The Federal Solar Tax Credit Expired. Here's What 2026 Buyers Need to Know.
The 30% residential solar Investment Tax Credit (Section 25D) expired on December 31, 2025 — ended by the One Big Beautiful Bill signed on July 4, 2025. Solar still makes financial sense in most US states, but the math has changed.
The federal 30% solar tax credit (Section 25D) is gone for residential buyers as of January 1, 2026. On a typical 8 kW system ($22,400), that's $6,720 you no longer get back. Payback periods extend by 2–4 years in most markets. State incentives, net metering, and utility rebates remain intact.
What Exactly Happened to the Solar Tax Credit?
The Investment Tax Credit for residential solar was established in 2005 and had been extended repeatedly. It sat at 30% from 2022 through 2025 under the Inflation Reduction Act. The One Big Beautiful Bill, signed into law on July 4, 2025, removed Section 25D — the residential solar provision — effective for systems placed into service after December 31, 2025.
Homeowners who installed solar and had it operational by December 31, 2025 can still claim the credit on their 2025 tax return. Systems completed in 2026 or later get nothing from the federal government — regardless of when the contract was signed.
The commercial solar credit (Section 48) for businesses remains in place. Residential lease agreements where a third party owns the panels may have different tax implications — consult a tax professional if you're considering a solar lease.
How Does the ITC Expiration Change the Solar Math?
A typical 8 kW residential solar system in 2026 costs approximately $22,400 installed (~$2.80/W national average). Without the 30% federal credit, that's your full out-of-pocket cost — unless your state offers its own tax credit.
In high-rate states like California (30¢/kWh), the payback period extends from roughly 5 to 7 years. In average-rate states like Texas (13¢/kWh), it goes from about 7 to 10 years. In low-rate states like Washington (10¢/kWh), payback was already long — now exceeds 14 years.
The 25-year savings picture is largely unchanged — a solar system that generates 12,000 kWh/year still produces the same electricity. The ITC expiry just means you're paying more upfront to get that savings.
What Solar Incentives Are Still Available in 2026?
The federal credit is gone, but state and utility programs remain intact. In some high-incentive states, the combined value of remaining programs rivals or exceeds the old federal credit.
Arizona (25%), New York (25%), South Carolina (25%), Massachusetts (15%), Hawaii (35%), and others still offer state-level credits.
Over 30 states exclude the solar-added home value from property tax assessments — permanently.
Solar equipment is sales-tax exempt in 20+ states, saving $500–$2,000 upfront depending on system size.
Bill credits for excess solar sent to the grid. Available in 40+ states, though credit rates vary.
States like NJ, MA, MD, PA, and IL pay homeowners for renewable energy certificates. One SREC = $50–$400.
Many utility companies offer direct rebates of $200–$2,000 per installed kW. Check your utility's website.
The best states for solar in 2026 are those that combine high electricity rates, strong net metering, and their own state credits — California, New York, Massachusetts, New Jersey, and Hawaii. Arizona and Nevada remain excellent thanks to near-record solar yield, even with modest state programs.
Is Solar Still Worth Buying in 2026 Without the Tax Credit?
In most US states, yes — especially in markets with electricity rates above 15¢/kWh. The break-even timeline is longer, but a 25-year savings of $40,000–$80,000 on a system that costs $22,400 is still a strong investment by any measure.
The clearest cases where solar remains excellent value in 2026: California, Hawaii, Massachusetts, New York, Connecticut, New Jersey, Arizona, and Florida. These states combine above-average electricity rates, strong net metering, and significant solar yield.
Solar makes less sense in 2026 for homeowners in states with very low electricity rates (below 10¢/kWh) who lack state credits — primarily Pacific Northwest states like Washington, Oregon, and Idaho. Even there, if you're planning to stay in the home 15+ years, the numbers can still work.
What Should You Do If You're Considering Solar Right Now?
Should I rush to install solar now, or wait?
There's no meaningful advantage to rushing in 2026 — the federal credit is already gone. Solar panel costs have been declining at roughly 5–8% per year. Waiting 12–18 months could mean lower hardware costs, though installer labor pricing is less predictable. The bigger variable is your electricity rate: if your utility raises rates (as most are), every month you wait is another month of full utility bills.
How do I calculate whether solar is worth it for my home?
Start with your average monthly electricity bill. Divide by your local electricity rate to get monthly kWh usage. Use our solar calculator to model your specific city — it pulls real PVGIS yield data and current EIA rates for your exact location. For state-specific incentives, check our incentives page.
Does the ITC expiry affect solar leases or PPAs?
Solar leases and power purchase agreements (PPAs) have the installer own the system, not the homeowner. In these arrangements, the installer may still claim commercial tax credits (Section 48) and pass some savings to you through lower lease rates. This is worth asking installers about specifically — leasing economics may improve relative to ownership in 2026.
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