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. That route has its own clock: the July 4, 2026 begin-construction window has closed, so a leased system started after it has to be placed in service by December 31, 2027. What survives for owners: state tax credits (New York 25% capped at $5,000, Massachusetts 15% capped at $1,000), 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. The credit is non-refundable, so any part your tax bill can't absorb carries forward to later years through Form 5695. That still works for pre-2026 installs. It just isn't available for anything a homeowner buys new this year.
The gradual 2032-2034 step-down the old law promised never took effect; what it would have looked like, and what replaced it, is laid out in the ITC phase-down.
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, and part of it has already passed. Under the OBBBA, a solar project that began construction by July 4, 2026 keeps the credit; one that didn't must be placed in service by December 31, 2027 (Eide Bailly, 2025). Residential systems sit far below the 1.5 MW(ac) line under which IRS Notice 2025-42 still lets a solar project establish its start by incurring 5% of its cost, so a lease signed today may be riding on equipment the developer bought before the deadline. Ask the provider directly which deadline your system falls under. 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.
Whether that trade works in your market is an arithmetic question, and it usually goes against the lease. Our payback calculator runs both sides over 25 years: owning still comes out ahead in roughly 97% of the combinations it can produce, and the lease wins mainly where retail electricity is cheap enough that owning barely clears its own capital cost.
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% (capped $1,000) | 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's "Selling Into the Sun" study (2015), built on almost 22,000 home sales across eight states, found buyers paid a premium of about $4 per watt of owned PV. On a 6 kW system that's roughly $24,000 of added value, which without an exemption could mean several hundred dollars a 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.
Is There Solar Help for Low-Income Households in 2026?
Yes, but it's the least stable part of the incentive map right now. The biggest piece is the EPA's $7 billion Solar for All program, which had already obligated grants to state and nonprofit recipients serving more than 900,000 lower-income households when the agency cancelled it in August 2025. On September 18, 2026, Judge Mary McElroy of the federal district court in Rhode Island ruled that termination unlawful and vacated it, ordering the EPA to keep administering the grants already obligated (OPB, 2026). The EPA said it was reviewing the decision and considering an appeal, and a parallel case brought by state attorneys general was dismissed by a federal judge in Washington in June and is on appeal.
What does that mean for a household today? Money may start flowing again through the state-level recipients, but nobody should sign a contract that only pencils out if a grant arrives on schedule. Check your state energy office's Solar for All page, and treat the timeline as unknown until the appeal question is settled.
Some low-income programs never depended on the federal grant. Illinois Solar for All, run by the state, serves households at or below 80% of area median income and requires approved vendors to design systems that guarantee bill savings. Programs like it are listed on DSIRE under income-qualified incentives, and for renters, community solar subscriptions are often the only practical door in.
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.
The 30% federal solar credit ended for homeowners on Jan 1, 2026. If you buy your own system now, a lease is the only way left to touch a federal incentive.
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 a system that missed the July 4, 2026 construction start must be in service by December 31, 2027. What survives for owners is the state layer: New York's 25% credit, Massachusetts 15% up to $1,000, a reinstated but contested Solar for All program for lower-income households, 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.