The Federal Solar Tax Credit in 2026: What Changed
The federal residential clean energy credit, established under Internal Revenue Code Section 25D, allowed homeowners to claim a credit equal to 30 percent of qualified costs for eligible solar and other clean energy systems placed in service between January 1, 2022, and December 31, 2025. Qualified costs generally included equipment, labor, and related installation expenses for systems such as solar panels, solar water heaters, battery storage, and small wind turbines, subject to IRS definitions. Homeowners claimed this credit by filing IRS Form 5695 with their federal return for the tax year the system was placed in service.
The One Big Beautiful Bill Act (Pub. L. 119-21) ended the Section 25D residential credit for property placed in service after December 31, 2025. A homeowner whose system was fully installed and operational by that date may still claim the 30 percent credit on their 2025 federal tax return using Form 5695. However, the residential credit is not available for new residential installations placed in service in 2026 or later. A separate investment credit for businesses and certain other entities, under Section 48E of the tax code, continues on its own statutory schedule and is a distinct program from the expired residential credit.
Beyond the federal level, a range of state and utility programs may offset solar costs. Based on verified program data across 51 jurisdictions as of June 2026, roughly 10 states offer an active state solar tax credit or deduction, 37 provide a property-tax exemption for solar equipment, 23 offer a sales-tax exemption, and 13 operate solar renewable energy certificate markets. Net metering and solar export compensation rates vary significantly by state, utility, and tariff; there is no single national rate, and terms can change with regulatory proceedings.
This page provides general background information only and is not tax or legal advice. Program availability, credit amounts, and utility tariffs can change. Readers should verify current federal tax rules directly with the IRS, consult a qualified tax professional for guidance specific to their situation, and contact their state energy office, public utility commission, or utility for current state and local program terms.
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Verified as of June 2026. How we verify this data. Informational only — not tax or legal advice.