Federal Solar Tax Credit 2026: What Changed and What You Can Still Claim
Published July 22, 2026
If you’ve seen conflicting claims about whether “the solar tax credit is gone,” the confusion is understandable — the answer depends on whether you’re buying or leasing. Here’s the specific, sourced breakdown.
The law: One Big Beautiful Bill Act (H.R. 1)
H.R. 1, commonly referred to as the One Big Beautiful Bill Act (OBBBA), was signed into law on July 4, 2025. Among many other tax provisions, it repealed the Section 25D Residential Clean Energy Credit — the 30% credit homeowners had been able to claim on solar (and other qualifying home clean-energy equipment) since it was expanded by the Inflation Reduction Act of 2022.
Under the prior law, the 30% rate was scheduled to hold through 2032, then step down to 26% in 2033 and 22% in 2034 before expiring in 2035. H.R. 1 eliminated that entire schedule roughly seven years early, ending the credit for systems placed in service on or after January 1, 2026 — with no reduced-rate transition year.
Who is and isn’t affected
| Situation | Effect |
|---|---|
| Bought (cash or loan) and placed in service before Jan 1, 2026 | Still eligible for the 30% Section 25D credit on that year’s tax return |
| Bought (cash or loan), placed in service Jan 1, 2026 or later | Not eligible for Section 25D — $0 federal credit for the homeowner |
| Signed a contract in 2025 but system not placed in service until 2026 | Generally not eligible — eligibility follows the placed-in-service date, not the contract or installation date. Confirm your exact date with your installer and a tax professional. |
| Solar lease or PPA (third-party-owned), any date | Section 25D never applied directly to the homeowner in this structure; the owning company may claim the separate Section 48E credit instead |
| New construction with solar included, closing in 2026 | Follows the same placed-in-service rule as a retrofit — confirm the date with the builder |
Does a lease or PPA give you a back-door tax credit?
Not directly. In a lease or power purchase agreement, the solar installation company (or a financing partner) owns the equipment and sells you the electricity or leases you the hardware at a fixed monthly rate. That company — not you — may be eligible to claim the Section 48E Clean Electricity Investment Credit, a separate provision aimed at commercial and third-party-owned clean energy assets.
Some solar companies factor an expected 48E credit into the monthly rate they quote you, effectively passing part of the value through as a lower payment. This is not guaranteed, is not the same as a credit on your own return, and varies by provider — ask directly whether a given quote already reflects any such pass-through, and get it in writing rather than assuming it. See Solar Loan vs. Lease vs. PPA for a full comparison of how these structures affect your total cost.
What hasn’t changed
- State and local incentives are set independently of federal tax law and are unaffected by H.R. 1. See our state-by-state incentives guide.
- Net metering and net billing rules, which determine what you’re credited for excess solar power sent to the grid, are set at the state or utility level and are separate from this federal tax provision.
- Section 48E for commercial/TPO systems continues to exist, on its own schedule, separate from the now-repealed Section 25D.
What this means for your decision
The end of Section 25D doesn’t make solar pointless — it removes one significant piece of the savings equation and shifts more of the calculation onto local electricity rates, state incentives, and net metering terms. Read Is Solar Still Worth It in 2026? for a framework to evaluate your specific situation, and always confirm placed-in-service dates and eligibility specifics with a qualified tax professional before assuming either outcome.
Frequently asked questions
What law ended the solar tax credit?
The One Big Beautiful Bill Act (H.R. 1), signed into law by President Trump on July 4, 2025. It repealed the Section 25D Residential Clean Energy Credit for systems placed in service on or after January 1, 2026.
Is there any grace period or phase-down?
No. Unlike a typical step-down, H.R. 1 ended the 30% credit outright with a hard January 1, 2026 cutoff based on when the system is placed in service (i.e., operational and inspected), not when you signed a contract or made a deposit.
What does 'placed in service' mean, and why does it matter?
It generally means the system has passed final inspection and is approved to operate (permission to operate, or PTO, from your utility) — not the installation date or contract date. A system installed in December 2025 but not granted permission to operate until January 2026 would not qualify, which is why some homeowners who signed contracts in 2025 still missed the deadline. Confirm your specific project's placed-in-service date with your installer and, ideally, a tax professional.
Do commercial or third-party-owned solar systems still get a credit?
A separate credit, the Section 48E Clean Electricity Investment Credit, still applies to commercial and third-party-owned (TPO) systems — including systems installed under residential leases and PPAs, since the leasing company technically owns the equipment. That credit follows its own phase-down schedule and eligibility rules distinct from the repealed Section 25D, and is claimed by the system owner (the leasing company), not the homeowner.