The 30% Federal Solar Tax Credit Is Gone — What Replaced It in 2026

If you've been quoted "30% off your solar system" recently, or read older articles online claiming the federal government will refund 30% of your installation cost, **you need to know that information is no longer accurate.**

On July 4, 2025, the One Big Beautiful Bill Act (OBBB) was signed into law. As of **December 31, 2025**, the residential solar tax credit known as Section 25D — the credit that for nearly two decades let homeowners deduct 30% of their solar system cost from their federal taxes — has been **terminated**. There was no phase-down. No transition period. It simply ended.

If you're considering solar in 2026, this changes the math completely. Here's exactly what's available now, what's gone, and how it affects your financial decision.

## What Section 25D Used to Do

The Residential Clean Energy Credit (Section 25D of the U.S. tax code) gave homeowners a dollar-for-dollar federal tax credit equal to 30% of the total cost of their solar system — including panels, inverters, batteries, labor, and permits.

A $30,000 solar installation generated a $9,000 reduction in federal taxes owed.

This credit was the single biggest financial incentive for residential solar in the United States. It was originally introduced in 2006, expanded multiple times, and most recently extended by the Inflation Reduction Act through 2034 with a planned step-down.

Then OBBB happened.

## What the OBBB Act Actually Did

The One Big Beautiful Bill Act, signed by the president on July 4, 2025, made sweeping changes to federal tax policy. Among them: **Section 25D was terminated outright as of December 31, 2025.**

This means:

- Solar systems installed and paid for by homeowners on or before December 31, 2025 still qualify for the 30% credit on their 2025 tax filing. - Solar systems installed in 2026 and beyond do **not** qualify for any federal residential tax credit if purchased with cash or financed via a loan.

There is no replacement program for cash and loan buyers at the federal level.

## The Reality for Cash Buyers in 2026

If you pay cash for solar in 2026, you receive **zero federal tax credit**.

The financial case for cash purchases now rests entirely on:

- Your monthly bill reduction - Long-term savings vs. utility rate inflation - State-level incentives (where they exist) - Increased home value

Without the 30% kicker, payback periods on cash systems have extended significantly — typically from 5–7 years to 8–11 years depending on your utility rates and local incentives.

## The Reality for Loan Buyers in 2026

Same as cash. If you finance your solar with a loan in 2026, you do **not** receive the 30% federal credit.

This affects how loan products are structured. Many older solar loans were built with the assumption that homeowners would receive 30% back as a tax credit and apply it to a balloon payment within 18 months — keeping monthly payments low. Without the credit, those structures collapse.

If you're being quoted a loan that assumes a "tax credit re-amortization," ask whether the math still works without it. In most cases, it doesn't.

## The One Pathway That Still Qualifies: Lease and PPA (48E)

There is one way to still benefit from federal solar incentives in 2026: **third-party-owned systems** under leases or Power Purchase Agreements (PPAs).

These systems are owned by an installer or solar finance company — not the homeowner — and qualify under Section 48E (the commercial-side investment tax credit). Section 48E remains available through the end of 2027, but with two important conditions:

1. **Construction must begin by July 4, 2026.** Projects that start construction after this date do not qualify. 2. **FEOC compliance is required.** Components used in the system must meet Foreign Entity of Concern rules (essentially, certain Chinese-manufactured components are excluded).

Under a 48E-qualifying lease or PPA, the installer claims the credit and passes the savings through to you in the form of lower monthly payments. You don't claim anything on your taxes — but your bill is lower from day one.

For most homeowners in 2026, lease and PPA are now the only way to access federal solar incentives.

## State-Level Incentives Still Available

The good news: OBBB did not affect state-level solar incentives. Many of these are still strong, and in some states they meaningfully offset the loss of the federal credit.

**Florida**

- Sales tax exemption on solar equipment (saves ~6%) - Property tax exemption — the value solar adds to your home is not taxed - Net metering significantly weakened in recent years; confirm current rules with your utility

**Texas**

- Property tax exemption on the added home value - Local utility rebates vary widely (Austin Energy, CPS Energy, Oncor service area) - No statewide net metering — financial case rests on bill offset and resilience

**California**

- SGIP (Self-Generation Incentive Program) rebates for battery storage — substantial, especially for low-income or fire-zone customers - Property tax exemption - NEM 3.0 in effect — solar-only economics are weak; pair with battery storage for best return

If you're in another state, check your state energy office and your local utility's website for current incentive listings.

## What This Means for Your Financial Decision

The conversation about whether to go solar in 2026 has changed.

**Before OBBB:** "Solar pays for itself in 5–7 years thanks to the 30% credit and your bill savings."

**After OBBB:** "Solar pays for itself in 8–11 years through bill savings and state incentives — unless you use a lease or PPA, which gets you Day-1 savings without the wait."

For most homeowners, **lease or PPA is now the strongest financial path** — not because it's cheaper overall, but because it captures the only remaining federal incentive and produces savings immediately rather than on a multi-year payback timeline.

For homeowners with strong state incentives (like California with SGIP) or specific reasons to own (very long planned home tenure, off-grid resilience priority, large property), cash or loan can still make sense — but the math is no longer automatic.

## What You Should Do Now

1. **Be skeptical of "30% off" pitches.** Any solar rep quoting the federal tax credit on a cash or loan deal in 2026 either doesn't know the law has changed, or is hoping you don't.

2. **Ask specifically about 48E qualification on lease and PPA quotes.** Confirm the installer can begin construction by July 4, 2026 and that components meet FEOC requirements. Without those, the lease or PPA doesn't qualify and the savings claims may not hold.

3. **Get a current quote that reflects 2026 reality.** Quotes prepared before the OBBB termination took effect may still show 30% credit lines that don't apply to your project anymore.

4. **Compare lease/PPA against cash math honestly.** Don't assume cash is "always better" — without the 30% credit, the upfront capital is doing more work and the payback is longer.

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If you want a current, OBBB-accurate solar analysis specific to your home, your utility, and your state — built around what's actually available in 2026 — get in touch.

**Eric Brickus, Solarfying**

- Email: eric@solarfying.com - Phone: (407) 813-5731 - Get a free solar audit: [solarfying.com/quote](https://solarfying.com/quote)