The federal solar tax credit changed — what it means for 2026 buyers

Published July 2026 · Tax rules in this area are new and evolving. This is general information, not tax advice — confirm current IRS guidance or ask a tax professional before deciding.

For a decade, every solar payback estimate in America started with “take 30% off the top.” That era ended: under the budget law enacted in July 2025, the Section 25D residential clean energy credit — the 30% federal credit homeowners claimed for purchased solar, batteries, and geothermal — terminated for expenditures after December 31, 2025. If you buy a system in 2026, there is no federal residential purchase credit to claim.

Why this matters more than any other single number

The credit was the largest line item in most residential solar economics. Removing it raises the net cost of a purchased system by roughly 43% relative to the with-credit price (paying 100% instead of 70% of gross). On otherwise identical assumptions, paybacks stretch proportionally — a project that penciled at 10 years with the credit pencils around 14 without it. Some projects still clear the bar; marginal ones no longer do. Every guide, calculator, and installer spreadsheet built before mid-2025 silently includes the credit — check the date on anything you read, including this.

The lease/PPA nuance

The 2025 law treated business-owned systems differently from homeowner-purchased ones. Systems owned by a third party (as in a lease or power-purchase agreement) may still generate a federal credit for the owner under the business credit rules, subject to their own deadlines and sourcing restrictions that are being worked out in guidance. Practical consequences for you as a homeowner:

• Expect salespeople to steer harder toward leases and PPAs in 2026 — the credit they can capture is a real cost advantage.
• Whether any of that advantage reaches you depends entirely on the contract pricing. A lease is not automatically a good deal because the lessor got a credit; compare the full stream of lease payments against buying, using the same discounted math.
• Lease escalator clauses (payments rising annually) deserve special attention — they compound against you exactly the way rate escalation is assumed to compound for you.

What’s left in 2026

• State and local incentives — property-tax and sales-tax exemptions in many states, some state credits and utility rebates. These vary enormously and change; verify each is currently funded.
• Export compensation — net metering or net billing rules, set state by state, now often matter more than incentives: compare Florida (retail-rate netting) against California (avoided-cost exports).
• Falling hardware costs — the long-run trend that has repeatedly bailed out solar economics. Module prices have declined for decades; installation labor and soft costs have not fallen as fast.

Does waiting make sense?

An honest framing: the credit is gone, hardware gets slowly cheaper, your utility rates do what they do, and policy could change again in either direction. Waiting is not free (you forgo savings) but it is not reckless either (the incentive cliff already happened; you are no longer racing a deadline). The right answer is house-specific: if your project clears a discounted-cash-flow bar without any federal credit, 2026 is a fine time to build it — you’re buying on fundamentals. If it only worked with the credit, the honest verdict is “not now,” and no amount of urgency from a sales rep changes the arithmetic.