What Happened to the Solar Tax Credit?

If you were planning to go solar expecting a 30% tax credit, there's important news: that credit is gone as of January 1, 2026. Here's exactly what changed and what it means for your solar math.

What Was the Federal Solar Tax Credit?

The Residential Clean Energy Credit (Section 25D) allowed homeowners to deduct 30% of their solar system cost from their federal tax liability. On a $20,000 system, that meant a $6,000 credit — a substantial reduction in effective cost.

What Changed

The credit expired December 31, 2025, under recent federal legislation. Systems installed and placed in service in 2026 no longer qualify for this federal credit, regardless of when the contract was signed.

What This Means for Your Math

A system that would have cost $14,000 net after the credit now costs the full $20,000. This extends payback periods by roughly 2-4 years depending on your electricity savings rate.

What Incentives Still Exist

• State tax credits: Some states offer their own solar tax credits independent of the federal program.
• State rebates: Certain states and utilities offer upfront rebates for solar installation.
• Net metering: Still available in most states, this isn't a tax credit but significantly affects your ongoing savings.
• Property tax exemptions: Many states exempt the added home value from solar panels from property tax reassessment.
• Sales tax exemptions: Some states waive sales tax on solar equipment purchases.

Is Solar Still Worth It?

Yes, for most homeowners — just with longer payback periods than a few years ago. Rising electricity rates and falling equipment costs partially offset the loss of the federal credit. Run your specific numbers rather than relying on outdated "30% off" assumptions from older articles or sales materials.