Are Government Solar Tax Credits Still Available?

Government solar tax credits for homeowners have narrowed sharply. The federal residential clean energy credit, which covered 30% of installation costs, ended on December 31, 2025, after Congress accelerated its termination through Public Law 119-21, signed July 4, 2025.¹ If your system was fully installed and operational before January 1, 2026, you can still claim the credit on your tax return. If it wasn’t, the federal credit is off the table, and state, local, and tribal programs are where the remaining government support lives.

The Federal Credit Ended December 31, 2025

Under 26 U.S.C. § 25D as amended, the credit “shall not apply with respect to any expenditures made after December 31, 2025.”² The IRS has clarified that an expenditure is treated as “made” when the original installation of the equipment is completed. Signing a contract or paying a deposit in 2025 does not count. If your panels weren’t installed and running before January 1, 2026, you cannot claim the credit.¹

For new construction, the rule keys off first use of the completed structure. A home still being built into 2026 misses the window even if the solar equipment itself was delivered earlier.

What the 30% Credit Covers if You Qualified in 2025

The credit applies to the full cost of qualifying equipment and installation. That includes solar photovoltaic panels, solar water heaters certified by the Solar Rating and Certification Corporation or a comparable state-endorsed entity, and battery storage systems rated at least three kilowatt-hours.²

Eligible costs go beyond the panels themselves. Onsite labor for preparation, assembly, and installation counts. So does the piping and wiring that connects the system to the home. Solar roofing tiles and shingles that actually generate electricity qualify. Conventional roofing materials that only support or surround the panels do not, and the IRS specifically excludes roof trusses and standard shingles even when replaced as part of a solar project.³

Ownership and Residence Requirements

You must own the equipment. If you signed a solar lease or a power purchase agreement, the third-party developer owns the system and claims the credit. The U.S. Treasury has told homeowners plainly: “With a PPA, you don’t own the system, so that claim is a lie” if a salesperson tells you the tax credit is yours.⁴

The system also has to be installed at a U.S. home where you live. Primary residences and second homes both qualify, provided you actually use the second home part of the year and don’t rent it out. Landlords installing panels on rental property they never occupy cannot claim the credit.³

Home offices complicate things slightly. If business use of the property is 20% or less, you can still claim the full credit. Above 20%, the credit is reduced proportionally to the personal-use share. A property used entirely for business does not qualify.³

Community solar subscriptions do not qualify. The credit is limited to new clean energy property installed at your home, including onsite labor and wiring, so a monthly subscription for electricity generated at an off-site solar farm doesn’t fit the definition.³

How Rebates and Other Incentives Affect Your Number

You have to subtract certain incentives from your costs before applying the 30% rate. Public utility subsidies for buying or installing the equipment come off the top, whether the utility paid you directly or paid your installer. Manufacturer or installer rebates tied to the cost of the equipment also reduce your eligible expenses.³

Net metering credits from your utility for excess electricity you send back to the grid do not reduce your qualified expenses. Most state incentives labeled as “rebates” also do not qualify as rebates under federal tax law, so they don’t reduce your eligible costs, but they may count as taxable gross income on your federal return. Keep records of every incentive and how your state classified it.

Revenue from selling Solar Renewable Energy Certificates is taxable income. The IRS has treated SREC payments as gross income rather than a tax-free utility subsidy, based on Private Letter Ruling 201035003. If a 1099 shows up for SREC sales, that income belongs on your return.

Filing With Form 5695

The credit is calculated on IRS Form 5695 and carried to Schedule 3 of Form 1040, line 5a.⁵ You enter total qualified expenses after subtracting any rebates and subsidies, then apply 30%.

The credit is non-refundable. It can reduce your federal tax liability to zero, but it won’t produce a refund beyond that. Any unused portion carries forward to the next tax year. On a $30,000 system, the credit is $9,000; a homeowner who owes $6,000 in federal tax applies $6,000 in year one and carries $3,000 into the next return.

You don’t need to attach receipts or contracts unless the IRS asks. Keep them anyway. The IRS recommends holding purchase and installation records for a potential audit and to substantiate your cost basis if you sell the home.⁶ Three years after filing is a reasonable floor.

State and Local Programs for 2026 Installations

With no federal credit for new systems, state and local incentives are the main government support left. What’s available depends heavily on where you live.

Renewable Portfolio Standards and SRECs

Many states require utilities to source a set percentage of power from renewable energy. Utilities meet these obligations by buying Renewable Energy Certificates, each representing one megawatt-hour of renewable generation. States with a specific solar carve-out create a separate SREC market, and homeowners with solar panels can earn certificates and sell them to utilities or through aggregators. Prices vary by market and change over time.

Net Metering

Net metering rules in many states require utilities to credit homeowners for excess electricity sent back to the grid. Some states credit at the full retail rate; others use a lower rate based on the utility’s avoided cost. Policies differ on system size caps, how unused credits roll over, and which customer classes participate.

Local Rebates and Property Tax Exemptions

Some local governments and utilities pay upfront cash rebates for permitted installations. Many states exempt solar equipment from property tax assessments, so the panels don’t raise your property tax bill even though they add value to the home. These programs change often. A call to your local utility and municipal planning office before installation is worth the time.

Loan Interest Deduction if You Finance the System

Financing costs matter more without a federal credit. Interest on a home equity loan or line of credit used to install solar may be deductible. The IRS allows a deduction for home equity debt interest when the funds are used to buy, build, or substantially improve the residence securing the loan, and solar panels generally count as a substantial improvement.⁷ You have to itemize to benefit. Interest on a standalone solar loan not secured by your home does not qualify.

Tribal Energy Funding Is Still Active

The Department of Energy’s Office of Indian Energy continues to fund renewable energy projects on tribal lands. A $50 million funding opportunity is currently open, supporting community-scale energy project development and large-scale energy project planning, with applications due July 24, 2026.⁸

The office also provides no-cost technical assistance through DOE national laboratories and partner organizations, covering energy planning, efficiency assessments, resource evaluations, project planning, and support for building codes and utility formation. Federally recognized Indian Tribes and tribal entities, including Alaska Native regional corporations and village corporations, are eligible. A separate Tribal Energy Financing Program offers direct loans and partial loan guarantees for energy projects on tribal lands.⁸

Solar for All Is No Longer Accepting Applications

If you’ve seen references to the EPA’s Solar for All program, it has ended. The $7 billion program, originally funded through the Greenhouse Gas Reduction Fund to bring solar access to low-income and disadvantaged communities, was terminated in August 2025 after Congress repealed the EPA’s authority to administer it.⁹ About $53 million had been disbursed before shutdown. The program had awarded competitive grants to 60 recipients including states, municipalities, and tribal governments.¹⁰ No new applications or grants are being accepted.

1
Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under Public Law 119-21
2
Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit
3
Internal Revenue Service. Residential Clean Energy Credit
4
U.S. Department of the Treasury. Before You Sign a Power Purchase Agreement
5
Internal Revenue Service. Form 5695 – Residential Energy Credits
6
Internal Revenue Service. How to Claim a Residential Clean Energy Tax Credit
7
Internal Revenue Service. Real Estate Taxes, Mortgage Interest, Points, Other Property Expenses
8
Department of Energy. Current Funding and Technical Assistance Opportunities
9
US EPA. Greenhouse Gas Reduction Fund
10
SAM.gov. Greenhouse Gas Reduction Fund – Solar for All