Independent research guide
The residential solar credit ended for new expenditures after 2025. Learn how the installation deadline, 30% rate, carryforwards, batteries, roofing, and Form 5695 work in 2026.
Last updated: Oct 9, 2026
9 min readPrimary sources linked belowA homeowner searching for the “2026 solar tax credit” can encounter two statements that appear to conflict: the residential credit ended, yet some taxpayers can still report a solar credit on a 2026 return. Both can be true. The key distinction is between a new expenditure and an unused credit carried forward from qualifying earlier work.
This guide explains the federal rules for individual homeowners after Public Law 119-21 accelerated the termination of section 25D. It uses IRS guidance checked on October 9, 2026. State, local, utility, business, and low-income incentives have separate rules and are outside the calculation unless specifically noted.
No section 25D credit is allowed for residential clean energy expenditures made after December 31, 2025. The IRS termination FAQ lists that date for the Residential Clean Energy Credit. A homeowner whose original solar installation is completed during 2026 generally cannot claim the old 30% residential credit merely because the contract was signed or a deposit was paid during 2025.
This is a material change from older guidance that described a gradual phase-down through 2034. Pages written before the 2025 law may still show that former schedule. For a current estimate, use the accelerated termination date and confirm the latest IRS instructions.
Section 25D does not generally use the contract date as the decisive point. IRS guidance says an expenditure for an item is treated as made when its original installation is completed. For construction or reconstruction, the expenditure is treated as made when the taxpayer's original use of the constructed or reconstructed structure begins.
The completion date should be supported with project records rather than chosen for tax convenience. Keep the permission-to-operate notice, final inspection, installer completion certificate, invoices, proof of payment, interconnection records, and photographs. These documents can have different dates, so ask a qualified tax professional which evidence controls for the particular project.
For property that met the 2025 requirements, the residential clean energy credit was generally 30% of qualified costs. IRS Form 5695 instructions list solar electric property, solar water heating property, small wind energy property, geothermal heat pumps, battery storage technology, and fuel cells.
Properly allocable labor for onsite preparation, assembly, or original installation could be included, along with qualifying piping or wiring used to connect the property to the home. The credit was a percentage of qualified expenditure, not 30% of every line on an installer invoice.
Assume a project completed in 2025 had $18,000 of documented qualified solar electric property and installation costs. Ignoring rebates, subsidies, personal tax limitations, and nonqualifying work, the starting calculation would be:
The $5,400 is not automatically a cash refund. The allowed current-year amount depends on the Form 5695 limitation calculation and the rest of the tax return. An unused eligible amount may carry forward under the applicable rules.
The 2025 Form 5695 instructions say the form is also used to take a residential clean energy credit carryforward from 2024 and to carry the unused portion of the residential clean energy credit to 2026. That means 2026 can still matter for an earlier qualifying project even though new expenditures after 2025 are barred.
A carryforward is tied to an amount previously generated under the credit rules. It is not a way to convert a 2026 installation into a 2025 expenditure. Preserve the prior Form 5695, the return on which the credit originated, notices from the IRS, and the project cost records.
| Situation | General federal section 25D result | Document to review |
|---|---|---|
| Installation completed in 2025 and qualified | 30% framework may apply | 2025 Form 5695 and instructions |
| Deposit paid in 2025, installation completed in 2026 | New credit generally unavailable | IRS OBBB termination FAQ |
| Unused eligible credit from 2024 or 2025 | Carryforward may be usable in 2026 | Prior return and 2026 filing instructions |
| New residential installation completed in 2026 | No new section 25D credit | Current IRS guidance |
| Business or commercial solar project | Different code sections may apply | Business credit rules and Form 3468 |
For qualifying pre-termination residential expenditures, battery storage technology had to be installed in connection with a U.S. home and have a capacity of at least 3 kilowatt-hours. A battery did not need to be paired with newly installed solar panels to appear in the eligible-property list, but all other requirements still applied.
A battery completed in 2026 does not gain section 25D eligibility merely because solar panels were completed in 2025. Treat the completion timing and invoice allocation for each item carefully, especially when a contract spans both years.
Traditional roofing materials and structural components generally did not qualify just because they were necessary before solar panels could be installed. Roof decking, rafters, and conventional shingles primarily perform a roofing or structural function.
Some solar roofing tiles and solar shingles can qualify because they act as both solar electric collectors and structural roofing. Separate qualifying solar components from ordinary roof replacement in the contract and invoice. A single bundled price makes review harder and does not transform every roof cost into solar property.
The credit calculation begins with qualified costs after applying the rules for rebates, subsidies, and incentives. A utility payment that is treated as a purchase-price adjustment can reduce the expenditure used for the federal calculation, while other incentives may have different treatment. Do not subtract every incentive automatically or ignore every incentive automatically.
IRS instructions also state that an allowed residential energy credit reduces the increase in the home's tax basis that would otherwise result from the expenditure. Retain the final credit amount with the home's purchase and improvement records because basis can matter when the property is sold.
Section 25D applied to individuals and residences. Commercial clean electricity investment and production credits use different provisions, eligibility tests, labor rules, placed-in-service rules, and termination dates. IRS guidance for sections 45Y and 48E discusses deadlines for applicable wind and solar facilities, but those provisions should not be inserted into a homeowner estimate without a valid business-tax analysis.
Home-based work, rental activity, mixed personal and business use, trusts, partnerships, and leased systems can change which taxpayer owns the equipment and which rules apply. Confirm ownership and tax use before assuming a credit belongs on an individual return.
Generally no under the residential section 25D credit. The IRS says the credit is not allowed for expenditures made after December 31, 2025, and an expenditure is generally made when original installation is completed.
Payment alone does not preserve the credit when installation was completed after December 31, 2025. The IRS FAQ specifically rejects that result.
Potentially. Form 5695 instructions provide for carrying an unused eligible residential clean energy credit into 2026. The amount and use depend on the prior return and current limitation calculation.
Qualified battery storage technology generally required at least 3 kWh of capacity and connection with a U.S. home, along with the other section 25D requirements.
Conventional roofing and structural components generally did not. Some solar tiles or solar shingles can qualify because they collect solar energy while serving a roofing function.
This guide was checked on October 9, 2026 against the IRS OBBB energy-credit termination FAQ, the 2025 Form 5695 instructions, the IRS Residential Clean Energy Credit FAQ, and IRS guidance for business clean-energy provisions. Dollar examples illustrate the calculation and are not individualized tax advice.
We update this page when the IRS changes Form 5695, publishes new carryforward instructions, or issues material guidance on section 25D termination. Verify the form revision for the return year being prepared.
For homeowners, 2026 is mainly a record and carryforward year rather than a new federal section 25D installation-credit year. Confirm when the installation was completed, isolate qualified 2025 costs, reconcile prior Form 5695 amounts, and keep residential and business incentives separate.
Quick reference
| Data point | Value | Context |
|---|---|---|
| New section 25D expenditures after | Dec. 31, 2025 | Residential clean energy credit termination |
| Qualifying 2025 credit rate | 30% | Residential clean energy property |
| Minimum qualifying battery capacity | 3 kWh | Battery storage technology for qualifying 2025 expenditure |
| Illustrative credit on $18,000 | $5,400 | $18,000 × 30%; limitations and adjustments excluded |
| Fuel-cell credit limit | $500 per 0.5 kW |
Research
| Special limit for qualifying fuel-cell property |
| 2026 carryforward | Permitted for unused eligible prior credit | Form 5695 instructions cover carryforward into 2026 |