What is the difference between the 25D and 48E solar tax credits?

Section 25D was the residential clean energy credit claimed directly by qualifying homeowners. Section 48E is a business tax credit that can apply to qualifying commercial projects and certain third-party-owned residential solar projects. The eligible project owner or taxpayer, not necessarily the installer, claims Section 48E.

Can I still claim the solar tax credit if I installed in 2025?

Yes. Homeowners with qualifying Section 25D expenditures made by December 31, 2025 can claim the 30% credit on their 2025 federal tax return using IRS Form 5695, subject to applicable tax rules.

Does the solar tax credit apply to battery storage in 2026?

It depends on ownership. Homeowner-owned battery storage installed after December 31, 2025 no longer qualifies for Section 25D. Qualifying business- and third-party-owned energy storage may still qualify for Section 48E and is not subject to the same accelerated December 31, 2027 termination rule that applies to certain solar projects.

What is a solar lease or PPA, and does it qualify for a tax credit in 2026?

A qualifying PPA or lease may allow a third-party project owner to claim Section 48E while the homeowner purchases the electricity produced. The new Section 48E leasing restriction applies specifically to solar water heating and small wind property, not to ordinary solar-electric leases, though other Section 48E requirements still apply to the project owner.

What are the commercial solar tax credit deadlines under the Big Beautiful Bill?

Commercial solar projects generally must establish beginning of construction by July 4, 2026 to avoid the accelerated December 31, 2027 placed-in-service deadline. Notice 2025-42 generally requires the Physical Work Test, but solar facilities with maximum net output of 1.5 MW AC or less may also use the Five Percent Safe Harbor.

What are PFE (FEOC) rules, and how do they affect solar projects in 2026?

PFE means prohibited foreign entity. Projects beginning construction in 2026 or later can face Section 48E restrictions tied to material assistance from prohibited foreign entities. IRS Notice 2026-15, issued February 12, 2026, provides interim guidance on calculating material assistance, while Notice 2025-42 addresses beginning-of-construction rules for applicable wind and solar facilities.

Are there still solar incentives available for homeowners who missed the 2025 deadline?

Yes. State incentives, utility rebates, net metering or net billing policies, and local programs may still improve solar economics in 2026. Availability and eligibility vary by location.

Does the solar tax credit still exist in 2026?

Yes, but not as a direct homeowner credit for new solar purchases. Section 25D ended after 2025, while qualifying commercial and certain third-party-owned projects may still access Section 48E subject to timing, ownership, sourcing, PFE, and other requirements.

Can I claim a solar tax credit in 2026 for a system installed in 2025?

Yes. If a homeowner had qualifying Section 25D expenditures by December 31, 2025, the 30% credit can be claimed when filing the 2025 federal tax return in 2026 using IRS Form 5695, subject to applicable tax rules.

Federal Solar Tax Credit 2026: What Ended, What Remains

Q: Is the federal solar tax credit still available in 2026?

Not for homeowners who purchase solar outright. Section 25D ended for new qualifying homeowner expenditures made after December 31, 2025. Some third-party-owned residential solar projects may still benefit from Section 48E, including qualifying leases and PPA structures, subject to ownership, timing, sourcing, and other requirements.

Sarah Lozanova

Aug 31

10 min read

The federal solar tax credit changed significantly after 2025. Homeowners can no longer claim the Section 25D Residential Clean Energy Credit for new qualifying expenditures made after December 31, 2025, though unused credit from an eligible prior-year project can still be carried forward. Some third-party-owned solar and business-owned battery storage may still qualify for a separate federal incentive under Section 48E.

This guide explains what the residential solar tax credit covered, how the federal solar tax credit evolved between 2025 and 2026, and which solar panel tax credit alternatives and other incentives homeowners can still explore.

Since 2013, GreenLancer has supported solar contractors and homeowners nationwide with engineering, permitting, and interconnection services. This guide covers the history of the federal solar tax credit, what the Big Beautiful Bill changed, and what incentives are still available in 2026.

Is There Still a Federal Solar Tax Credit in 2026?

For homeowners buying and installing their own solar system, no. The Section 25D Residential Clean Energy Credit ended for new expenditures after December 31, 2025. If you had qualifying solar expenses in 2025, you can still claim the credit on your 2025 federal tax return.

Some third-party-owned residential solar may still connect to a federal incentive in 2026. When a solar company or project owner retains ownership, that owner, not the homeowner, may qualify for the Section 48E Clean Electricity Investment Credit. We cover how that works in detail further down this page.

Situation	Federal credit in 2026?
Homeowner buys and installs solar in 2026	No Section 25D credit available
Homeowner had qualifying 25D expenditures in 2025	May qualify for the 30% credit on the 2025 tax return
Unused 25D credit from a qualifying prior year	Can be carried forward to a future tax year
Third-party-owned residential solar or PPA in 2026	Project owner may qualify for Section 48E
Commercial solar	Section 48E may apply, subject to construction and timing rules

What Was the Federal Solar Tax Credit?

The federal solar tax credit, formally the Section 25D Residential Clean Energy Credit, allowed eligible homeowners to claim a credit equal to 30% of qualifying residential clean energy expenditures against their federal income tax liability. For solar electric property, there was no overall dollar cap after 2008, and no income limit applied. It was nonrefundable, meaning it could reduce a tax bill to zero but could not generate a payment back.

Here is a quick look at what the 30% residential solar credit historically covered.

Solar panels and other solar electric property
Inverters, racking, and balance-of-system equipment
Battery storage with a capacity of at least 3 kilowatt-hours
Labor for onsite preparation, assembly, and original installation
Wiring needed to connect the system to the home

Under the statute, an expenditure counted as made once the original installation was completed, not simply when a contract was signed or a deposit paid. If you installed solar in 2025 and want the full walkthrough on claiming your credit, our solar tax credit filing guide covers Form 5695 step by step.

A Brief History of Solar Tax Credits in the U.S.

federal solar tax credit history timeline 1978 to 2025

Federal support for solar has existed in some form since the 1970s energy crisis, but the credit homeowners know today has a more recent and specific origin. Here is how it developed over five decades.

Early Federal Solar Incentives, 1970s to 2005

The first federal solar tax incentives date back to 1978, when Congress introduced tiered credits for early solar equipment, mostly solar water heating systems. These early programs were modest and narrowly focused, but they established solar as a legitimate federal policy priority decades before rooftop panels became common.

2005: The Modern Residential Solar Tax Credit Begins

The Energy Policy Act of 2005 created Section 25D and the 30% residential solar credit homeowners came to rely on. The credit initially carried a $2,000 cap for solar electric property, which limited its value for larger systems. Even with that cap, it marked the start of the modern era of solar tax policy.

2008: Congress Removes the $2,000 Cap

Congress removed the solar-specific dollar cap in 2008, unlocking the full 30% value regardless of system size. Removing the cap substantially increased the potential value of the credit for larger residential solar projects. Larger, more expensive systems suddenly made financial sense for many more households.

Extensions and Step-Downs, 2016 to 2021

The credit was extended multiple times through the 2010s to keep pace with a growing industry. Between 2020 and 2021, it briefly stepped down from 30% to 26%, signaling an eventual phase-out under prior law. That step-down did not last long.

2022: The Inflation Reduction Act Restores 30%

The Inflation Reduction Act restored the credit to 30% in 2022 and extended it, under the law then in effect, through 2032. Beginning in 2023, qualifying standalone battery storage with at least 3 kilowatt-hours of capacity also became eligible for the first time. For a couple of years, the credit looked more secure than it had in over a decade.

2025: The Residential Credit Ends Early

The One Big Beautiful Bill Act, signed July 4, 2025, reversed course. The law ended Section 25D for expenditures made after December 31, 2025, nearly a decade ahead of the IRA's original 2032 timeline. There was no phase-out period. The commercial and third-party-ownership side of the tax code was not eliminated, but the era of a direct federal credit for homeowners who purchase solar outright is over for now.

Section 25D vs. Section 48E: What's the Difference?

A lot of the confusion around the solar tax credit right now comes down to two different sections of the tax code with two very different rules. Understanding the difference helps explain what is actually available in 2026.

	Section 25D	Section 48E
Formal name	Residential Clean Energy Credit	Clean Electricity Investment Credit
Who claims it	The homeowner	The business or project owner
Homeowner buys and owns the system	Formerly eligible through 2025	Not applicable
Third-party-owned residential solar	Homeowner does not claim it	Project owner may qualify
Potential credit percentage	30% through 2025	Generally 6% base; 30% may apply when prevailing-wage and apprenticeship requirements are met or an applicable exception applies
Status for new homeowner purchases in 2026	No longer available	Homeowner does not claim it directly

Do Solar Leases and PPAs Still Qualify for a Federal Tax Credit in 2026?

This is one of the most misunderstood parts of the new law, so it is worth getting right. Some coverage online suggests that all solar leases lost access to a federal credit. That is not accurate for typical residential solar electric leases.

The new leasing restriction under Section 48E specifically targets solar water heating and small wind leases. It does not apply to ordinary solar-electric leases, which are defined separately in the tax code. In practice, that means the business or project owner of a qualifying third-party-owned solar system may still be eligible for Section 48E, though the mechanics work differently than they did under the old homeowner credit.

A few things to keep in mind if you are considering a lease or PPA.

The system owner or project owner claims the Section 48E credit, not you.
Whether that savings shows up in your monthly payment is contractual, not guaranteed by law.
Projects still need to satisfy Section 48E's timing, sourcing, and other requirements.
Ask providers directly how much of any federal benefit, if any, gets reflected in your rate.

Does Battery Storage Qualify for a Federal Tax Credit in 2026?

Battery eligibility depends heavily on ownership. Here is how it breaks down for 2026.

A homeowner-owned battery installed in 2026 does not qualify for a new Section 25D credit.
A battery that was part of an eligible 2025 project may still qualify on that year's return.
Business-owned or third-party-owned energy storage may qualify for Section 48E under a different set of federal tax rules.
Standalone batteries generally needed at least 3 kilowatt-hours of capacity to qualify under the old 25D rules.

Thinking about adding storage to a system you already own? Our team can walk you through the planning side with our battery retrofit guide, separate from any tax question.

What Were the Benefits and Limitations of the Federal Solar Tax Credit?

Looking back at what the credit accomplished, and where it fell short, helps explain both its legacy and why its end matters.

Benefits

Reduced the effective cost of a qualifying system by 30%, shortening payback periods for millions of households
Removed its dollar cap in 2008, making larger systems financially realistic
Supported the growth of the U.S. residential solar market
Encouraged solar-plus-storage adoption once battery storage became eligible in 2023

Limitations

Nonrefundable, so households with low tax liability could not always use the full value in one year
Delivered through the tax system, so savings arrived months after installation rather than upfront
Largely unavailable to renters and residents of shared or multifamily housing
Vulnerable to policy change, as its 2025 repeal demonstrated despite a prior long-term extension

federal solar tax credit pros and cons homeowners

How Did the Federal Tax Credit Shape the U.S. Solar Market?

Few tax incentives have reshaped an industry as visibly as this one. Installed U.S. solar capacity grew enormously over the credit's lifetime, and SEIA's research tracks that expansion year over year. Falling equipment costs, state programs, and utility financing all played a role alongside the federal credit, so no single factor deserves all the credit for that growth.

The industry also became a meaningful source of jobs. By 2024, solar supported hundreds of thousands of American jobs across installation, design, permitting, and engineering, according to SEIA's workforce research. Many regional installers that now form the backbone of the residential market got their start during the credit's most active years.

What Solar Incentives Are Still Available to Homeowners in 2026?

Solar incentives still available in 2026 can include state tax credits, utility rebates, battery incentives, SRECs, net metering or export compensation, and third-party-owned solar financing structures.

Availability depends heavily on your state, your utility, and how the system is owned. Our broader solar incentives coverage digs deeper into programs beyond the federal credit.

The federal purchase credit is gone for new homeowner-owned systems, but it was never the only incentive on the table. Here is what is still worth checking.

State and Local Incentives

State tax credits, rebates, and solar renewable energy certificates vary widely by location. The DSIRE database, maintained by NC State University, is the most comprehensive place to check what applies where you live.

Utility Rebates and Battery Programs

Many utilities offer their own rebates for solar or battery installations, separate from anything at the federal or state level. Availability depends heavily on your specific utility, so it is worth asking directly.

Net Metering and Export Compensation

Net metering and export compensation are not tax credits, but they directly affect how much a solar system saves you over time. Policies vary by state and utility, and they can meaningfully change a system's payback period.

Leases and PPAs

As covered above, a qualifying solar lease or PPA may still connect to a federal incentive through the project owner. Compare the total contract cost, buyout terms, and any rate escalators closely before signing.

Could the Federal Residential Solar Tax Credit Return?

Congress could reinstate, modify, or replace a residential solar credit through future legislation. As of August 2026, no federal Section 25D credit applies to new homeowner solar expenditures made after December 31, 2025, and no reinstatement is currently scheduled under federal law. Industry groups continue to advocate for its return, but it makes sense to plan around today's rules rather than a future possibility.

Already Have Solar? Keep It Running at Its Best

If you installed solar before the credit ended, the policy change does not affect your equipment or your warranty. It does make it more important to keep your existing system performing well, since a new purchase in 2026 no longer comes with the same federal offset.

A few things worth staying on top of as an existing solar owner.

Keep your solar panel warranty documents and installation records somewhere easy to find
Watch for inverter fault codes or unexpected drops in production, since catching issues early usually means a simpler fix
Review your inverter warranty coverage so you know what is still protected
If your original installer closed, our guide on what to do if your solar company goes out of business covers your options

Keeping your system running at peak output is critical. GreenLancer partners with experienced solar repair technicians across the United States to keep solar systems running at maximum performance.

Complete the form below for solar maintenance services.

FAQs on the Solar Tax Credit 2025 and 2026

Is the federal solar tax credit still available in 2026?

Not for homeowners who buy and install solar outright. The Section 25D credit ended for expenditures made after December 31, 2025. Some third-party-owned residential systems may still connect to a federal incentive through Section 48E.

Can I claim the solar tax credit if I installed my system in 2025?

If you had qualifying Section 25D expenditures in 2025, you may claim the credit on your 2025 federal tax return using IRS Form 5695. For original installation costs, the tax code generally treats the expenditure as made when the installation is completed. Our filing guide covers the detailed timing scenarios.

What is the difference between Section 25D and Section 48E?

Section 25D was the homeowner-claimed residential credit that ended after 2025. Section 48E is a business tax credit that can apply to commercial solar and certain third-party-owned residential systems, with the project owner claiming it instead of the homeowner.

Do solar leases and PPAs qualify for a federal tax credit in 2026?

Many can. The new leasing restriction under Section 48E targets solar water heating and small wind leases specifically, not typical solar-electric leases. The system owner would claim any available credit, not the homeowner, and other Section 48E requirements still apply.

Does battery storage qualify for a tax credit in 2026?

It depends on ownership. A homeowner-owned battery installed in 2026 does not qualify for a new Section 25D credit, while business or third-party-owned storage may qualify under Section 48E.

Can I carry forward an unused solar tax credit?

Yes, if you earned the credit on a qualifying installation before the deadline. Unused Section 25D credit amounts can generally be carried forward into future tax years, even though new expenditures no longer qualify.

Are state solar incentives still available now that the federal credit has ended?

Yes. State tax credits, rebates, SRECs, and net metering programs are independent of federal law and vary significantly by location. The DSIRE database is a solid starting point for checking what applies in your state.

What replaced the federal solar tax credit in 2026?

Nothing directly replaced the Section 25D homeowner credit. State and utility incentives may still be available, while qualifying third-party-owned and business-owned projects can fall under different federal tax provisions such as Section 48E.

Could the federal solar tax credit come back?

Congress could pass new legislation to reinstate or modify it, but nothing is currently scheduled. Homeowners should plan around today's rules rather than a future possibility.