The federal solar tax credit for homeowners has ended. The 30% Residential Clean Energy Credit, known as Section 25D, does not apply to systems installed after December 31, 2025. The One Big Beautiful Bill Act, signed on July 4, 2025, cut the credit short. It had been scheduled to run through 2032.
That does not mean the credit is gone from your tax life. If your system was finished in 2025, you can still claim 30% of the cost on your 2025 return. If your credit was too large to use in one year, the unused part carries forward to 2026 and beyond. At Nexus United Inc., our tax team in Delray Beach is helping Palm Beach County homeowners claim these credits and plan what comes next.
Quick Answer: Solar Tax Credit Status in 2026
| Your situation | Federal credit? | What to do |
|---|---|---|
| Installed and finished by December 31, 2025 | Yes, 30% of cost | Claim it on your 2025 return with Form 5695 |
| Claimed in 2025 but could not use it all | Yes, as a carryforward | Carry the unused amount to your 2026 return |
| Paid in 2025, finished in 2026 | No | The IRS treats the cost as paid when installation is completed |
| New system installed in 2026 | No | Look at state and local incentives instead |
| Leased system or power purchase agreement (PPA) | No credit for you | The solar company owns the system and claims any credit |
What Changed and Why the Install Date Matters
The original plan under the Inflation Reduction Act kept the credit at 30% through 2032. The 2025 tax law moved the end date to December 31, 2025. The law says the credit does not apply to expenditures made after that date.
In an FAQ released on August 21, 2025, the IRS explained what “made” means. An expense counts as made when the installation is completed. So a deposit paid in 2025 does not save a system that was switched on in 2026. For a newly built home, the cost generally counts when you first move in. A new home with solar that you moved into in 2026 does not qualify.
The Energy Efficient Home Improvement Credit (Section 25C) for items like heat pumps, windows and doors ended on the same date.
How to Claim the Credit for a Solar 2025 Installation
You claim the credit on IRS Form 5695, Residential Energy Credits, and attach it to your Form 1040. If you filed an extension, your 2025 return is due October 15, 2026. If you already filed and missed the credit, you can usually fix it with an amended return within three years. Our guide on how to file an amended tax return shows you the steps.
These rules still apply to 2025 claims:
- Eligible property: solar panels, solar water heaters, small wind turbines, geothermal heat pumps, fuel cells and battery storage of at least 3 kilowatt hours.
- Eligible costs: equipment, onsite labor, assembly, and the wiring or piping that connects the system to your home.
- Main or second home: the home must be in the United States. A fuel cell only qualifies on a main home.
- Residents, not just owners: you only need to live in the home. A son who pays for panels on his mother’s house, where he lives, can claim the credit.
- Condos and co-ops: you can claim your share of a system the association paid for.
- Mixed use homes: if more than 20% of the home is used for business, only the personal share qualifies.
- Utility rebates: a nontaxable rebate reduces the cost you can use for the credit.
- Not eligible: systems that only heat a pool or hot tub, and repairs or replacement panels on an existing system.
The Nonrefundable Trap: Why Many Families Get Less Than They Expect
The solar credit is nonrefundable. It can lower your tax to zero, but it cannot create a refund on its own. Solar sales pitches often skip this point. To see how refundable and nonrefundable credits differ, read our guide on how to get a bigger tax refund.
Here is a 2025 example. A married couple with three children under 17 earns $80,000. They install a $20,000 system and expect a $6,000 credit.
| Step | Amount |
|---|---|
| Income | $80,000 |
| 2025 standard deduction (married filing jointly) | $31,500 |
| Taxable income | $48,500 |
| Federal income tax before credits | $5,343 |
| Child tax credit ($2,200 x 3 children) | $6,600 |
| Tax left for the solar credit to reduce | $0 |
| Solar credit used in 2025 | $0 |
| Solar credit carried forward | $6,000 |
The family gets nothing from the solar credit in 2025. If their income stays the same, the carryforward may sit unused for years.
Financing adds to the cost. A $20,000 loan at 5% for 20 years costs about $132 a month. Total interest is $11,678, which brings the real cost of the system to $31,678.
How Solar Carryforwards Work After 2025
The 2025 law ended the credit for new installs, but it did not change the carryforward rules. Any unused credit from a qualified 2025 or earlier installation rolls to the next year. You keep carrying it until it is used up.
To claim a carryforward, complete Form 5695 each year using the amount carried from the prior year. Keep your original invoices, proof of the completion date and any rebate records. You will need them for as long as you carry the credit, plus three years after the last year you use it.
Solar and Your Home’s Basis
The cost of a solar system adds to your home’s basis. The credit you claim reduces that basis. For example, a $20,000 system with a $6,000 credit adds $14,000 to your basis.
A higher basis can lower the taxable gain when you sell. In many states, this creates a different basis for federal and state taxes. Florida has no state income tax, so Florida homeowners track only the federal number. Learn more in our guide to tracking your investment basis, and keep every solar receipt with your home improvement records.
Solar Leases, PPAs and Business Owners
With a lease or power purchase agreement, the solar company owns the equipment. You cannot claim the homeowner credit. The company may claim the commercial clean energy credit under Section 48E, which has its own deadlines. Most new projects must be in service by the end of 2027. Some companies pass part of that value to customers through lower monthly rates. Read the contract for price increases, buyout terms and what happens when you sell the home.
Business owners who install solar on business property follow different rules. They may still qualify for the commercial credit and depreciation deductions if strict timing and sourcing rules are met. Talk to a tax professional before you sign a contract.
Florida Solar Incentives in 2026
Florida has no state income tax, so it offers no state solar tax credit. It does offer two valuable exemptions, and they did not end with the federal credit.
| Florida incentive | What it does | How you get it |
|---|---|---|
| Sales tax exemption | Removes the 6% state sales tax on qualifying solar equipment | Applied by your installer at purchase |
| Property tax exemption | Excludes the value solar adds to your home from your assessment | File with your county property appraiser |
| Net metering | Credits extra power you send to the grid on your bill | Offered by major Florida utilities |
Some local governments also offer grants or loans from time to time. Check with your city and your utility before you buy.
Is Solar Still Worth It Without the Federal Credit?
It can be, but the math has changed. Without the 30% credit, your payback period is longer. Before you sign, compare:
- The full price with no federal credit
- Your average monthly power bill and your utility’s net metering terms
- Loan interest over the full term
- How long you plan to stay in the home
- Lease or PPA price increases over 20 to 25 years
Be careful with sales pitches that still promise a federal tax credit for a 2026 install. That credit no longer exists for homeowners who buy their system.
How Nexus United Inc. Can Help
Nexus United Inc. helps homeowners and small business owners in Delray Beach, Boynton Beach, West Palm Beach and across Palm Beach County claim every credit they are owed. We file Form 5695, track solar carryforwards, amend past returns and review solar contracts from a tax angle before you sign. Call (855) 639 8740 or contact our team to book a review.
Frequently Asked Questions About the Solar Tax Credit
Is there a federal solar tax credit in 2026?
No, not for homeowners who buy a new system. The Section 25D credit ended for installations completed after December 31, 2025. You can still use carryforwards from earlier systems on your 2026 return.
My solar was paid for in 2025 but finished in 2026. Can I claim it?
No. The IRS counts the expense when installation is completed, not when you paid. A system finished in January 2026 does not qualify for the credit.
What happens to my unused solar credit?
It carries forward to future years. The 2025 tax law did not change the carryforward rules. Claim the carried amount on Form 5695 each year until it is used up.
Can I still claim the solar credit if I already filed my 2025 return?
Yes, if you qualified and missed it. File Form 1040-X with Form 5695, usually within three years of the original due date. Keep proof that the system was finished in 2025.
Can I get the tax credit on a leased solar system?
No. With a lease or PPA, the solar company owns the system and any credit belongs to it. You may see the benefit only through a lower monthly payment.
Does Florida have a solar tax credit?
Florida has no state income tax, so there is no state solar credit. Florida does exempt solar equipment from the 6% sales tax and excludes the added solar value from your property tax assessment.
