In short: The 30% federal tax credit for homeowners who buy solar (the Residential Clean Energy Credit, Section 25D) can’t be claimed for expenditures made after December 31, 2025, according to IRS instructions. You can still claim it if your system was installed and paid for by that date, and you can still carry forward unused credit from earlier years. Homeowners who buy solar in 2026 or later get no federal credit, although leases and PPAs and many state and local incentives are still available.
This article is general information, not tax advice. Tax rules are technical and your situation may differ, so talk to a tax professional or check IRS.gov.
The federal solar credit was the biggest incentive in US residential solar for years, and its end changed how systems are priced and financed. This guide explains exactly what changed, who can still claim what, how carryforwards work, and what other incentives are still on the table.
What changed and when
| Date | What happened |
|---|---|
| 2022–2025 | The credit rate for residential clean energy property (solar, and battery storage that qualified) was 30%. |
| July 4, 2025 | The One Big Beautiful Bill Act (P.L. 119-21) was signed, ending the residential clean energy credit for expenditures made after 2025. |
| December 31, 2025 | Last day for expenditures to qualify for the credit. |
| 2026 and later | No federal credit for solar purchased by homeowners, whether paid in cash or with a loan. |
The IRS instructions for Form 5695 state plainly that you can’t claim residential clean energy credits for expenditures made after December 31, 2025. The energy efficient home improvement credit (Section 25C, which covers items such as some heat pumps and insulation) also ended for property placed in service after that date.
Who can still claim the federal solar credit?
| Your situation | Can you claim a federal credit? |
|---|---|
| You bought solar and it was installed and paid for by December 31, 2025 | Yes. Claim it on your 2025 tax return using Form 5695. |
| You claimed the credit before and had unused amount left over | Yes. You can carry forward the unused portion on later returns. |
| You bought solar in 2026 (cash or loan) | No. No homeowner federal credit for expenditures after 2025. |
| You signed a contract or paid a deposit in 2025 but the installation finished in 2026 | Generally no. Under the rules, the expenditure is treated as made when installation is completed. Confirm with a tax professional. |
| You lease your system or buy power through a PPA | Not directly. The company that owns the system may claim a separate business credit and reflect part of it in your rate. |
If your system was installed in 2025: how to claim the credit
- Gather documents: your contract, invoices, proof of payment and the date the system was completed.
- Complete IRS Form 5695, Part I. The credit is 30% of eligible costs for property placed in service through 2025. Qualified costs can include the solar equipment and installation, and, for 2025, battery storage that met the requirements.
- Attach it to your Form 1040 (Form 5695 is used for both the current-year credit and any carryforward).
- Note the basis rule: the IRS requires you to reduce the cost basis of your home by the credit allowed.
- File the form even if you can’t use it all, so any unused amount can carry forward.
There’s no income limit for the residential clean energy credit, and it can apply to a primary or a second home in the US. If you haven’t filed your 2025 return yet, or you forgot to claim the credit, check the current filing deadlines and options with a tax professional or the IRS.
How the carryforward works
The residential clean energy credit is nonrefundable: it can reduce your tax to zero but it doesn’t produce a refund beyond that. If your credit is larger than your tax liability in a year, the unused portion carries forward to the next year.
Example (illustrative): your credit is $9,000, but your federal tax liability for the year is $4,000. You use $4,000 and carry forward $5,000 to the next year, where you use it against that year’s tax (and carry forward anything still unused).
- The IRS instructions say to use Form 5695 to take any carryforward from earlier years and to carry unused amounts forward.
- The law that ended the credit for new expenditures didn’t change the carryforward rules, so credit properly earned before the deadline can still be used.
- Keep your original Form 5695, invoices, proof of payment and worksheets showing how the carryforward was computed.
The energy efficient home improvement credit (Section 25C) is different: there is no carryforward, so unused credit there is lost.
What if you’re buying solar now?
If you’re buying solar in 2026, there’s no federal credit for the purchase itself. That makes price, export rules and state incentives much more important. Read:
- Is Solar Worth It Without the Federal Tax Credit? for the payback math.
- How Much Do Solar Panels Cost in 2026? for what to expect on price.
- How to Compare Solar Quotes and Spot Red Flags before you sign.
Watch out for outdated or misleading claims
Some sellers still advertise the 30% credit or imply you can still get it on a system installed this year. If a salesperson says you can claim the federal credit for a purchased system installed in 2026, verify it with the IRS or a tax professional before signing. Treat it as a red flag if they can’t point to a specific rule. See How to Choose a Solar Installer for more red flags.
Leases and PPAs: the indirect federal credit
With a solar lease or power purchase agreement (PPA), a company owns the system on your roof. That company, not you, may be able to claim a business tax credit (Section 48E) for qualifying systems, under a schedule that phases out. Some providers pass part of that value to you through lower payments or rates.
- You don’t claim the credit: you can’t put a lease or PPA on Form 5695.
- Dates and eligibility conditions are technical. Sources describe the deadlines differently, generally tying eligibility to when construction began or when the system is placed in service, so confirm details with the provider and a tax professional.
- Compare the total cost, not just the monthly payment: escalators, ownership, maintenance, and what happens when you sell the home. See Solar Leases and PPAs After the Tax Credit Ended and What Happens to a Solar Lease When You Sell Your Home?
What about batteries?
Battery storage that qualified for the residential credit and was installed and paid for by the end of 2025 could be included in a 2025 claim, subject to the rules. For batteries purchased after 2025, there’s no homeowner federal credit. Storage owned by a third party may be treated under different business-credit rules. See Solar + Battery Cost After US Incentives and Do You Need a Solar Battery?
Other incentives that can still help
The federal credit was only one layer of savings. You may still be able to combine:
- State tax credits, rebates or grants. See State Solar Incentives and Rebates Directory.
- Utility rebates and programs. See Utility Solar Rebates: How to Find Yours.
- Property tax exemptions that keep added home value from raising your taxes in many states. See Property Tax Exemptions for Solar Panels by State.
- Sales tax exemptions, where available.
- Performance payments or certificates, such as SRECs in some states. See SRECs by State.
- Net metering or export credits. See Net Metering vs Export Tariffs.
- Low-income and community programs in some areas.
Availability and amounts change often, so check your state, utility and local government.
Common mistakes
- Assuming the credit still applies to a system finished in 2026 because you signed or paid a deposit in 2025.
- Forgetting to file Form 5695 for 2025, even if you can’t use the entire credit.
- Not tracking a carryforward and losing track of the amount.
- Believing a seller’s claim about a federal credit without verifying it.
- Ignoring the basis reduction and record-keeping requirements.
- Missing state and utility incentives that are still available.
Next steps
- Work out which category you fall into in the table above.
- If you installed in 2025, gather your paperwork and talk to a tax professional about your Form 5695 and any carryforward.
- If you’re buying now, look up your state’s incentives and recalculate your payback: How to Calculate Your Solar Payback Period.
- Get itemized quotes and compare them.
Where to next:
- 🇺🇸 State Solar Incentives and Rebates Directory
- 🇬🇧 Solar Grants and Funding Schemes in the UK
Frequently asked questions
Is the federal solar tax credit still available in 2026?
Not for homeowners who buy solar and complete the installation after December 31, 2025. The credit still applies to systems installed and paid for by that date (claimed on the 2025 return), and unused credit from earlier years can be carried forward.
Can I still claim the solar tax credit for 2025?
Yes, if your system was installed and the expenditure was made by December 31, 2025. You claim it with Form 5695 on your 2025 federal return. Check current filing deadlines and options with the IRS or a tax professional.
What if I signed a contract in 2025 but the installation finished in 2026?
Generally, the expenditure is treated as made when the installation is completed, so a 2026 completion would not qualify. Confirm your specific situation with a tax professional.
Does the carryforward still work after the credit ended?
Yes. The ending of the credit for new expenditures didn’t change carryforward rules for credit properly earned earlier. Use Form 5695 to carry forward any unused amount.
Do solar leases and PPAs still get a federal tax credit?
The company that owns the system may qualify for a business credit (Section 48E) under a phase-out schedule, and may pass some of the value to you through lower payments. You don’t claim the credit yourself, and details vary, so check with the provider.
Is there a federal tax credit for home batteries in 2026?
There’s no homeowner federal credit for batteries purchased after 2025. Batteries installed and paid for by the end of 2025 that met the requirements could be part of a 2025 claim, and third-party-owned storage may follow different business-credit rules.