Solar Tax Credit 2026: The Federal Credit Is Gone -- Here's What's Still Available

If you have been searching for information about the solar tax credit in 2026, you are finding a lot of outdated content. Articles from 2023-2024 still rank promising a generous federal credit that no longer exists.

Here is the truth: the federal residential solar tax credit is gone. But solar incentives have not disappeared entirely. Several states still offer their own tax credits, rebates, and programs that can meaningfully reduce the cost of going solar.

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What Happened to the Federal Solar Tax Credit

The federal residential solar Investment Tax Credit (ITC), codified under Section 25D of the Internal Revenue Code, allowed homeowners to deduct a percentage of their solar installation cost from their federal income taxes. At its most recent level, the credit had covered 30% of total system costs -- equipment, labor, permitting, and sales tax.

The Inflation Reduction Act of 2022 had extended this credit at 30% through 2032. That timeline never played out. The residential ITC was repealed as part of the broader rollback of IRA clean energy provisions, and it officially expired for residential installations on December 31, 2025.

For a homeowner installing a $25,000 solar system, this means the loss of a $7,500 credit that would have been available just months earlier. That changes the payback math -- but does not make solar unaffordable.

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Timeline: How We Got Here

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The Commercial ITC Still Exists -- What That Means for You

The commercial Investment Tax Credit under Section 48E remains in effect for businesses. This matters if you are considering a solar lease or PPA -- the leasing company can claim the commercial ITC, which may be reflected in lower lease payments.

If you were planning to purchase outright and counting on the federal credit, this does not help directly. But leases and PPAs may now be relatively more attractive. See our lease vs buy vs PPA guide.

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State Solar Tax Credits Still Available in 2026

Multiple states operate their own solar tax credit programs -- state income tax credits claimed on your state tax return, completely independent of the federal government:

Always verify through DSIRE before making decisions. For a complete 50-state breakdown, see Solar Incentives by State 2026.

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State and Utility Rebate Programs

Beyond tax credits, many states and utilities offer direct cash rebates:

• California SGIP: Battery storage rebates, especially for low-income and fire-threat areas
• New York NY-Sun: Per-watt rebates through NYSERDA
• Massachusetts SMART: Performance-based production incentive
• Illinois Adjustable Block Program: Upfront REC payments through Illinois Shines
• Colorado Xcel Solar*Rewards: Per-watt utility incentives
• Connecticut RSIP: Performance-based incentives

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Net Metering: The Other Major Incentive

With the federal credit gone, strong net metering is now the single most important factor in your solar payback period.

• Full retail rate (best): NJ, NY, MA, and others credit at full retail
• Net billing/reduced rate: CA (NEM 3.0) and others credit at lower than retail
• No statewide mandate: Some states leave it to individual utilities

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Property and Sales Tax Exemptions

Property tax exemptions prevent solar from increasing your property tax bill. Available in AZ, CA, CO, CT, FL, IA, MD, MA, MN, MT, NV, NH, NJ, NM, NY, NC, ND, OR, RI, TX, VT, VA, and others.

Sales tax exemptions save you the tax on the full purchase price. At 6% on $25,000, that is $1,500. Available in AZ, CT, FL, MD, MA, MN, NJ, NY, RI, VT, WA, and others.

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Is Solar Still Worth It Without the Federal Credit?

For many homeowners, yes. Here is a comparison for a typical 8 kW system at $25,000:

An 11-year payback on a 25-30 year system still delivers 14-19 years of free electricity. Solar is most worth it if your state offers incentives, electricity rates exceed $0.15/kWh, you have strong net metering, good sun, and plan to stay 10+ years.

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How to Maximize Your Savings in 2026

1. Stack every state and local incentive. Use DSIRE.
2. Get 3+ quotes. Pricing varies $5,000-$10,000 for the same system.
3. Consider a lease or PPA. The commercial ITC still benefits leasing companies.
4. Right-size your system. Match actual usage, not more.
5. Avoid financing traps. Watch for hidden dealer fees (15-25%). Compare total cost.
6. Negotiate hard. Demand has softened. Ask for price matching and upgrades.

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Watch Out for Companies Still Promising the Federal Credit

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FAQ

Is there a federal solar tax credit in 2026?

No. The federal residential solar tax credit (Section 25D ITC) expired on December 31, 2025. Homeowners who install solar in 2026 cannot claim a federal tax credit. The commercial ITC (Section 48E) still exists for businesses only.

What happened to the 30% solar tax credit?

It was repealed as part of the broader rollback of Inflation Reduction Act clean energy provisions. The credit expired for residential installations on December 31, 2025.

Which states still offer solar tax credits?

Arizona (25% up to $1,000), New York (25% up to $5,000), South Carolina (25% up to $3,500), New Mexico (10% up to $6,000), Iowa (up to $5,000), Massachusetts (15% up to $1,000), Montana (up to $1,000), and Utah (up to $1,600).

Is solar still worth it without the federal credit?

For many homeowners, yes. The payback period is longer but state incentives, net metering, and rising electricity costs can still make solar a strong investment.

Does the commercial solar tax credit still exist?

Yes. The commercial ITC under Section 48E remains for businesses. Solar leases and PPAs can still benefit indirectly. But homeowners purchasing outright cannot claim any federal credit.

Will the federal solar tax credit come back?

There is no current legislation to reinstate it. Make decisions based on current law.

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The Bottom Line

The federal credit is gone. But solar in 2026 is defined by falling panel prices, rising electricity costs, state-level programs, and net metering -- not a single incentive. In states with strong programs, solar still delivers attractive returns. Do not let any company sell you on incentives that no longer exist.