Solar Incentives in 2026: What's Left After the Federal Credit Expired
The residential federal solar tax credit expired 12/31/2025. State incentives, utility rebates, and net metering are now the levers that make solar pencil out.
Houses with solar panels showcasing clean energy
The residential federal solar tax credit (Section 25D) expired on December 31, 2025 under the One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025). No phase-down. Owner-financed residential solar placed in service on or after January 1, 2026 gets a 0% federal credit.
What is left: state tax credits, utility rebates, net metering, and — for third-party-owned (TPO) or leased systems only — the commercial Section 48E ITC at 30% through 2027. This guide walks through every incentive that still exists in 2026 and what actually moves your payback.
Quick Answer: In 2026 there is no federal tax credit for owner-financed residential solar. State incentives and utility rebates typically save $1,000–$5,000 on a system, and net metering saves $500–$2,500 a year on electric bills. If you lease or sign a PPA, the leasing company claims the Section 48E ITC (30% through 2027) — some of that value may flow to you through a lower monthly rate, but you don't own the system.
What Changed: The End of the Section 25D Credit
Before OBBB, the Residential Clean Energy Credit (Section 25D) gave homeowners a 30% federal tax credit on solar, scheduled to stay at 30% through 2032 before a phase-down. OBBB killed the credit with a cliff date of December 31, 2025 — no phase-down, no grandfathering for systems already contracted but not yet placed in service.
Sources:
If you installed solar and placed it in service on or before 12/31/2025, you can still claim the 30% credit on your 2025 tax return. If the system wasn't operational by year-end 2025, you cannot claim it.
What Still Exists in 2026
1. Section 48E Commercial ITC (TPO and Lease Only)
The commercial Section 48E Investment Tax Credit stays at 30% through 2027 before it begins phasing down. For homeowners, this only matters if you sign a third-party-owned (TPO) agreement or a lease. The leasing company owns the equipment and claims the 48E credit. How much of that value actually reaches you depends entirely on PPA/lease terms — get the math in writing before you sign anything with a 20-year commitment.
2. State Solar Tax Credits
Several states still offer standalone solar tax credits, unaffected by OBBB:
These programs change. Verify current-year amounts and caps on your state's revenue department website or on DSIRE.
3. Utility Rebates
A handful of utilities run their own rebate programs:
Utility rebates are often first-come, first-served and close when the budget runs out. Check DSIRE filtered by "Utility" for what is active in your territory.
4. Net Metering
Net metering credits you for electricity you export to the grid. It is set by state public utility commissions, not OBBB, so it is unchanged.
Net metering has been eroding nationally over the past five years. Systems installed today may be grandfathered if a state changes policy later, but that is not guaranteed. Get your grandfathering protections in writing.
5. Property Tax and Sales Tax Exemptions
A lot of states exempt the added home value from solar from property tax assessments (so adding solar doesn't raise your property tax bill) and/or exempt solar equipment from sales tax. Both are state-level and unaffected by OBBB. Not cash in hand, but they protect the bottom line.
Battery Storage in 2026
OBBB also hit standalone residential battery storage under federal law. The old rule — batteries over 3 kWh qualified for 25D whether or not paired with solar — no longer provides that federal credit for systems placed in service after 12/31/2025. Verify current-year eligibility with a tax professional before relying on any federal battery credit.
State battery incentives still apply:
Realistic 2026 Savings: A South Carolina Example
For an 8 kW system in South Carolina:
Line ItemAmount Installed cost (8 kW)$24,000 Federal tax credit$0 (expired 12/31/2025) SC state tax credit (25%, capped at $3,500)−$3,500 Utility rebate (varies, often $0 for new customers)$0 Net cost$20,500 Annual electricity savings (with net metering)~$1,400–$1,800 Payback period~11–14 years 20-year net savings (with rate inflation)~$8,000–$14,000
Compare to the pre-OBBB math: same system, with the old 30% federal credit, was netting out around $11,800 with a 6.5-year payback. The federal credit was doing most of the heavy lifting, and it is gone.
Your numbers depend heavily on your state's incentives, your utility's net metering policy, and your electricity rate. Use the solar calculator for an estimate based on your location.
Common 2026 Mistakes
1. Reading outdated articles
Most solar-incentive articles on the internet still reference a 30% federal credit. As of 2026 that is wrong for residential owner-financed systems. Check the publish date and whether the article was updated after July 2025.2. Trusting installer math that still includes the federal credit
Some installers are still showing quotes with a 30% "federal incentive" line. On any owner-financed quote for a 2026 or later install, that line should be $0. If it isn't, make the installer re-run the numbers — or walk away.3. Assuming lease/TPO math passes the full 48E value through
Leasing companies claim the 30% 48E credit and pass some of the value through as a lower PPA rate. How much? Varies wildly. Get a written PPA term sheet and compare total 20-year cost against a cash purchase before signing.4. Ignoring net metering deadlines
If your state utility commission is reviewing net metering policy, systems installed before the change may be grandfathered. Timing matters — ask your installer what proceeding is active in your state right now.5. Forgetting HOA solar access laws
28 states have solar access laws preventing HOAs from banning rooftop solar outright. HOAs can still regulate aesthetics. See the solar permit guide for details by state.Frequently Asked Questions
Is there really no federal solar tax credit in 2026?
Correct, for owner-financed residential solar. The Section 25D Residential Clean Energy Credit expired December 31, 2025 under the One Big Beautiful Bill Act. Systems placed in service 1/1/2026 and later get 0% federal credit. The commercial Section 48E ITC (30% through 2027) still applies to TPO/leased residential systems because the leasing company — not you — is the tax credit claimant.I signed a contract in 2025 but the system won't be installed until 2026. Do I get the credit?
The 25D credit requires the system to be placed in service by 12/31/2025 — not just contracted. If your system wasn't operational by year-end 2025, you cannot claim the credit. Talk to a tax professional to confirm your specific situation.Can I still combine state and federal credits?
No federal residential credit exists in 2026 to combine with, so the question doesn't apply for 2026 installs. If you installed before 12/31/2025, federal and state credits generally stack, though some states reduce the state credit by the federal amount. Check your state's rules.Do solar leases qualify for any federal credit?
Yes — the commercial Section 48E ITC (30% through 2027) goes to the lease owner, not you. Whether any of that value reaches you depends on your PPA or lease terms. Compare total 20-year cost against a cash purchase before signing.Is solar still worth it if I plan to move in 5 years?
Solar adds roughly 4.1% to home value per Zillow research — about $16,400 on a $400,000 home. Without the federal credit, your upfront cost is higher, so recouping at resale is less likely to cover the install. If you're moving in 5 years, lease or PPA may be a better fit than an outright purchase.What about heat pumps, water heaters, and other home energy upgrades?
OBBB also terminated the Section 25C Energy Efficient Home Improvement Credit (heat pumps, heat pump water heaters, insulation, windows) effective 12/31/2025. If you're budgeting for any home energy upgrade in 2026, assume no federal credit unless you have verified current-year rules with a tax professional.---
*Run 2026 solar numbers in the free solar calculator — no federal credit assumed, state incentives and net metering factored in. For the ROI view, see Are Solar Panels Worth It in 2026?.*