The 30% Federal Solar Tax Credit Is Gone — What Replaced It in 2026

On July 4, 2025, the One Big Beautiful Bill Act terminated the 30% federal solar tax credit for cash and loan buyers. Here's exactly what's available now — and the only path that still qualifies for federal incentives in 2026.

If you've been quoted "30% off your solar system" recently, or read older articles online claiming the federal government will refund 30% of your installation cost, you need to know that information is no longer accurate.

On July 4, 2025, the One Big Beautiful Bill Act (OBBB) was signed into law. As of December 31, 2025, the residential solar tax credit known as Section 25D — the credit that for nearly two decades let homeowners deduct 30% of their solar system cost from their federal taxes — has been terminated. There was no phase-down. No transition period. It simply ended.

If you're considering solar in 2026, this changes the math completely. Here's exactly what's available now, what's gone, and how it affects your financial decision.

What Section 25D Used to Do

The Residential Clean Energy Credit (Section 25D of the U.S. tax code) gave homeowners a dollar-for-dollar federal tax credit equal to 30% of the total cost of their solar system — including panels, inverters, batteries, labor, and permits.

A $30,000 solar installation generated a $9,000 reduction in federal taxes owed.

This credit was the single biggest financial incentive for residential solar in the United States. It was originally introduced in 2006, expanded multiple times, and most recently extended by the Inflation Reduction Act through 2034 with a planned step-down.

Then OBBB happened.

What the OBBB Act Actually Did

The One Big Beautiful Bill Act, signed by the president on July 4, 2025, made sweeping changes to federal tax policy. Among them: Section 25D was terminated outright as of December 31, 2025.

This means:

  • Solar systems whose original installation was completed on or before December 31, 2025 still qualify for the 30% credit. The statute ends 25D "with respect to any expenditures made after December 31, 2025," and an expenditure counts as made when the installation is completed — so paying in 2025 for a system finished in 2026 does not preserve it.
  • If you completed a 2025 install and the credit was larger than the tax you owed, the unused portion still carries forward to later years. Nobody took that away. Ask your CPA before you assume it is gone.
  • Solar systems installed in 2026 and beyond do not qualify for any federal residential tax credit if you own the system. That is true of every homeowner-owned system, however you pay for it — there is no purchase structure that survived.

There is no replacement program at the federal level for a homeowner who owns their own system.

The Reality for Cash Buyers in 2026

If you pay cash for solar in 2026, you receive zero federal tax credit.

The financial case for cash purchases now rests entirely on:

  • Your monthly bill reduction
  • Long-term savings vs. utility rate inflation
  • State-level incentives (where they exist)
  • Increased home value

Without the 30% kicker, payback periods on cash systems have extended significantly — typically from 5–7 years to 8–11 years depending on your utility rates and local incentives.

The Reality for Loan Buyers in 2026

Same as cash. If you finance your solar with a loan in 2026, you do not receive the 30% federal credit.

This affects how loan products are structured. Many older solar loans were built with the assumption that homeowners would receive 30% back as a tax credit and apply it to a balloon payment within 18 months — keeping monthly payments low. Without the credit, those structures collapse.

If you're being quoted a loan that assumes a "tax credit re-amortization," ask whether the math still works without it. In most cases, it doesn't.

Lease and PPA (48E): The Credit Goes to the Company, Not to You

There is one place a federal solar credit still exists in 2026, and it is on someone else's tax return: third-party-owned systems under leases or Power Purchase Agreements (PPAs). Be clear about who gets what here — you claim nothing, because you do not own the system.

These systems are owned by an installer or solar finance company — not the homeowner — and the owner is the party that may be able to claim Section 48E (the commercial-side investment tax credit). Whether a provider actually qualifies on a residential roof is not settled: Section 50(b)(2) denies the investment credit for property "used predominantly to furnish lodging," there is a carve-out at 50(b)(2)(D) for "any energy property," and whether that carve-out reaches residential rooftop solar under 48E has never been resolved — the final 48E regulations do not mention lodging at all. That is the provider's problem, not a fact anyone should assert on your behalf. Two further conditions matter:

  1. There is a placed-in-service wall. A project whose construction begins after July 4, 2026 has to be placed in service by December 31, 2027 to qualify.
  2. FEOC compliance is required. Components used in the system must meet Foreign Entity of Concern rules (essentially, certain Chinese-manufactured components are excluded).

Under a 48E-qualifying lease or PPA, the company that owns the panels is the taxpayer. It claims the credit; you claim nothing, and nothing about the system goes on your tax return. Whatever value the owner chooses to pass along reaches you in exactly one place: your monthly payment. That payment is a price the provider sets — not a credit, not a rebate, not 30% of anything — and whether it stays a saving across a 20- or 25-year term depends on the escalator written into the contract. Find that number before you compare anything else.

For most homeowners in 2026, a lease or PPA is the only structure where a federal credit is still in play at all — and it is in play on the provider's return, not yours.

State-Level Incentives Still Available

The good news: OBBB did not affect state-level solar incentives. Many of these are still strong, and in some states they meaningfully offset the loss of the federal credit.

Florida

  • Sales tax exemption on solar equipment (saves ~6%)
  • Property tax exemption — the value solar adds to your home is not taxed
  • Net metering significantly weakened in recent years; confirm current rules with your utility

Texas

  • Property tax exemption on the added home value
  • Local utility rebates vary widely (Austin Energy, CPS Energy, Oncor service area)
  • No statewide net metering — financial case rests on bill offset and resilience

California

  • SGIP (Self-Generation Incentive Program) rebates for battery storage — substantial, especially for low-income or fire-zone customers
  • Property tax exemption
  • NEM 3.0 in effect — solar-only economics are weak; pair with battery storage for best return

If you're in another state, check your state energy office and your local utility's website for current incentive listings.

What This Means for Your Financial Decision

The conversation about whether to go solar in 2026 has changed.

Before OBBB: "Solar pays for itself in 5–7 years thanks to the 30% credit and your bill savings."

After OBBB: "Solar pays for itself in 8–11 years through bill savings and state incentives — or you use a lease or PPA, put no capital down, and the question becomes whether that monthly payment and its escalator beat your utility over the whole term."

For many homeowners, lease or PPA is now the most accessible path — not because it's cheaper overall, and not because you get a credit (you don't), but because it needs no upfront capital. Whether it actually saves you money is a function of the payment, the escalator and the term, so price those three against your utility before you sign.

For homeowners with strong state incentives (like California with SGIP) or specific reasons to own (very long planned home tenure, off-grid resilience priority, large property), cash or loan can still make sense — but the math is no longer automatic.

What You Should Do Now

  1. Be skeptical of "30% off" pitches. Any solar rep quoting the federal tax credit on a system you would own in 2026 — cash, loan, or any other structure — either doesn't know the law has changed, or is hoping you don't. And a rep who tells you a lease "still gets you the 30%" is describing the provider's tax return, not yours.

  2. Ask specifically about 48E qualification on lease and PPA quotes. Ask how the owner expects to qualify, whether the system will be placed in service by December 31, 2027, and whether the components meet the foreign-sourcing rules. That eligibility is the provider's risk to carry, not a benefit to you — but if it fails, the pricing built on top of it may not hold.

  3. Get a current quote that reflects 2026 reality. Quotes prepared before the OBBB termination took effect may still show 30% credit lines that don't apply to your project anymore.

  4. Compare lease/PPA against cash math honestly. Don't assume cash is "always better" — without the 30% credit, the upfront capital is doing more work and the payback is longer.

If you want a current, OBBB-accurate solar analysis specific to your home, your utility, and your state — built around what's actually available in 2026 — get in touch.

Eric Brickus, Solarfying