Topic · Federal incentives
The federal solar credit in 2026
The single biggest change to the residential solar landscape in the last decade happened quietly on December 31, 2025. The residential clean energy credit — the long-running benefit that returned a portion of solar system cost to homeowners on their tax return — terminated. No phase-down. Systems placed in service in 2026 or later, if they are owned by the homeowner outright or financed with a loan, get nothing from the federal residential side.
What changed and when
The One Big Beautiful Bill (Public Law 119-21) was signed into law on July 4, 2025. It eliminated the residential clean energy credit for systems placed in service after December 31, 2025. The credit had previously been scheduled to run through 2034 under the Inflation Reduction Act of 2022 — the OBBB compressed that runway to zero.
Systems placed in service in calendar year 2025 can still claim the credit on a 2025 tax return. Anything operational on or after January 1, 2026 cannot.
What this means for a 2026 homeowner
A homeowner who would have paid roughly $20,000 for a 7 kW system in 2024 and recovered $6,000 of that on their tax return now pays the full $20,000 with no federal offset. State and utility-level programs still apply, but the math is materially worse than it was. Payback periods that were 7 to 9 years in 2024 are commonly 9 to 13 years for the same install in 2026, depending on state.
What's still available on the federal side
The business-side investment credit is still in effect through 2027. That credit applies to third-party-owned arrangements — where a financing company technically owns the panels and either rents the system to you or sells you the electricity it produces. The dollar value of the credit can in some cases be passed through to the homeowner as a lower monthly payment.
This is materially different from a homeowner-owned system. You don't own the equipment, you don't get the long-tail savings, you sign up for a contract that runs 20–25 years, and you may face complications when selling the house. We do not generally recommend third-party-owned arrangements for the typical homeowner in our footprint.
What state programs still do
State-level programs are now the only sizable financial benefit a 2026 homeowner gets, and they vary substantially by state and utility. Illinois Shines pays a 15-year lump sum based on Solar Renewable Energy Credits. Michigan offers Distributed Generation export credits but no state cash rebate. Colorado offers Xcel Solar*Rewards and county-level rebates. Oregon offers an Energy Trust rebate plus a periodic Oregon Department of Energy rebate when funded.
If your quote still shows the federal credit
Several large solar publisher sites — SolarReviews, Modernize, and some pages on Sunrun's site — were still publishing the pre-2025 federal credit as a live benefit when this page was last verified. Affiliate sites are even worse. If a solar quote you've been handed in 2026 includes a federal credit on the bottom-line price for a cash purchase or loan, the price is overstated.
Ask the installer to remove the federal credit line and re-issue the quote. The corrected number is the real price.
Sources
- IRS, Residential Clean Energy Credit overview page. Source: irs.gov/credits-deductions/residential-clean-energy-credit · accessed 2026-05-13
- IRS, FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D under Public Law 119-21. Source: irs.gov/newsroom (P.L. 119-21 FAQs) · accessed 2026-05-13