The Inflation Reduction Act's 30% federal solar tax credit (Section 25D, IRS) applied to residential solar through 2025 but expired for systems placed in service (installed) after December 31, 2025; leased or PPA systems may still capture 30% via the §48E commercial credit (for systems placed in service by December 31, 2027). This applies to purchased and financed systems. A 2026 cash or financed purchase earns no federal credit — a $20,000 system that once earned $6,000 now earns $0.
How the Section 25D residential solar tax credit worked (expired after 2025 for purchases)
For homeowners who purchased and installed a residential solar system, the federal Section 25D credit (IRS) expired for systems installed after December 31, 2025. A system purchased and installed in 2026 does not qualify for a federal residential tax credit under Section 25D. However, if you use a solar lease or PPA, the installer/owner may claim a 30% credit under the commercial Section 48E (IRS) — provided the system is placed in service by December 31, 2027 or construction began by July 4, 2026 — and often passes those savings through as a lower rate. State and utility incentives remain unaffected. This is general information, not tax advice.
What qualifies for the credit
Rooftop solar photovoltaic systems on residential properties. When the §25D credit applied it covered: battery storage, inverters, wiring, permitting, labor, and equipment installation. It expired for homeowner-purchased systems installed after December 31, 2025. Does NOT include: lawn equipment, swimming pool heaters (unless solar thermal), portable systems. System must be new (first use), installed on your primary or secondary residence.
Who can claim the credit
Through 2025: homeowners who bought a solar system with cash or a loan, for a US home, with the system installed by December 31, 2025. The IRS says the credit is claimed for the tax year the property is installed, not merely purchased. Renters and lessees could not claim it. If a 2025 credit was larger than your tax liability, the unused amount can be carried forward to reduce tax in future years (IRS). Nothing new can be claimed for a system installed in 2026.
Cash rebates vs tax credits
Federal tax credit for a purchased system: The residential Section 25D credit (IRS) expired for systems installed after December 31, 2025, so a 2026 purchase earns no federal credit. If you use a solar lease or PPA, the installer may claim a 30% credit under Section 48E (IRS) (for systems placed in service by December 31, 2027) and pass savings through as a lower rate. State/utility rebates: $2-5k immediately from the installer (available in some states). Example: $20k system with $3k state rebate — state rebate reduces your out-of-pocket immediately; no federal purchase credit applies in 2026. Lease/PPA options may offer rate savings reflecting the installer's Section 48E credit (for systems placed in service by December 31, 2027).
Tax credit phase-out and timeline
The federal residential solar tax credit (Section 25D, IRS) applied to purchased systems through 2025 and has now expired for homeowner-purchased systems installed in 2026 or later. If you are considering a solar lease or PPA, the installer may still capture a 30% credit under the commercial Section 48E (IRS) — provided the system is placed in service by December 31, 2027 or construction began by July 4, 2026 — and often passes savings through as a lower rate. State and utility incentives remain unaffected. This is general information, not tax advice.
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Get Free Quotes →Frequently Asked Questions
Can I claim the tax credit if I finance the solar system?
For systems installed by December 31, 2025, cash and loan purchases qualified the same way; leased and power-purchase-agreement systems never qualified for the homeowner, because the homeowner does not own the equipment. For a 2026 installation no §25D credit applies however you pay; under a lease or PPA the owner may claim §48E (for systems placed in service by December 31, 2027) instead.
What if the tax credit is larger than my tax liability?
For a system installed by December 31, 2025, the IRS says any excess unused credit can be carried forward to reduce tax in future years. Example: a $6,000 credit with only $3,000 of 2025 tax owed → use $3,000 on the 2025 return and carry $3,000 forward.
Do I have to own the home to claim the credit?
Yes—homeowners and primary/secondary homeowners qualify. Renters cannot claim; landlords can. You must own the property and live in the US.
Can married couples filing separately claim the credit?
No—if you claim a dependent, one spouse must claim the full credit on a joint return. If filing separately, you split the credit equally.
Is the tax credit refundable?
No—it's non-refundable, meaning it can't exceed your tax liability. Unused credits carry forward indefinitely but don't result in a refund if you owe $0 tax.