Solar Tax Credit 2026: How to Claim It (Federal + State)

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The federal solar tax credit — 30% back on a $25,000 system, no income limits, no lifetime cap — was one of the best financial incentives a homeowner could claim. The solar tax credit 2026 picture is more complicated: the credit is still fully claimable if you installed in 2025, but it’s gone for new owner-installed systems in 2026. Where you stand depends on when your system went in, and this guide covers both situations.

Table of Contents

• Is the Solar Tax Credit Still Available in 2026?
• Which situation are you in?
• How the Residential Clean Energy Credit works
• How much is the credit? Real dollar examples
• Solar Tax Credit 2026 Estimator
• The carryforward rule explained
• How to claim the credit: step by step
• State solar credits and incentives
• Installing solar in 2026: what you still have
• Frequently Asked Questions
• Conclusion

Is the Solar Tax Credit Still Available in 2026?

The short answer: it depends on when your system was placed in service. If you installed by the end of 2025, claim the credit on your 2025 return using Form 5695. If you installed in 2026, the federal homeowner credit is gone — but state incentives and leasing remain, covered below. If you’re still weighing whether solar makes financial sense at all, see our complete guide to solar panels for homeowners.

Which situation are you in?

This article serves two readers who are in very different places right now. Find yours before scrolling:

How the Residential Clean Energy Credit works

If you’re researching the solar tax credit 2026, the first thing to sort out is the official terminology. The IRS name is the Residential Clean Energy Credit — that’s what you’ll see on Form 5695 and IRS.gov. “Solar tax credit,” “ITC,” and “IRA solar tax credit” all refer to the same thing. The IRA solar tax credit takes its name from the Inflation Reduction Act (IRA, not an Individual Retirement Account), which set the 30% rate back in 2022 and originally ran through 2032 before the One Big Beautiful Bill Act changed that.

Here’s the mechanic most people get wrong: a tax credit is not a refund check. It reduces what you owe. If you owe $9,000 in federal income tax and your solar credit is $7,200, your tax bill drops to $1,800. The IRS doesn’t mail you $7,200 — it reduces what you have to pay. This is what “nonrefundable” means. If your credit is larger than what you owe in a given year, the unused portion carries forward to the next year.

What qualifies for the credit

For systems placed in service between January 1, 2022 and December 31, 2025, the credit equals 30% of the total eligible installed cost. Here’s what counts:

• Solar panels (photovoltaic equipment)
• Battery storage systems (minimum 3 kWh capacity)
• Inverters and related electrical components
• Mounting hardware and racking
• Labor costs for installation
• Permitting and inspection fees
• Sales tax on eligible equipment

What doesn’t count: Roof repairs or replacement (unless the new roof itself generates electricity, like solar shingles), loan interest, and any costs allocable to a swimming pool or hot tub energy storage.

Who qualifies

• You must own the system. Leased systems and PPAs don’t qualify for the homeowner credit (the leasing company claims the commercial credit instead)
• The property must be your primary or secondary U.S. residence. Rental properties don’t qualify.
• No income limit. The credit applies regardless of what you earn.
• The system must have been fully installed (placed in service) by December 31, 2025. Starting in 2025 but finishing in 2026 doesn’t qualify.

One edge case worth noting: if your installation started in 2025 but the final inspection or utility interconnection happened in 2026, the IRS currently treats the completion date as the “placed in service” date. There’s no official safe-harbor rule yet — document your inspection date carefully and consult a tax professional if you’re in this situation.

How much is the credit? Real dollar examples

To calculate yours: add up all eligible costs (panels + battery + installation + permits), multiply by 0.30, and that’s your credit amount. The estimator below handles the math.

The carryforward rule explained

This is the rule most articles mention and then fail to explain. In my experience, it’s also the one that causes the most unnecessary panic at tax time. Here’s how it actually works.

The credit carries forward indefinitely — there’s no time limit. Each year, you apply whatever portion of the credit equals your federal tax liability, and any remainder rolls to the next year’s return automatically.

Real example: You have a $9,000 credit. You owe $4,000 in federal taxes in 2025. Your 2025 tax bill drops to $0, and $5,000 carries to 2026. In 2026, if you owe $4,500, your bill drops to $0 again and $500 carries to 2027. You continue until the credit is fully used.

What about selling your house before you’ve used the full carryforward? If you sell before the credit is fully applied, the unused amount is lost — it doesn’t transfer to the buyers and doesn’t convert to a deduction. If you expect a large carryforward and are considering selling within 1–2 years, that timing is worth discussing with a tax professional.

How to claim the credit: step by step

Here’s exactly how to claim the solar tax credit on your 2025 return. The form you need is IRS Form 5695 (Residential Energy Credits), available at IRS.gov/Form5695.

Step 1: Gather your documentation

• Final installer invoice — itemized costs (panels, battery, labor, permits)
• Proof of payment (bank statement, credit card statement, loan confirmation)
• Interconnection agreement or utility approval letter
• Building permit and final inspection certificate
• System specification sheet from your installer
• If battery included: documentation showing at least 3 kWh capacity

You don’t submit most of this to the IRS — keep it for at least 7 years in case of audit. The installer invoice and proof of payment are the two most important.

Step 2: Complete Form 5695, Part I

Part I covers the credit. Here’s what each key section does:

• Lines 1–5: Enter costs by category. Solar panels go on Line 1, battery storage (if any) on Line 5b. Include labor, permitting, and wiring costs in the same line as the equipment they relate to.
• Line 6: Total of all eligible costs.
• Line 7: Multiply Line 6 by 0.30. This is your tentative credit.
• Lines 8–13: The form walks through the tax liability limitation automatically based on your other figures.
• Line 14: Your actual credit for this year: the lesser of Line 7 and your tax liability.
• Line 16: Carryforward amount, if any.

Step 3: Transfer to Schedule 3

The credit from Line 14 of Form 5695 goes on Schedule 3, Line 5 (Nonrefundable Credits). Schedule 3 feeds into your Form 1040. Tax software handles this transfer automatically.

Step 4: In TurboTax or H&R Block

Both handle Form 5695 through their guided interview. In TurboTax, answer “Yes” when asked about energy-efficient home improvements during the deductions and credits section. That pulls up the solar credit screens. Have your installer invoice ready; the software calculates the form lines automatically. One thing that trips people up: TurboTax sometimes asks for the “date placed in service” separately from the purchase date — use the date your system passed final inspection, not the date you signed the contract. In H&R Block, search for “solar energy credits” in the credits section. For standard filers using software, this is a straightforward process — but if your situation involves a large carryforward, multiple years, or a system that straddles the 2025 deadline, a tax professional can prevent costly errors.

Not confident about filing Form 5695 yourself?

State solar credits and incentives

Table current as of March 2026. State programs change frequently — use DSIRE’s searchable database for your exact zip code before making any decisions.

State incentives exist entirely independently of the federal solar tax credit 2026 changes and weren’t affected by the One Big Beautiful Bill Act. Here’s where the major state programs stand in 2026:

For current program details and states not listed above, check DSIRE — the U.S. Department of Energy’s database of state energy incentives, maintained by NC State University. Programs change, utility rebates run out, and SREC values fluctuate, so verify before making a purchase decision.

Installing solar in 2026: what you still have

Without the 30% federal credit, the math changes for 2026 buyers — but solar isn’t a write-off. Here’s an honest look at the three main paths.

Option 1: Buy (own the system)

Take a homeowner considering a $28,000 system today. Without the federal credit, there’s no $8,400 coming back at tax time. The payback period for owner-installed systems is longer now — typically 10–14 years depending on your state, system size, and electricity rate (those numbers will shift as more 2026 data comes in), vs. 6–9 years when the credit was active. That said, equipment costs have continued to fall, and national electricity rates are averaging above $0.18/kWh, making the per-kilowatt savings more valuable. State incentives (listed above) still meaningfully reduce upfront cost in a number of states. For current panel comparisons and brand rankings, see our best solar panels for home guide. If you’re not sure how large a system you need, our solar system sizing guide walks through the calculation.

Option 2: Solar lease or PPA

Leasing companies can still claim the Section 48E commercial Investment Tax Credit — a separate program that the One Big Beautiful Bill Act didn’t touch. They pass a portion of those savings through lower monthly rates or per-kWh PPA prices, so you get reduced electricity costs from day one with no large upfront payment. You don’t own the system and can’t claim a tax credit directly. One practical note: selling your home will require a lease transfer, which most buyers accept but adds a step; and exact commercial ITC eligibility windows are still being clarified, so verify terms with any installer before signing.

Option 3: Community solar

If your roof isn’t right for solar — wrong orientation, too much shade, rental situation — or you simply prefer no installation commitment, community solar subscriptions let you buy a share of an off-site solar farm and receive credits on your electric bill. Available in a growing number of states, they typically save 5–20% on electricity with no equipment, no permits, and no installer coordination required. Enrollment is usually free; you pay your normal electric bill and receive a statement credit at a discounted rate. To find programs in your zip code, check your state’s utility commission site or the Energy.gov community solar finder.

Conclusion

The solar tax credit 2026 landscape looks different from prior years — but it didn’t disappear entirely. If you installed in 2025, your 30% federal credit is secure: file Form 5695, apply it to your tax liability, and carry forward anything unused. If you’re buying in 2026, the federal piece is gone for owner-installed systems, but state incentives, net metering, and the lease market still make solar worth running the numbers on. The calculator above handles the math; the step-by-step guide handles the filing.

If you’re exploring other clean energy tax incentives that are still fully available for 2026 installs, the heat pump tax credit 2026 covers a separate $2,000 federal credit for qualifying heat pump installations — it wasn’t touched by the One Big Beautiful Bill Act.

This article explains general rules of the Residential Clean Energy Credit (Form 5695) based on IRS guidance and current law as of early 2026. It is not a substitute for advice from a licensed tax professional. Tax situations vary — if your credit is large, your situation is complex, or you’re uncertain about your eligibility, consult a CPA before filing. Sources: IRS Residential Clean Energy Credit page, IRS Form 5695 (2025) and instructions, One Big Beautiful Bill Act (Public Law 119-21, July 4, 2025).