Section 25D Solar Tax Credit Ended: What's Left in 2026
In short
The 30% credit for homeowner-owned solar and batteries ended for installs completed after Dec 31, 2025. What that does to payback and what remains.
The federal Residential Clean Energy Credit (Section 25D), worth 30% of the cost of home solar, battery storage and similar equipment, is not available for expenditures made after December 31, 2025. The IRS treats the expenditure as made when installation is completed, so a system finished in 2026 gets no credit, even if you signed and paid in 2025. What remains: unused 25D credit from earlier years can still be carried forward, leasing companies may still claim a business credit on a deadline, and state and utility incentives are unaffected.
What Ended and When
The One, Big, Beautiful Bill Act, signed July 4, 2025, ended several home and vehicle energy credits early:
| Credit | What it covered | Not allowed for |
|---|---|---|
| 25D Residential Clean Energy | 30% of solar panels, solar water heaters, batteries of 3 kWh or more, geothermal heat pumps, small wind, fuel cells | Expenditures made after Dec 31, 2025 |
| 25C Energy Efficient Home Improvement | 30% of insulation, windows, heat pumps and more, up to $1,200 a year ($2,000 for heat pumps) | Property placed in service after Dec 31, 2025 |
| 30C Refueling Property | Home EV chargers in eligible areas | Property placed in service after June 30, 2026 |
The installation date is the line. Under the IRS FAQ, a 25D expenditure is treated as made when the original installation is completed. Paying a deposit or the full price in 2025 doesn't qualify a system whose installation was finished in 2026. For a new home, the expenditure is treated as made when you begin using the home.
What You Can Still Use
- Carryforward from past years. 25D is nonrefundable, but the IRS says excess unused credit can be carried forward to reduce tax in future years. If you installed solar in 2025 or earlier and couldn't use the whole credit, keep claiming the remainder on Form 5695.
- Leased and third-party-owned systems. With a lease or power purchase agreement, a company owns the system and may claim the business clean electricity credit (Section 48E). For solar, IRS Notice 2025-42 says that credit ends for facilities placed in service after December 31, 2027, unless construction began by July 4, 2026. Whether any of that value reaches you depends on the company's pricing. Ask in writing how the credit affects your monthly payment.
- State, local and utility programs. The federal change didn't touch state tax credits, rebates, property or sales tax exemptions, or utility rebates. These vary widely; check your state energy office and utility.
Worked Example: What the Credit Was Worth
Using the defaults in our Solar Payback calculator: a $25,000, 8 kW system, 5 peak sun hours a day, an 80% efficiency factor, $0.18 per kWh, rates rising 3.5% a year, and output falling 0.5% a year.
Year-one output: 8 × 5 × 365 × 0.80 = 11,680 kWh. At $0.18, that is $2,102.40 of electricity.
With the old 30% credit: $25,000 × 0.30 = $7,500 credit, net cost $17,500. Cumulative savings pass $17,500 at about 7.5 years.
2026, no credit: net cost $25,000. Cumulative savings pass $25,000 at about 10.3 years.
The repeal adds about 2.8 years to payback in this example. Over 25 years the calculator shows $51,476 of net savings with no credit, versus $58,976 with it; the $7,500 difference is exactly the lost credit.
If Your Install Was Near the Deadline
- Find the completion date. Keep the installer's completion paperwork, the final inspection record and the invoice showing when work finished.
- Claim it for the right year. A system completed in 2025 is claimed on the 2025 return, on Form 5695. If you missed it, a tax professional can tell you whether to amend.
- Watch for a pitch that promises the 30% credit. For a homeowner-owned system installed in 2026, there isn't one. A salesperson quoting it is working from old material.
Is Solar Still Worth It?
For many homes, yes, but it depends more than before on your electricity rate and how your utility credits exported power. The U.S. average residential price was 18.31 cents per kWh in July 2026 (EIA), but prices range widely by state. At higher local rates, payback shortens; at lower rates, or with low export credits and no battery, it lengthens. Run the calculator with your own bill, and compare cash, loan and lease quotes on total cost over the same period.
What This Doesn't Cover
This guide doesn't cover business or rental property, the details of 48E eligibility and foreign-supplier rules, or amending a prior-year return. If you are carrying forward a 25D credit or disputing whether an install was complete in 2025, talk to a tax professional. For system sizing and a site-specific quote, use a licensed solar installer.
Solar Payback Calculator
Re-run payback with no federal credit and your own rate.
Home Battery Guide
Sizing and payback for a battery with no federal credit.
Sources
- IRS: FAQs on the One, Big, Beautiful Bill changes to 25C, 25D, 30C and more
- IRS: Residential Clean Energy Credit (qualifying property, carryforward)
- IRS Notice 2025-42 (48E beginning-of-construction rules for solar)
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