a fixed rate per kWh instead. SRECs often go unclaimed by owners never told about them. If your system has run over a year in an SREC state, check with your PUC or a broker like SRECTrade or Sol Systems, you may have certificates earning nothing that should fetch $200-$400 each.
Which States Offer Property Tax and Sales Tax Exemptions?
Most strong-solar states exempt the added home value from property tax assessment. Lawrence Berkeley National Laboratory found solar adds $4-$6 per watt to resale value (Tracking the Sun, 2023). A 6 kW system adds $24,000-$36,000 in assessed value, which without an exemption could mean $300-$600/year in extra property tax. Sales-tax exemptions remove 5-10% of equipment cost: New Jersey's 7% exemption on a $15,000 package saves $1,050 directly.
Does Battery Storage Still Get a Tax Credit?
Not federally, for a homeowner buying their own. The standalone battery credit rode on Section 25D, and that section ended December 31, 2025 along with the solar credit. A Tesla Powerwall 3, Enphase IQ Battery 5P, or SolarEdge Home Battery 10 kWh you buy and install in 2026 no longer earns the 30% federal credit as an owner.
State battery help continues, though. California's SGIP offers up to $0.25 per watt-hour, or roughly $3,375 on a 13.5 kWh Powerwall, and Massachusetts and Maryland run their own battery incentives. Third-party-owned storage can still reach the commercial credit. So batteries aren't incentive-free, the support just moved from a clean federal credit to a patchwork of state programs.
How Do You Claim What You Still Qualify For?
If your system was placed in service by December 31, 2025, claim the 30% on IRS Form 5695 for that year, same as always: get the line-item invoice, confirm the permission-to-operate date, complete Part I, and carry forward any unused balance. Keep the invoice, permits, and interconnection agreement.
For anything installed in 2026, skip Form 5695 for the federal solar credit, there's nothing to claim as an owner. Instead, put your energy into DSIRE: search your address, register for SRECs if you're in an eligible state, file for your state credit and property and sales-tax exemptions, and confirm any utility rebate before you sign. That stack is smaller than the old federal credit, but it's real, and most buyers leave part of it on the table.
Summary
The headline incentive changed completely in 2026: the 30% federal solar tax credit for homeowners ended December 31, 2025 under the One Big Beautiful Bill Act, with no phase-down. Buy and own a system this year and there's no federal credit to claim; the only federal route left is a lease or PPA, where a developer claims the commercial credit and it has to begin construction by July 4, 2026. What survives for owners is the state layer: New York's 25% credit, Massachusetts 15%, SREC income in eight markets, and property and sales-tax exemptions. Systems placed in service by the end of 2025 still claim the old 30%. Use DSIRE (dsireusa.org) to find every incentive at your address before finalizing a purchase or financing decision.