There is no federal tax credit for a home solar system you buy and have installed in 2026. The 30% Residential Clean Energy Credit (Internal Revenue Code §25D) does not apply to any expenditure made after December 31, 2025, and the IRS treats the expenditure as made when installation is completed, not when you paid.
Two groups can still get value from it: owners whose system was completed in 2025, who claim it on their 2025 return with Form 5695, and filers carrying an unused 2024 or 2025 credit into 2026. Leased and PPA systems follow separate business-credit rules that belong to the company that owns the equipment, not to you.
What changed for residential solar in 2026?
Public Law 119-21, signed July 4, 2025 and often called the One Big Beautiful Bill, ended §25D after 2025, years earlier than the schedule it replaced, with no step-down year. The IRS states in Fact Sheet FS-2025-05 (August 21, 2025) that no Residential Clean Energy Credit is allowed for expenditures made after December 31, 2025.
The same FAQ answers the question that catches most late-2025 buyers: if installation was completed after December 31, 2025, the expenditure counts as made after the deadline even if you paid in full before it. A 2025 deposit, signature or prepayment did not keep the credit for a system finished in 2026. The home-efficiency credit (§25C, used for heat pumps, insulation and windows) ended on the same date for property placed in service after 2025.
Your situation | Federal result | What to do |
|---|---|---|
You buy a system and installation is completed in 2026 | No §25D credit | Price the project without it; check state and utility programs |
Installation was completed in 2025 (cash or loan) | 30% of qualified cost, claimed on the 2025 return | File Form 5695 with the 2025 return, or amend if you missed it |
Your 2024 or 2025 credit was larger than your tax | The unused part carries to 2026 | Use Form 5695 again on the 2026 return |
You lease the system or buy its power under a PPA | No personal §25D credit; you do not own the equipment | Judge the contract price and escalator on their own |
A company or business owns the project | Separate business credits (§48E or §45Y) may apply to that owner | Owner gets its own tax advice; the household checks the contract |
Claiming a system completed in 2025
The 2025 Instructions for Form 5695 set the credit at 30% of qualified costs for solar electric property and battery storage installed in 2025. It is claimed in Part I of Form 5695, filed with your Form 1040. If you financed the system, the IRS says not to include loan interest or loan origination fees in the cost.
Deadlines that matter in October 2026
- On an extension: the IRS extension runs to October 15. Include Form 5695 with the 2025 return.
- Already filed without the credit: you can file an amended return (Form 1040-X). To claim a refund, the IRS window is generally 3 years from the original filing date or 2 years from the date you paid the tax, whichever is later.
- Credit bigger than your tax: the IRS says to file Form 5695 even if you cannot use any of the credit in 2025, so the unused amount is on record for 2026.
Worked example
A homeowner’s solar-plus-battery installation was completed in November 2025. The contract price, including installation labor, was $25,000. The utility paid a $1,000 rebate that the homeowner did not report as income, so the IRS rule reduces the cost basis to $24,000.
- Credit: $24,000 × 30% = $7,200.
- The homeowner’s 2025 tax, after the other credits listed on the IRS limit worksheet, is $4,500. The credit is nonrefundable, so it uses $4,500 in 2025.
- The remaining $7,200 − $4,500 = $2,700 carries to the 2026 return.
The figures are illustrative. Your result depends on your actual tax, qualified cost and any subsidies, which is why an installer’s “30% back” line is not the same as the credit on your return.
Keep these records with the return:
- the signed purchase or loan contract and itemized final invoice;
- proof of payment;
- the installation completion record and the utility’s permission-to-operate letter, which show the 2025 date;
- equipment make, model, capacity and, for batteries, the kWh rating;
- any rebate or subsidy paperwork; and
- each Form 5695 that created, used or carried the credit.
What counted as a qualified cost
These rules apply to 2025 claims only. They come from the IRS Form 5695 instructions and the IRS Residential Clean Energy Credit page.
| Counted toward the 30% | Did not count or reduced the basis |
|---|---|
| Solar panels and the equipment that makes electricity for the home | Used (previously owned) equipment |
| Labor for on-site preparation, assembly and original installation | Roof decking, rafters and other parts that only serve as roof or structure |
| Piping or wiring to connect the system to the home | Batteries under 3 kWh |
| Battery storage of at least 3 kWh | Utility subsidies and other rebates treated as a price reduction (subtract them from the cost) |
| Solar roof tiles or shingles that also generate electricity | Loan interest and loan origination fees |
Net-metering credits for power you send to the grid do not reduce the cost basis. The home could be your main home or a second home you live in part-time and do not rent out. A landlord who does not live in the property could not claim §25D.
A carryforward is not a new 2026 credit
The 2025 instructions say Form 5695 is used to take a carryforward from 2024 or to carry the unused part of a 2025 credit into 2026. That keeps an old credit alive; it does not reopen §25D for equipment installed in 2026.
- Start with the unused amount on your last Form 5695.
- Apply it on the 2026 return using the Form 5695 version and instructions for that year.
- If some is still unused, carry it forward again and keep the paper trail for every year.
Leases and PPAs: the business credit belongs to the owner
With a lease or power-purchase agreement, a company owns the panels and you pay a monthly charge or a price per kWh. You cannot claim §25D for equipment you do not own.
The owner may be able to claim a business credit instead: the Clean Electricity Investment Credit (§48E) or its production-based sibling, §45Y. These have their own rules, and the 2025 law also ends them for solar. Under IRS Notice 2025-42, a solar facility whose construction begins after July 4, 2026 must be placed in service by December 31, 2027 to qualify.
None of this obliges the company to lower your price. Whether any of the owner’s tax value reaches you depends on the owner’s tax position and the price it chooses to offer. Compare the contract on what you will pay:
- starting monthly payment or price per kWh;
- annual escalator and term length;
- production guarantee and what happens if output falls short;
- transfer rules if you sell the home; and
- buyout terms and total projected payments.
Our solar financing guide compares owning, loans, leases and PPAs side by side.
What is left for a 2026 buyer
State tax credits, rebates, performance payments, property- and sales-tax exemptions, and utility programs run under their own laws and were not ended by the federal change. They differ widely, and each has its own funding, eligibility and deadline.
One example: New York’s Solar Energy System Equipment Credit is 25% of qualified costs, capped at $5,000, for a system at your New York principal residence. Unusually, it also covers a written solar lease and a power-purchase agreement of at least ten years. Unused amounts carry over for up to five years. See our New York solar incentives page for the rest of that state’s programs.
For other states, start with the solar incentives guide, then confirm the current rule with the state energy office or your utility. Do not subtract a program from a quote until its administrator confirms your home and equipment qualify.
Is there a federal solar tax credit for a system installed in 2026?
Not for a homeowner who buys the system. §25D does not apply to expenditures made after December 31, 2025. A company that owns a leased or PPA system may have its own business credit, but that is not a credit on your return.
I paid in 2025 but the installation finished in 2026. Can I claim it?
No. The IRS treats the expenditure as made when installation is completed, so a 2026 completion falls after the cutoff even if you paid earlier.
I installed in 2025 but did not claim the credit. Is it too late?
Usually not. If you are on an extension, the 2025 return is due October 15, 2026. If you already filed, you can generally amend with Form 1040-X within 3 years of filing or 2 years of paying the tax, whichever is later.
Can I use a leftover credit in 2026?
Yes, if your 2024 or 2025 credit was larger than your tax. Carry the unused amount to the 2026 return on Form 5695 and keep the earlier forms.
Does a lease or PPA get me the credit?
No. You do not own the equipment. Evaluate the contract price on its own rather than assuming a tax benefit is built in.
Will the solar tax credit come back?
As of October 2026, IRS guidance still says no §25D credit is allowed for expenditures after December 31, 2025. Do not sign a contract on the promise of a future federal credit.
Your next step depends on the year
System completed in 2025: gather the completion record and invoice and file or amend with Form 5695, with a tax professional if the dates or costs are disputed. Shopping in 2026: ask every installer for a quote with no federal credit in it, then compare price per watt and your utility’s export credit. Our is solar worth it guide shows how the numbers work without the credit.
