Solar Tax Credit 2026: What the OBBBA Changed and What's Still Available
The 30% federal solar tax credit—officially the Residential Clean Energy Credit under Section 25D—expired December 31, 2025. The One Big Beautiful Bill Act (OBBBA), signed into law in 2025, terminated it as part of a broader rollback of IRA clean energy provisions. If you had solar installed before December 31, 2025, you can still claim the credit on your 2025 tax return. If you're buying in 2026, the federal credit is gone.
That said, solar financing isn't dead. What's changed is the structure: the incentive landscape has shifted from one dominant federal credit to a patchwork of state programs, utility rebates, and income-based federal grants that, for many households, can actually cover more than the old 30% credit did.
What Exactly the OBBBA Terminated
The One Big Beautiful Bill Act ended the following residential solar incentives effective January 1, 2026:
- Section 25D Residential Clean Energy Credit (30% of solar PV system cost, no cap) — terminated
- Section 25D battery storage credit (30% for standalone batteries) — terminated for new installations
- Section 48E Investment Tax Credit for commercial solar placed in service after December 31, 2027 — phased out
Commercial and utility-scale solar has a slightly longer runway: projects that began construction before July 4, 2026 (one year after OBBBA enactment) can still access the 30% ITC if placed in service by December 31, 2027. For homeowners, that distinction is irrelevant—residential solar had a hard cutoff at year-end 2025.
What's Still Available for Solar in 2026
State Solar Tax Credits
State-level incentives have become more important than ever. Several states offer significant credits that partially replace the federal credit:
| State | Credit/Rebate | Max Amount |
|---|---|---|
| New York | 25% state tax credit | $5,000 |
| South Carolina | 25% state tax credit | $3,500 |
| Massachusetts | 15% state credit | $1,000 |
| Maryland | Residential Clean Energy Grant | $1,000 |
| California | SGIP battery incentive (ongoing) | Varies |
State programs vary significantly and many have annual funding caps that are exhausted quickly. Check your state energy office before planning any installation.
HOMES Rebates (Federal, Income-Based)
The HOMES (Home Owner Managing Energy Savings) rebate program, funded by the IRA and administered by states, is income-based rather than a tax credit. It provides point-of-sale rebates for home energy improvements including solar:
- Households at or below 80% Area Median Income (AMI): up to $8,000 in rebates
- Households at 80-150% AMI: up to $4,000 in rebates
- Rebates are not taxable income and are available regardless of tax liability
HOMES rebates survived the OBBBA intact. For lower-income households, this program can now deliver more savings than the old 30% credit, which required significant tax liability to fully benefit from. Use our HOMES rebate calculator to check your eligibility.
Utility Net Metering and Buy-Back Programs
Net metering—where your utility credits you for excess solar energy sent to the grid—remains available in most states, though rates vary and some states have weakened their net metering programs. Net metering doesn't reduce your upfront cost, but it affects the long-term ROI calculation significantly.
The financial case for solar in 2026 depends heavily on your utility's net metering rate. In states with full retail net metering (New Jersey, Maryland, Massachusetts), the economics remain strong even without the federal credit. In states with reduced compensation rates (California's NEM 3.0, Nevada), payback periods have lengthened.
Should You Still Go Solar in 2026?
The short answer depends on three factors: your state's incentive program, your utility's net metering policy, and your electricity rate. The elimination of the 30% federal credit adds approximately $4,500-$6,000 to the effective cost of a typical residential solar system.
For comparison, battery storage rebates in 2026 have also changed significantly, affecting the economics of paired solar+storage systems. And if you're looking at other energy efficiency upgrades, our guide on the heat pump situation in 2026 explains a similar post-OBBBA landscape.
The bottom line: solar is still financially viable in many markets, but requires more careful analysis than before. The era of a straightforward 30% federal credit is over.
How to Find Current Solar Incentives in Your Area
- Check the DSIRE database (dsireusa.org) for your state's current programs
- Contact your utility directly about buy-back rates and any utility rebates
- Verify HOMES rebate availability through your state energy office
- Get at least three installer quotes that itemize incentives separately from system cost