If you have been quoted a 30% federal tax credit on a home solar system in 2026, the person quoting it is either out of date or hoping you are. This is the clearest explanation we can give, and then the practical part: what it changes about whether solar still makes sense.
What changed
The Residential Clean Energy Credit, Internal Revenue Code section 25D, the credit that let homeowners deduct 30% of a solar system's cost from their federal tax bill, was terminated by legislation enacted in 2025 for property placed in service after 31 December 2025.
"Placed in service" is the operative phrase. It does not mean the day you signed a contract or the day the panels went on the roof. It generally means the date the system was ready and available for its intended use, which for solar usually tracks to your utility's permission to operate.
If your system was energized in 2025 or earlier, you may still be able to claim the credit on the return covering that year. If it was energized in 2026, the residential credit is not available to you.
What still exists
Business systems: section 48E
The clean electricity investment credit under section 48E applies to systems owned by a business. It survives into 2026 with conditions attached, placed-in-service deadlines, domestic content thresholds, and prevailing wage and apprenticeship requirements that affect the credit rate. If you own a commercial property, this is the provision your CPA should be looking at.
Third-party ownership: leases and PPAs
Here is the part most homeowners miss. In a lease or a power purchase agreement, the system is owned by a business, the financing provider, not by you. That business may be able to claim credits available to businesses, and competitive pressure pushes some of that value into the rate you are offered.
This does not make third-party ownership automatically the right answer. It does mean the gap between buying and leasing narrowed in 2026, and anyone still assuming a cash purchase is obviously optimal should re-run the numbers.
State and utility programs
These were never federal and are unaffected. As of mid-2026 the ones that matter most in our service territory are New Mexico's state solar tax credit, Arizona's state credit and sales tax exemption, NV Energy's storage incentive, California's SGIP for qualifying storage customers, and per-watt rebates from several Colorado utilities. Most are capped, budgeted annually, and awarded first-come.
Property tax exemptions deserve more attention than they get. In most of our states, the value solar adds to your home is exempt from property tax assessment. A benefit that compounds quietly for 25 years and never appears in a headline.
Does solar still pay?
Yes, in most of our markets, but the payback period moved. A cash-purchase system in Arizona or Nevada that would have paid back in six to eight years with the credit now typically lands in the eight to twelve year range. That is still comfortably inside the 25-year warranted life of the equipment, and the calculation improves every time your utility raises rates.
What changed more than the answer is who it works for. Households with no federal tax liability were never able to use the credit anyway, so nothing changed for them. Households with large tax bills lost the most. And the case for financing structures, particularly leases and PPAs, strengthened relative to cash in a way that is genuinely new.
How to check what a company is telling you
- Ask which code section any claimed federal credit falls under. §25D is residential and expired for 2026 systems; §48E is the business credit.
- Ask whether the savings figures in the proposal assume any federal credit, and have them show you the number with it removed.
- Ask for the placed-in-service assumption in writing if any credit is claimed.
- Take anything tax-related to your own CPA. We are solar engineers and roofers. We are not tax advisers, and neither is the salesperson at the other company.
The short version
The 30% homeowner credit is gone for systems energized in 2026 and later. State, utility and property tax benefits remain. Business-owned systems, including those behind a lease or PPA, still have a federal path. Payback periods lengthened by roughly two to four years in our markets, and solar still beats paying a utility that raises rates every year. Anyone who tells you otherwise in either direction is selling something.