Federal Solar Tax Credit 2026: How to Claim It
- How Much Do Solar Panels Cost for a House in 2026?
- Cost of Solar Panels for a 2,000 Sq Ft Home
- Cost of Solar Panels for a 3,000 Sq Ft Home
For over a decade, «how to claim the solar tax credit» meant filling out a straightforward IRS form after installing panels. In 2026, the honest starting point is different: for most new homeowner-owned systems, there’s no credit left to claim. Here’s exactly what changed, who’s still eligible, and how to file if you fall into one of the groups that qualify.
Table of Contents
- What Happened to the Federal Solar Tax Credit
- Who Can Still Claim It
- How to Claim the Credit for a 2025 Installation
- Carrying Forward Unused Credit
- What About Leases and PPAs?
- What’s Left If You’re Installing in 2026
- FAQ
What Happened to the Federal Solar Tax Credit
The federal solar tax credit, formally the Residential Clean Energy Credit under Section 25D of the tax code, let homeowners deduct 30% of their solar installation cost from what they owed the IRS. It applied to panels, inverters, mounting equipment, and standalone battery storage, with no cap on the dollar amount and no income limit.
Under the One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, Section 25D was terminated early. The credit expired at midnight on December 31, 2025, for any system placed in service after that date. It had originally been scheduled to run at 30% through 2032 before stepping down. That timeline no longer applies to homeowner-owned systems.
Who Can Still Claim It
| Situation | Federal Credit Status |
|---|---|
| System installed and placed in service by Dec 31, 2025 | Full 30% credit available on your 2025 return |
| System installed in 2026 or later, cash or loan purchase | No federal credit ($0) |
| Solar lease or PPA (third-party owned), installed in 2026 | Indirect benefit possible — see below |
| Unused credit carried from a 2025 installation | Still valid, can carry forward |
The key word in the law is «placed in service,» not «signed a contract» or «paid a deposit.» What matters is the date your system was installed and operational, not when you agreed to the purchase.
How to Claim the Credit for a 2025 Installation
If your system was placed in service on or before December 31, 2025, you’re still entitled to the 30% credit — this hasn’t been taken away retroactively.
- Gather your documentation. You’ll need the total cost of your qualifying system: solar panels, inverters, mounting/racking hardware, wiring, and labor directly tied to installation.
- File IRS Form 5695 (Residential Energy Credits) with your federal tax return for the year the system was placed in service.
- Transfer the credit amount to Schedule 3 of your Form 1040, which reduces your total tax liability dollar-for-dollar.
- Keep your installation paperwork — contracts, permits, and the final inspection or interconnection date — in case of an audit, since that date determines eligibility.
The credit is nonrefundable, meaning it can reduce your tax bill to zero but won’t generate a cash refund beyond that.
Carrying Forward Unused Credit
If your 2025 tax liability wasn’t large enough to use the full credit in one year, the unused portion carries forward to future tax years until it’s fully used. For example, a $9,000 credit against a $6,000 tax liability leaves $3,000 to apply to the following year’s return. This carryforward remains valid even though new Section 25D credits are no longer available — it only applies to credit already earned from a qualifying installation completed by the deadline.
What About Leases and PPAs?
Homeowners who sign a solar lease or power purchase agreement (PPA) don’t own the system — a third-party company does, and that company can still claim a federal credit under a different provision, Section 48E, which covers commercial and third-party-owned clean energy property. Some providers pass part of that savings through to the homeowner as a lower monthly rate, though the credit itself is claimed by the system owner, not the homeowner, and doesn’t appear on your personal tax return.
If lowering your monthly cost matters more to you than owning the system outright, it’s worth asking installers directly whether their current lease or PPA pricing reflects a Section 48E benefit.
What’s Left If You’re Installing in 2026
Even without the federal credit, going solar in 2026 isn’t priced in a vacuum:
- State tax credits and rebates still exist in a number of states and vary significantly — check our state-by-state incentive guides for what applies where you live.
- Property tax exclusions, offered by several states, keep your added home value from solar out of your property tax assessment.
- Utility-specific rebates and net metering programs remain independent of federal policy and can still meaningfully affect your long-term savings. Net Metering Explained: How Solar Credits Work.
- Electricity bill savings over time remain the core financial case for solar regardless of tax credits — most systems still pay for themselves within 7 to 12 years based on avoided utility costs alone.
*IRS.gov (Form 5695 and official instructions) + text of the «One Big Beautiful Bill Act» (congress.gov) + energy.gov/eere.
FAQ
Is the federal solar tax credit still available in 2026? Not for homeowner-owned systems. It expired for any system placed in service after December 31, 2025. Third-party-owned lease and PPA systems can still connect to a federal credit indirectly.
How do I know if my system qualifies for the 30% credit? Your system qualifies if it was placed in service — installed and operational — on or before December 31, 2025, regardless of when you signed the contract or made a deposit.
What form do I use to claim the solar tax credit? IRS Form 5695, Residential Energy Credits, transferred to Schedule 3 of Form 1040 for the tax year your system was placed in service.
Can I still carry forward credit from a previous year? Yes. If you didn’t use the full credit against your tax liability in the year it was earned, the remaining balance carries forward to future years until exhausted.
Does a solar lease still get me any tax benefit in 2026? Not directly — the credit belongs to the system owner (the leasing company), not to you. Some providers pass part of that value through as a lower monthly rate, so it’s worth comparing lease pricing carefully against a cash or loan purchase.