Federal solar credit in 2026: what changed and what to do if you buy or lease

The 30% federal credit for homeowners who buy their solar system (Section 25D) is over: according to the IRS, it does not apply to expenditures made after December 31, 2025, and an expenditure counts when installation is completed. The credit for third-party-owned systems (Section 48E, the one behind leases and PPAs) remains in place, with a placed-in-service deadline at the end of 2027 according to SEIA. If you buy, the incentive is gone. If you lease, it sits with the system owner. Confirm everything with your tax preparer.

What exactly changed, and why?

The law known as the One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025) accelerated the termination of several energy credits. The IRS published FAQs to explain it.

For homeowners, the change that matters is Section 25D, the Residential Clean Energy Credit. It was the 30% credit on the cost of a purchased solar system. The IRS states it plainly: you cannot claim the credit for expenditures made after December 31, 2025, and an expenditure is treated as made when the original installation of the item is completed. If your installation finished in 2026, there is no 25D, even if you signed or paid in 2025.

What does it mean if you buy the system (cash or loan)?

It means the price on the proposal is the real price. There is no longer a 30% that “comes back” on your tax return.

For years, many proposals showed a “net cost after credit” that made the system look cheaper than it was. That is over for installations from 2026 onward. If a salesperson still shows you a federal discount on a purchase, ask which section of the tax code supports it. The correct answer is that there is none.

Without the credit, the decision to buy depends only on your home’s arithmetic: what you pay today, what the system produces, and how many years it takes to pay for itself. For many homes it still makes sense. For others, the gap between buying and another option narrowed, and it is worth comparing.

Heads up: some salespeople present the end of 25D as urgency to push signatures. The date has passed. Any urgency you are sold about the purchase credit in 2026 is pressure, not information.

What does it mean if you lease (lease or PPA)?

It means the federal credit exists, but it is not yours: the company that owns the system claims it under Section 48E.

In a lease or PPA (power purchase agreement), a third party owns the panels on your roof and you pay a monthly amount. Because the company is the owner, it is the one that claims 48E. SEIA confirms that the new law does not ban third-party rented or leased solar systems, and that for residential third-party-owned systems the base credit is 30%.

What you should demand is that the credit shows up in your contract: a lower monthly payment or a lower annual escalator. If the company takes the 30% and your payment does not reflect it, the incentive got lost along the way.

The dates affect you too, even though the credit is not yours. According to SEIA, projects that begin construction after July 4, 2026 must be placed in service by the end of 2027. That means lease companies have a window to install with the credit. After that, their pricing will likely change.

What should you do now?

It depends on how you were planning to acquire the system. The table sums up the concrete action.

Everything above is general information, not tax advice. Your situation (income, other credits, exact installation date) needs to be reviewed by your tax preparer.

What to check before deciding

• Installation completion date, not signing or payment date. That is what the IRS uses for 25D.
• If you are offered a purchase with a “30% credit,” ask for the code section behind it. For 2026 installations there is none.
• If you are offered a lease or PPA, ask to see the payment with and without 48E, and the annual escalator.
• Compare the options without incentives. If the project only works with a credit that does not apply, it does not work.
• Confirm with your tax preparer before making any decision based on credits.

The full guide is at federal solar tax credit 2026. And if you want to know which option fits your specific home without relying on incentives, start with the diagnosis.