The Federal Solar Tax Credit Is Now Officially Closed for New Projects — Here's What's Actually Left

As of today, July 4, 2026, there is no federal tax credit available for a new owned residential solar system. The Section 48E construction-start deadline — the last open federal door — just closed. This is the definitive, plain-English guide to what ended, what remains, and exactly what to do next. It is the post-deadline companion to ourU.S. Solar Hub and our earlierfinancing-inversion analysis.

The short version (TL;DR)

Two federal pathways for residential solar are now closed fornew projects:

• Section 25D (the 30% owned-residential credit) expired December 31, 2025. An owned system placed in service in 2026 receives $0 in federal credit.
• Section 48E construction-start window closedJuly 4, 2026. New projects can no longer begin construction in time to qualify.

The only remaining federal solar path is alease or PPA on a project that already began construction before July 4, 2026 — and that pipeline is finite. Once developers exhaust their pre-deadline projects, even the lease/PPA federal benefit disappears. After that, residential solar economics rest entirely on state incentives,local buyback plans, andself-consumption value.

What actually ended, and when

The One Big Beautiful Bill Act (OBBBA) rewrote the clean-energy tax code in mid-2025 with a cascade of hard statutory deadlines. Two of them directly killed the residential solar credit stack:

The 48E phase-out is important to understand: July 4, 2026 (a Saturday; under IRC 7503 the effective deadline rolled to Monday, July 6, 2026) was the deadline to begin construction, not to finish it. Projects that were already in the ground (or that met the 5% safe-harbor expenditure test, which was restored by a federal court on June 6, 2026 in Oregon Environmental Council v. IRS, No. CV-25-4400) can still be completed and can still claim 48E through the 2027 phase-out. The IRS may appeal the safe-harbor ruling, so construction-status documentation matters more than ever.

What this means in practice: there is afinite pipeline of qualifying 48E projects — systems developers started before July 4. As that pipeline is absorbed by lease and PPA customers over the next 12–18 months, the federal benefit disappears entirely from the residential market.

Where payback stands now: post-48E by state

With the federal credit gone, payback is now set entirely by your state's cost-per-watt, electricity rate, and state/local incentive stack. The chart below shows post-48E payback across all 50 states plus DC for a typical 7 kW system on a $150/mo bill. Tap any state for detail; re-sort by cost-per-watt or by incentive stack value.

Option 1 — Lease or PPA via 48E passthrough (the only federal path left)

For new contracts signed in mid-to-late 2026, alease or PPA is the only structure that can still deliver any federal solar value to a homeowner — and only if the developer's underlying project began construction before July 4, 2026. Here's the mechanism, in plain English:

1. The developer — not you — owns the system and claims the 30% Section 48E credit on their corporate tax return.
2. The developer passes that value through to you as a lower monthly payment (or a lower per-kWh PPA rate) than would otherwise be possible.
3. You get solar on your roof with little or no money down, and the federal credit shows up indirectly as a cheaper contract.

The math on this flipped in 2026. A cash or loan buyer now receives$0 federal credit (25D expired), while a lease/PPA buyer on a 48E-qualifying pipeline project still captures the value indirectly. For mid-bill homeowners, that is often enough to make the lease lifetime cost lower than cash. We unpack this in detail in ourpost-25D financing-inversion guide; for the passthrough mechanics specifically, see our48E passthrough guide.

The catch: this window is now closing for new contracts. As developers exhaust their pre-July-6 construction-start pipeline, new lease/PPA offers will lose the 48E passthrough value too. If you are considering a lease, ask the developer directly whether the specific project on your roof qualifies for 48E — and get it in writing.

Visualizing the ITC gap: 25-year cumulative savings

The chart below shows the difference the federal credit makes (or rather, made). For a national-average 7 kW system on a $150/mo bill, the post-48E path crosses break-even years later than the pre-48E path would have. The eco-green markers indicate the year cumulative savings finally exceed net system cost under each scenario.

The gap between the two lines is exactly the19.32¢/kWh federal-credit subsidy that no longer exists for owned residential systems. Lease/PPA deals that capture 48E effectively shift you closer to the lower (gray) curve by passing through some of that value as a lower monthly payment.

Option 2 — State incentives that still exist

Federal credit is gone, but roughly 13 states (plus D.C. and Puerto Rico) run their own solar incentive programs. These are now the single biggest variable in whether solar makes sense for a direct buyer in 2026 — and they stack on top of (zero) federal. The strongest remaining programs:

These programs change — caps fill, steps decline, legislatures tinker. The authoritative source is thestate solar tax credits guideand ourincentive finder, which pulls the current numbers for your ZIP code. The point: in a high-incentive state, direct ownership can still pencil out in 2026 even without the federal credit. In a zero-incentive state, it usually cannot.

Option 3 — Standalone battery storage

A battery was never the main 25D claim (most homeowners claimed the credit on the solar array, with storage as a paired add-on), so the end of 25D did not collapse storage economics on its own. What it did do is shift the entire storage value proposition ontostate and utility programs plusresilience and arbitrage value.

The strongest 2026 storage economics are:

• California SGIP equity tiers — $850–1,000/kWh for income-qualified and disadvantaged-community households, which can nearly cover a battery's cost. (General Market funds are largely waitlisted.)
• Utility VPP and buyback programs — Tesla Electric, Base Power, and similar programs in ERCOT pay homeowners for dispatching stored energy during scarcity events.
• Resilience value — in states with frequent outages (Texas winter storms, California PSPS, hurricane regions), backup alone can justify a battery even with zero incentive.

See our battery payback calculatorand the state-by-state battery rebate guide.

Option 4 — Wait for legislative action (be realistic)

Some homeowners are holding off, hoping Congress restores a solar credit. Be honest with yourself about the odds.

• No pending bill restores 25D. There is no realistic legislative vehicle moving in 2026 that would bring back the 30% owned-residential credit.
• Any restoration would be prospective. Even if a future Congress passed a new credit, it would apply to systems installed after enactment (next tax year at the earliest), not retroactively to a system you install today.
• State programs keep moving regardless. Waiting means watching the strongest state incentive steps (NY-Sun, SMART, Illinois Shines) fill and step down while you wait for a federal restoration that may never come.

The pragmatic stance: plan as if the federal credit is gone permanently. If a future Congress restores something, treat it as upside — but do not anchor your 2026 solar decision to a hypothetical Washington vote.

Decision framework — which path fits you

The national residential rate sits at about19.32¢/kWh (EIA April 2026), which is high enough that solar still offsets meaningful spend in most of the country — the question is no longer "does solar work?" but "which structure captures the most value in a post-credit world?"

Where things stand now

July 4, 2026 is the day the federal residential solar credit era ended for new projects. There is no graceful extension and no hidden workaround — 25D is expired, the 48E construction-start window is closed, and what remains is a finite lease/PPA pipeline plus whatever your state and utility offer. Solar still works in 2026, but the optimal path now depends entirely onwhere you live andhow you finance. Run your actual numbers, get competing cash and lease quotes, and ignore any 30% federal line item on a 2026 owned-system quote.

Tax guidance is general and educational, not individualized advice. Confirm current program status, caps, and eligibility with the administering agency (IRS for 25D/48E; your state energy office or utility for state programs) before relying on any figure here. The 48E 5% safe-harbor restoration (Oregon Environmental Council v. IRS, No. CV-25-4400, June 6, 2026) may be appealed; verify current status before claiming.