Solar Tax Credit 2026: What Replaced the 30% Credit

If you started researching solar a couple of years ago and put it on the back burner, you have probably come back to a confusing picture. The 30% federal solar tax credit that everyone talked about is no longer available to homeowners who buy a system outright. That change has left a lot of people assuming solar no longer makes financial sense.

The honest answer is more interesting than that. The credit did not disappear from the solar industry — it moved. And for most homeowners, the way it moved has made going solar simpler, not worse. Here is what actually changed in 2026, in plain English.

What changed: Section 25D ended on December 31, 2025

The residential clean energy credit, known in the tax code as Section 25D, is what gave homeowners a credit worth 30% of the cost of a solar system on their federal tax return. Under the One Big Beautiful Bill Act signed in July 2025, that credit was ended early. Systems that a homeowner purchases and places in service in 2026 or later no longer qualify.

So if you buy a system with cash or a standard solar loan today, you should not expect a 30% federal credit on it. Any company still advertising one for a homeowner-owned purchase is either out of date or not being straight with you.

That is the bad news, and I would rather you heard it from me than found out at tax time. Now the part most homeowners have not heard.

What replaced it: the credit is still there — a partner claims it instead of you

The federal government did not end solar incentives altogether. It ended the homeowner-claimed version. The business-side credit, Section 48E, is still in place and currently runs through at least 2027, with longer timelines available for projects that begin construction early enough.

That matters because of how modern residential solar is financed. When a system is owned by a finance partner rather than by you — the model the industry calls third-party ownership, or TPO — that partner is a business, and the business credit applies. The partner claims the federal credit and passes the value through to you in the price you pay.

In practice, that shows up in one of two ways:

Lower monthly payments, on a lease or power purchase agreement, because the partner’s cost of owning the system is lower.
A large up-front discount on prepaid products, where the credit value is applied to the purchase price rather than spread across a monthly bill.

The second one is what has changed the conversation most. On the prepaid products I work with — including Concert’s Propel and Credit Human’s Participate — the finance partner claims the federal credit and passes roughly 30% straight through as an up-front reduction. You get the benefit at signing rather than waiting a year to file for it, and you do not need the tax liability to absorb a credit.

Two caveats worth stating plainly: exact discount amounts vary by product, state, system size and utility, and availability differs by market. The numbers I quote you will always be the numbers for your address, not a national average.

Why this is arguably better than the old credit

The old 25D credit had a real catch that rarely got mentioned in ads: it was non-refundable. You only captured the full 30% if you owed at least that much in federal tax. Retirees, households on fixed incomes and anyone with modest tax liability often carried the credit forward for years, or never fully used it.

The current structure sidesteps that problem entirely. The partner claiming the credit is a business with plenty of tax liability, so the full value gets used — and passed to you as a price reduction rather than a tax outcome you have to qualify for.

You also stop waiting. Under 25D you paid the full price in, say, March and saw the benefit when you filed the following spring. Now the benefit lands in the price you sign.

So is solar still worth it in 2026?

For most households in the states I cover, yes — but the reasoning has shifted, and it is worth being specific about it.

The case is now driven by your utility rate, not by a tax credit. Electricity prices in most of these markets have risen faster than general inflation for several years running. Solar’s value has always been that it substitutes a predictable cost for an unpredictable one. That logic is untouched by anything Congress did.

The buy-versus-lease math has genuinely levelled. For over a decade, cash and loan purchases had an advantage that leases did not, because only the homeowner-owned route captured the credit directly. That advantage is gone. Third-party ownership now competes on first-year economics in a way it simply did not before.

Batteries got relatively cheaper under TPO. Storage also qualifies under the business credit, so adding a battery to a third-party-owned system is often more affordable than buying one outright — which matters in any market with time-of-use rates or outage risk.

Where solar is not worth it has not changed: a heavily shaded roof, a roof due for replacement in the next few years, very low electricity usage, or a near-term plan to move. I will tell you that before you sign anything. If that is your situation, I would rather say so than sell you a system.

If you want the numbers for your specific home rather than a national average, book a call and I will run them with you.

What to ask any solar company in 2026

The incentive change created an opening for sloppy or misleading sales pitches. A few questions will sort the serious companies from the rest:

“Who claims the federal credit on this deal — me or you?” If they say you do, and it is a purchase you own, ask them to show you the current rule.
“Show me the price with and without the credit pass-through.” A real partner can break this out.
“What is the escalator?” On a lease or PPA, ask what the payment does each year, and get the number in writing.
“What happens if I sell the house?” Third-party agreements are transferable, but the process differs by product. Ask before you sign, not after you list.
“What is your production estimate based on?” It should reflect your roof, your shading and your utility’s rate structure.

Timing: the window is not indefinite

The business-side credit is not permanent either. Current rules keep federal support in place for third-party-owned systems through at least 2027, with longer completion windows available for projects that begin construction before the relevant deadlines. Tax law can change again, and the practical availability of these prepaid products depends on partners continuing to offer them in your state.

That is not a reason to rush a bad decision. It is a reason not to sit on a good one for two years.

The bottom line

The 30% credit homeowners used to claim on their own tax return is gone. Federal support for residential solar is not. It now flows through the finance partner, which for most households means the value arrives sooner and does not depend on your tax liability.

What that means for you specifically depends on your roof, your utility and your state. That is a fifteen-minute conversation, not a guess.

Book a call and I will walk through your actual numbers — including telling you if solar is not the right move for your home.

This article is general information, not tax advice. Federal and state incentive rules change, and how they apply depends on your circumstances. Please confirm your own situation with a qualified tax professional.

Solar Tax Credit 2026: What Happened to the 30% Credit — and What Replaced It