Has the Federal Solar Tax Credit Expired? 2026 ITC Status Update

The federal 30% residential solar ITC expired Dec 31, 2025. Battery storage ITC also gone. State credits, net metering & rebates still exist — see what you can claim in 2026.

Important update (May 2026): The federal residential solar Investment Tax Credit (ITC, Section 25D) expired for homeowners on December 31, 2025. The IRS has confirmed that the credit is not available for solar systems placed in service after that date. This article has been updated to reflect the current situation.

If you installed solar before December 31, 2025, you can still claim the 30% credit on your 2025 tax return. If you’re installing in 2026 or later, the federal residential ITC no longer applies.

Here’s what you need to know about solar incentives that do remain available in 2026.

What Happened to the Federal Solar Tax Credit?

The 30% Residential Clean Energy Credit (Section 25D — IRS official page) was eliminated for residential systems placed in service after December 31, 2025. This resulted from the “One Big Beautiful Bill Act” signed into law in mid-2025, which ended the residential credit nearly a decade ahead of its previously scheduled phase-out.

Key points:

Systems installed on or before December 31, 2025: still eligible for the 30% credit on your 2025 taxes
Systems installed after December 31, 2025: federal residential ITC no longer applies
Commercial and third-party owned systems (leases, PPAs): the Section 48E commercial credit may still apply — the installer, not the homeowner, claims the credit in these cases

What Solar Incentives Still Exist in 2026?

While the federal residential ITC is gone, many valuable incentives remain at the state, local, and utility level.

State Tax Credits

Several states offer their own solar tax credits, independent of the federal credit:

State	Credit	Cap
New York	25% of cost	$5,000
Massachusetts	15% of cost	$1,000
South Carolina	25% of cost	$3,500
Arizona	25% of cost	$1,000
Utah	25% of cost	$1,600
Iowa	15% of cost	$5,000
Montana	100% of cost	$500

These state credits are claimed on your state income tax return and are completely separate from the federal credit.

Sales Tax Exemptions

Many states exempt solar equipment from state sales tax, saving you 5–10% on hardware costs:

California, Florida, Arizona, Colorado, Texas, Maryland, New Jersey, New York, and many others offer full or partial sales tax exemptions on solar equipment.

Property Tax Exemptions

Solar installations increase home value, but many states protect you from higher property taxes:

Over 30 states offer full or partial property tax exemptions for the added value from solar panels. This means your property taxes won’t increase even though your home is worth more.

Net Metering

Net metering is arguably the most financially impactful ongoing incentive — and it remains available in most states in 2026.

How it works: When your solar panels produce more electricity than you use, the excess is sent to the grid. Your utility credits you for that power, which offsets what you consume at night or on cloudy days.

The value of net metering varies:

Full retail rate net metering (best): your excess solar is credited at the same rate you pay for grid power
Avoided cost / wholesale rate (less favorable): you receive a lower rate for exports
No net metering (worst): some utilities don’t offer it

Check net metering policies in your state at DSIRE — the Database of State Incentives for Renewables & Efficiency. If you claimed the credit before it expired, use IRS Form 5695 to file.

Utility Rebates

Many utilities offer one-time rebates for solar installation, typically $100–$500 per kW installed. Check with your local utility for current programs.

SREC Markets (Solar Renewable Energy Credits)

In states like New Jersey, Massachusetts, Illinois, Maryland, and Ohio, you can earn Solar Renewable Energy Credits (SRECs) for the electricity your system produces. These are sold to utilities and can be worth hundreds or thousands of dollars per year.

Does Solar Still Make Financial Sense Without the Federal ITC?

Yes — for many homeowners, especially in states with high electricity rates and good incentives.

Before the ITC (2026 example):

7 kW system cost: $21,000
Federal ITC (30%): expired — $0
State/local incentives (varies): $1,000–$5,000
Net cost range: $16,000–$20,000

Payback period without federal ITC:

With strong state incentives + high electricity rates: 8–10 years
Average case: 10–13 years
Low incentives + low electricity rates: 13–16 years

For a detailed comparison of solar vs. staying on the grid over 25 years, see Solar Panels vs. Traditional Energy: Which Saves You More?.

The removal of the federal ITC does extend payback periods compared to pre-2026 calculations. However, electricity prices continue to rise, and solar still provides long-term protection against utility rate increases.

States where solar still makes strong financial sense in 2026:

Massachusetts, New York, New Jersey (high rates + state incentives)
Hawaii (extremely high electricity rates)
California (high rates, despite reduced net metering)
States with SREC programs

See the full breakdown in our Best States for Solar Energy in 2026 guide — including payback periods by state.

What About Leasing Solar?

One consequence of the ITC expiring for homeowners is that solar leases and PPAs (Power Purchase Agreements) become relatively more attractive for some homeowners.

With a lease or PPA:

You don’t own the system — the installer does
The installer (a commercial entity) can still claim commercial tax credits
You pay a monthly rate for the power produced, typically below your utility rate
You don’t pay upfront, and you don’t handle maintenance

Tradeoffs: You don’t build equity, you can’t claim any incentives yourself, and the terms can complicate home sales. But for homeowners who couldn’t use the residential ITC anyway (low tax liability), leasing may now be worth reconsidering.

Federal ITC Status by State: New Jersey, Ohio & South Carolina

New Jersey

New Jersey homeowners no longer have access to the federal residential ITC (expired Dec 31, 2025), but the state remains one of the best solar markets in the US thanks to its own incentive stack:

SuSI Program (Successor Solar Incentive): quarterly payments per kWh produced for 15 years — one of the most generous ongoing incentives in the country
SREC market: sell Solar Renewable Energy Credits to utilities for additional income
Retail-rate net metering: full credit for excess power exported to the grid
Sales tax exemption on solar equipment
Avg. payback period: 7–8 years even without the federal ITC

For NJ homeowners, the loss of the federal ITC is largely offset by the SuSI program. Solar in New Jersey remains financially compelling in 2026.

Ohio

Ohio’s situation post-ITC expiration is more mixed:

No state income tax credit for residential solar
Net metering: available through major utilities (AEP Ohio, Ohio Edison, Duke Energy Ohio) but policies vary
Some utility rebates: check directly with your utility
Avg. payback period: 12–15 years without federal or strong state incentives

Ohio homeowners should focus on utility-specific rebates and net metering terms. Get multiple quotes to ensure competitive pricing.

South Carolina

South Carolina stands out as one of the best states for solar incentives in 2026 despite the federal ITC expiration:

25% state tax credit on total system cost — cap of $35,000 (paid out at max $3,500/year, with excess carried forward up to 10 years)
100% property tax exemption on the added home value from solar — automatic in most counties
Santee Cooper rebate: $950/kW installed, up to $5,700 for Santee Cooper residential customers
Net metering: available through Duke Energy Carolinas, Dominion Energy SC, and SCE&G — rate structure varies by utility
Avg. payback period: 9–11 years

South Carolina’s 25% state credit with a $35,000 cap is one of the most generous in the Southeast. The $3,500/year payout structure means larger systems continue generating tax savings for up to 10 years. Check dsireusa.org and the SC Energy Office for current program details.

Does the Federal ITC Apply to Off-Grid Solar Systems in 2026?

For residential homeowners: No. The Section 25D residential ITC expired December 31, 2025 for all residential solar installations — including off-grid systems.

For commercial/business off-grid installations: The Section 48E commercial ITC may still apply if the system is used for a qualified business purpose. The installer or business owner (not the homeowner) would claim the credit.

Battery storage without solar: Standalone battery storage systems installed for residential use also lost the federal ITC alongside solar on December 31, 2025.

If you’re considering an off-grid system, check with a tax professional and review current guidance at the IRS Residential Clean Energy Credit page.

Federal ITC for Residential Battery Storage in 2026

This is one of the most-searched questions in 2026 — here’s the definitive answer:

Residential battery storage installed in 2026: No federal ITC.

Under the old Section 25D, home battery storage systems qualified for the 30% credit when installed alongside solar (or as standalone storage). That credit expired December 31, 2025 along with the rest of the residential ITC.

Here’s the breakdown by scenario:

Scenario	Federal ITC Available?
Solar + battery installed in 2026 (residential)	❌ No — Section 25D expired
Standalone battery storage in 2026 (residential)	❌ No — Section 25D expired
Battery installed before Dec 31, 2025	✅ Yes — claim on 2025 tax return
Battery for commercial/business use (Section 48E)	✅ May apply — installer/business claims it
Battery via solar lease or PPA	✅ Installer may claim commercial credit

What incentives remain for battery storage in 2026?

Some states offer battery-specific rebates: California’s SGIP program, New York’s NYSERDA incentives, and Massachusetts’ incentives cover battery storage
Utility rebates: Many utilities offer demand response or battery incentive programs
Property tax exemptions: Many states that exempt solar also exempt battery storage

If battery backup is important to you (especially in outage-prone areas), focus on states with dedicated battery incentive programs.

Will the Federal Solar Tax Credit Be Extended in 2026?

Short answer: No current legislation will reinstate it.

The One Big Beautiful Bill Act (Public Law 119-21), signed July 4, 2025, formally eliminated the Section 25D residential credit. As of May 2026, no bill has been introduced in Congress to restore the residential solar ITC.

Key points:

The commercial Section 48E ITC remains in place — but only the installer (not the homeowner) can claim it
Homeowners who went solar before December 31, 2025 can still claim the 30% credit on their 2025 tax return — this deadline has not changed
State-level credits (New York, Massachusetts, South Carolina, etc.) are completely independent of federal law and remain available
Solar industry groups (SEIA) continue to lobby for reinstatement, but no timeline exists

Bottom line: Plan your 2026 solar investment around state incentives, not a potential federal credit revival. The most reliable incentives right now are your state tax credit, net metering, and utility rebates.

How to Find Current Incentives in Your State

The most reliable way to find current solar incentives is:

DSIRE database: dsireusa.org — the authoritative database of all US renewable energy incentives, updated in real time
Your state energy office — most have a dedicated solar or renewable energy page
Your local utility — check for rebates and net metering rates directly
A local solar installer — they know the current incentive landscape in your area

Key Takeaways

The federal residential 30% ITC expired December 31, 2025 — it does not apply to solar or battery storage installed in 2026
Residential battery storage also lost the federal ITC — no Section 25D credit for batteries installed in 2026
No legislation currently exists to restore the residential ITC — plan around state incentives
State tax credits, sales tax exemptions, property tax exemptions, net metering, and utility rebates still exist in many states
Without the federal ITC, payback periods are typically 8–16 years depending on your state and electricity rates
Check dsireusa.org for a complete, current list of incentives in your area

Sources: IRS Residential Clean Energy Credit guidance, DSIRE database, SEIA State Solar Policies, U.S. Department of Energy.