Solar Tax Credits in 2025 & 2026: What Homeowners Need to Know

If you're a solar homeowner wondering what happened to the federal tax credit — you're not alone. The solar tax credit landscape changed dramatically after the "One Big Beautiful Bill" (OBBB) was signed into law on July 4, 2025, accelerating the end of the homeowner-claimed credit. Here's exactly what this means for you, what's still available, and the critical deadlines you need to know.

The Federal Solar Tax Credit Timeline

The Inflation Reduction Act of 2022 originally extended the 30% Residential Clean Energy Credit (Section 25D) through 2032. However, the OBBB dramatically changed the timeline:

What This Means for Existing Solar Owners

The good news first: if you already claimed the credit, there's no retroactive clawback. Your previously claimed credit is safe. But the rules going forward have changed significantly.

Installed by December 31, 2025?

You can still claim the 30% credit on your 2025 tax return, due April 15, 2026. The credit is nonrefundable, but any excess can be carried forward to future tax years. This is a critical deadline — if you installed solar in 2025 and haven't filed yet, make sure to include Form 5695 with your return.

Planning to Add Battery Storage in 2026?

If you own your system outright, you can no longer claim a federal credit for additions made in 2026. However, there's an important alternative: if you go through a third-party lease/PPA arrangement, the provider can still claim Section 48E credits through 2027 and pass savings to you through lower payments.

State Tax Credits Still Available

While the federal credit has changed, many state-level tax credits remain active and can provide significant savings:

• New York: 25% state tax credit, up to $5,000 — one of the most generous in the country
• Arizona: 25% state tax credit, up to $1,000
• Massachusetts: 15% state tax credit, up to $1,000
• Colorado: 10% state tax credit for battery storage (through 2026)

Additionally, most solar states offer property tax exemptions (your home value increases from solar aren't taxed) and sales tax exemptions on solar equipment purchases.

Remaining Federal Opportunities (2026+)

The Lease/PPA Pathway

Third-party solar providers can claim the 30% ITC under Section 48E if they begin construction by July 4, 2026, or place systems in service by December 31, 2027. Homeowners benefit through lower monthly lease or PPA payments. This is especially relevant for battery storage additions.

Bonus Adders for Commercial/Third-Party Systems

• +10% Domestic Content Bonus for U.S.-manufactured components
• +10% Energy Community Bonus for projects in designated energy communities
• +10–20% Low-Income Community Bonus

Credit Carry-Forward

If you have unused ITC from a system installed in 2025 or earlier, you can carry the credit forward to offset future tax liability. This is particularly useful if your tax bill was lower than the credit amount in the year you installed.

Key Deadlines Summary

Bottom Line: What Should You Do?

The federal solar tax credit for homeowner-owned systems is gone for new installations starting in 2026. But that doesn't mean the savings opportunity is over. Between state tax credits, property tax exemptions, battery storage rebates, and the third-party lease pathway, there are still significant ways to maximize your solar investment.

This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation. Last updated March 2026.