The 30% credit is gone. Here is what actually replaced it
If you buy a rooftop system today, there is no federal tax credit. The residential credit was terminated for expenditures made after 31 December 2025, and it did not taper on the way out. A great deal of what is still published about solar pricing has not caught up.
On a typical 8 kW system, this is a $9,000 change
Nothing about the hardware changed. The panels cost what they cost, the installer charges what they charge. What changed is that the federal government used to pay for most of three years of the payback period and now does not. Every payback figure on this site is computed without the credit, which is why our numbers are longer than the ones you will see quoted in sales material written before 2026.
Terminated, and the test changed with it
Section 70506(a) of the One Big Beautiful Bill Act amended the termination clause of Internal Revenue Code section 25D. The old clause cut the credit off for property “placed in service” after 2034. The new one cuts it off for “expenditures made” after 31 December 2025.
That is not only a new date, it is a different test, and the difference matters if your install straddled the new year. Section 25D(e)(8)(A) says an expenditure is treated as made when the original installation of the item is completed. So the deadline was the installation being finished, not the contract being signed or the invoice being paid.
The practical consequence cuts against the homeowner. A deposit paid in November 2025, a contract signed in December, panels delivered to the driveway before Christmas: none of it qualifies if the crew finished the job in January. This is the single most misreported point in consumer solar coverage.
There was no step-down year
The Inflation Reduction Act had scheduled the credit to fall to 26% in 2033 and 22% in 2034. Section 70506(b) struck those paragraphs outright. The credit was 30%, and then it was nothing. If you read that solar “drops to 26% soon”, you are reading something written before July 2025.
A credit still exists. It is not yours
Section 48E, the Clean Electricity Investment Credit, still reaches residential rooftop solar. But it goes to whoever owns the equipment, and under a lease or a power purchase agreement that is the finance company, not the household on whose roof it sits.
Whether any of that value reaches you depends entirely on the price you are quoted. Nothing in the statute obliges the owner to pass it through. This is worth holding in mind when a salesperson tells you a lease still “gets the tax credit”. The arrangement gets it. You get whatever they decided to price in.
And it is on a clock
Section 70513 denies the credit to solar placed in service after 31 December 2027, unless construction began on or before 4 July 2026. That hinge date has passed. Anything starting construction now faces a hard placed-in-service deadline of 31 December 2027.
Two carve-outs matter to a household. Co-installed battery storage is excluded from the 2027 cliff and keeps its own timeline. And IRS Notice 2025-42 preserves the 5% safe harbour for a “low output solar facility” of no more than 1.5 MW AC, which is every rooftop in the country. Utility-scale projects lost that option and must satisfy a physical work test instead.
Three honest sentences
No federal tax credit. The price you are quoted is the price you pay, less whatever your state or utility offers.
The credit goes to the owner. You may see some of it in the rate you are offered, or none of it. Compare the total cost over the term, not the monthly figure.
Storage is carved out of the 2027 cliff and follows its own timeline, which is the one part of this that got no worse.
State and utility programmes are untouched by any of this, and in some states they are now the only thing standing between a quote and a very long payback. What is available where you live.
The questions this raises
Did the 30% federal solar tax credit end?
Yes. Section 70506(a) of the One Big Beautiful Bill Act amended Internal Revenue Code section 25D so that the Residential Clean Energy Credit does not apply to expenditures made after 31 December 2025. There was no step-down year: the scheduled 26% and 22% rates were struck. Section 25D(e)(8)(A) treats an expenditure as made when the original installation is completed, so a system contracted or paid for in 2025 but finished in 2026 does not qualify.
Can I still get a tax credit if I lease solar panels?
The credit survives under third-party ownership as the section 48E Clean Electricity Investment Credit, but it belongs to whoever owns the equipment, which under a lease or power purchase agreement is the finance company rather than the household. Nothing obliges them to pass it through, so compare the total you will pay over the full term against the cash price of an equivalent system. That credit is also denied to solar placed in service after 31 December 2027 where construction began after 4 July 2026.
Primary sources
This page disagrees with a lot of what is currently published about solar pricing, so every claim on it is traceable. These are the sources, not summaries of them.
- Public Law 119-21, section 70506
The enacted text terminating the residential credit: section 25D(h) amended to read "shall not apply with respect to any expenditures made after December 31, 2025".
- 26 U.S.C. 25D
The credit as codified, including subsection (e)(8)(A), which treats an expenditure as made when the original installation is completed.
- Public Law 119-21, section 70513
Adds section 48E(e)(4): no credit for solar placed in service after 31 December 2027, with energy storage carved out, and the 4 July 2026 beginning-of-construction hinge.
- IRS Notice 2025-42
Beginning-of-construction rules. Section 6 keeps the 5% safe harbour for solar facilities of 1.5 MW AC or less, which covers every residential rooftop.
- IRS, Residential Clean Energy Credit
The consumer-facing page. Useful, but it states the test as "placed in service", which is the language the statute no longer uses.
This is a description of published law, not tax advice. Whether a particular credit applies to a particular household is a question for a tax professional who can see the whole return.