For twenty years, the federal solar tax credit was the anchor of residential solar economics in America. That era ended on December 31, 2025. If you're researching solar in 2026, most of what you'll read online is out of date — here's the accurate picture, and the paths that still put federal and state money behind your project.
What changed
The 2025 federal budget law (the "One Big Beautiful Bill Act," signed July 4, 2025) terminated the Section 25D Residential Clean Energy Credit — the 30% credit homeowners claimed when they purchased solar panels or batteries. There was no step-down to 26% or 22% as older articles describe; the credit ended outright for systems placed in service after December 31, 2025.
Installed in 2025? If your system was up and running by December 31, 2025, you still claim the full 30% on your 2025 return (IRS Form 5695). Unused credit generally carries forward — talk to your tax professional.
The door that's still open: leases and PPAs
Here's the nuance most homeowners miss. A separate credit — Section 48E, the clean-energy credit for businesses — survived with later deadlines. When a solar provider owns the system on your roof and you pay for it via a lease or power purchase agreement (PPA), the provider claims that credit and competitive providers pass the value through as lower monthly payments.
In practice that means third-party ownership is now the primary way federal incentive money reaches California rooftops. The timelines matter, though: projects must begin construction by mid-2026 to safe-harbor the credit, with completion deadlines through 2027 — so this window is real but not indefinite.
California incentives that remain
- SGIP battery rebates. The Self-Generation Incentive Program pays roughly $150 per kWh of battery capacity for general-market customers (about $1,500–$2,500 for a typical home battery), and dramatically more — up to nearly full cost — for the equity and equity-resiliency tiers: households in high fire-threat districts, areas with repeated PSPS shutoffs, or enrolled in income-qualified programs.
- Active solar property tax exclusion. Adding solar increases your home's value, but California law excludes that increase from property tax reassessment.
- Local utility programs. Some municipal utilities and community choice aggregators offer their own battery or electrification rebates. We check every program your address qualifies for as part of a free quote.
Does solar still make sense without the 25D credit?
In California — usually yes, and often strongly. The credit reduced upfront cost, but the engine of California solar savings has always been the state's electric rates, which run 2–3× the national average and keep climbing. A homeowner paying $300/month is on track to spend well over $100,000 on electricity over 25 years at historical escalation rates. Against that, a system that costs $20,000–$30,000 and produces for 25+ warrantied years still pays back in single-digit years for most homes.
What the change does mean: comparing ownership structures matters more than ever. In 2026 the right answer might be a straight purchase, a $0-down loan, or a PPA that captures the 48E credit — it depends on your tax situation, utility, and how long you'll stay in the home.
How ENP America handles this
Every quote we produce shows the options side by side — purchase, financed, and third-party-owned — with every incentive you actually qualify for applied, and nothing that expired still baked into the math. Start with the instant estimator or ask an advisor which structure wins for your situation.