What actually happened

The credit homeowners used for years was called the Residential Clean Energy Credit. In tax law it lives in a section of the code called 25D, and you’ll see it written that way on a lot of sites. It let you subtract 30% of what you spent on a solar system directly off your federal tax bill.

A law passed on July 4, 2025 — Public Law 119-21, usually called the One Big Beautiful Bill — ended it early. The credit had been scheduled to run until 2034. It now stops at December 31, 2025.

There was no phase-down and no transition period. It didn’t drop to 20%, then 10%, then zero, the way these things usually wind down. It went from 30% to nothing overnight.

The part that catches people out

A lot of homeowners signed contracts and paid deposits in late 2025 expecting to claim the credit. Whether they can comes down to one question, and it isn’t the one most people assume.

It is not about when you paid. It’s about when the installation was finished.

The IRS addressed this directly. Tax law treats the money as “spent” on the day the original installation is completed — not the day you signed, not the day you paid, not the day the panels were delivered. So if you paid in full in November 2025 but the crew finished the job in January 2026, the expense counts as a 2026 expense, and the credit is gone.

If your system was finished in 2025

Then you’re in the old rules and the credit applies. One thing worth knowing: this credit was never a refund. It reduced what you owed. If your tax bill for the year was smaller than the credit, the leftover amount generally carries forward to future tax years rather than disappearing. How much and for how long depends on your own return, so this is a question for whoever prepares your taxes — not for a website.

What still exists in 2026

The 30% credit didn’t vanish from the tax code entirely. It survives in a different section, 48E, which is written for businesses that own energy equipment. Homeowners can’t claim it. A solar company can.

That’s why leases and power purchase agreements have become far more common. Here’s the mechanism, in plain terms:

• A solar company pays for the system and keeps ownership of the panels on your roof.
• Because the company owns the equipment, it claims the 30% credit.
• You pay the company monthly — either to rent the equipment (a lease) or to buy the electricity it produces (a power purchase agreement, or PPA).
• Some of the credit’s value shows up as a lower monthly payment than you’d otherwise get.

These arrangements have deadlines too

The business credit is being wound down as well, on its own schedule:

The practical effect: this window is closing. If a salesperson tells you there’s time pressure on a lease or PPA, that part is actually true. It doesn’t mean you should sign quickly — it means you should get more than one offer while comparing.

Where the money is now: state and local

With the federal credit gone for buyers, state, utility and local programs now carry most of the financial weight. These vary enormously — two neighbors in different states can face completely different numbers for the same equipment.

The common types:

• Performance payments — you’re paid for the electricity your system produces or is expected to produce, sometimes as a large one-time payment.
• Utility rebates — a payment from your electric company, often based on system size.
• Property tax exemptions — solar raises your home’s value, and many states forbid that increase from raising your property tax.
• Sales tax exemptions — no sales tax on the equipment.
• Net metering — the rules for what your utility pays you for surplus power you send back. Not a rebate, but often worth more over 20 years than any rebate.

The most reliable place to look up what applies where you live is DSIRE, a database run by North Carolina State University. It’s free, it has no sales interest, and it’s kept current.

So does solar still make sense?

That depends on numbers that are specific to you, and anyone who answers it confidently without seeing your electric bill is guessing.

What changed, honestly stated:

• Buying with cash or a loan costs meaningfully more out of pocket than the same purchase did in 2025, because roughly a third of the cost is no longer coming back.
• Payback periods have stretched. A system that paid for itself in 9 years may now take 12 or more, depending on your electricity rate.
• Leases and PPAs look relatively better than they did, because they’re the only route to any federal credit value at all.
• Your state’s programs and your utility’s rates matter far more than they used to. In a state with strong incentives and expensive electricity, the math can still work well. In a state with neither, it may not.

The one thing that hasn’t changed is that solar pays you back in avoided electricity bills, and that has nothing to do with tax policy. If your bill is high, the panels still offset it.