Federal Solar Tax Credit 2026: What You Need to Know
- The 30% residential ITC (Section 25D) has been eliminated for new installations after December 31, 2025.
- If you installed solar in 2025 or earlier, you can still claim the credit on your 2025 tax return.
- Commercial solar (Section 48) credits may still apply for certain business installations — consult a tax professional.
- Some state-level solar incentives remain available regardless of the federal ITC status.
- Even without the federal ITC, off-grid solar remains financially viable in most scenarios.
What was the federal ITC?
The federal Investment Tax Credit (ITC) allowed homeowners to deduct 30% of their total solar system cost — including panels, batteries, inverters, wiring and installation — directly from their federal income tax liability. It was a dollar-for-dollar reduction, not a deduction. On a $15,000 system, that was $4,500 straight off your tax bill.
The credit applied to both grid-tied and off-grid solar systems, including standalone battery storage installed with solar. It was available to homeowners who owned (not leased) their systems and had sufficient federal tax liability to use the credit.
What changed in 2026
The One Big Beautiful Budget Act, passed in 2025, eliminated the residential solar ITC (Section 25D) for systems installed after December 31, 2025. This was a significant change from the previous law, which had extended the 30% credit through 2032.
| Installation year | Credit available? | Credit rate |
|---|---|---|
| 2022–2025 | Yes | 30% |
| 2026 onwards (residential) | No (eliminated) | 0% |
| Commercial / business (Section 48) | Consult tax pro | Varies |
Claiming the 2025 ITC — if you qualify
- Verify eligibilitySystem must have been installed and operational in 2025 (or earlier). You must own the system — leased systems don't qualify. The property must be your US residence (primary or secondary).
- Gather receipts and documentationCollect all receipts for solar panels, batteries, inverter, charge controller, wiring, mounting hardware and installation labor. All these costs are included in the credit calculation basis.
- Calculate your credit amountTotal all qualifying costs. Multiply by 30%. This is your credit amount. Example: $18,000 total system cost × 30% = $5,400 credit.
- Complete IRS Form 5695File Form 5695 (Residential Energy Credits) with your federal tax return. Line 1 is your total qualified costs. The form calculates your credit and carries it to Schedule 3 of Form 1040.
- Carry forward if neededIf your credit exceeds your tax liability, the unused portion carries forward to the next tax year. Keep documentation for all future years until the credit is fully used.
What costs qualify (for 2025 installations)
- Solar panels (all types)
- Battery storage installed with solar (including standalone battery if added to existing solar)
- Inverter and charge controller
- Wiring, conduit and electrical components
- Mounting hardware and racking
- Professional installation labor
- Permits and inspection fees
- Sales tax on all qualifying equipment
State incentives — still available in 2026
Even with the federal ITC eliminated, many states offer their own solar incentives:
| State | Incentive | Amount |
|---|---|---|
| New Mexico | State income tax credit | 10% (up to $9,000) |
| New York | State tax credit | 25% (up to $5,000) |
| Maryland | Residential Clean Energy Grant | Up to $1,000 |
| South Carolina | State tax credit | 25% |
| Massachusetts | State tax credit | 15% (up to $1,000) |
| Most states | Property tax exemption for solar | 100% of added value |
| Most states | Sales tax exemption on solar equipment | Varies (5–10%) |
Check your state's energy office website for current incentives — state programs change frequently. See our best states for off-grid solar guide for a full state-by-state breakdown.
Is off-grid solar still worth it without the ITC?
Yes — for most off-grid use cases. The 30% ITC significantly improved the economics but the underlying value proposition remains:
- Remote properties still face $15,000–$50,000+ grid connection costs — off-grid solar wins regardless of ITC
- Generator replacement still pays back in 2–4 years without any tax credit
- Full-time RV and van builds still eliminate $400–$800/month in campground fees
- Electricity rates will continue rising — locking in your cost at zero remains valuable
Use our ROI calculator to run your specific numbers with the ITC set to zero.
Frequently asked questions
Can I still claim the ITC for a system installed in late 2025?
Yes — if your system was installed and operational in 2025, you can claim the 30% credit on your 2025 federal tax return, filed in early 2026. The credit applies to the tax year of installation, not the filing year.
Does the ITC apply to battery storage only (no panels)?
For 2025 installations: standalone battery storage qualified for the ITC if it was charged at least 75% from solar. For 2026 and beyond, the residential ITC has been eliminated so this is no longer relevant for new residential installations.
I'm a business owner — can I still get a solar tax credit?
Possibly — the commercial ITC (Section 48) has a different status than the residential Section 25D credit. Consult a tax professional familiar with energy tax credits for your specific business situation.