The 30% Solar Tax Credit Still Exists. It's Just Not Yours Anymore.

If you are shopping for solar in 2026 and a salesperson mentions the 30% federal tax credit, here is the thing you most need to know before you sign anything: if you are buying your system with cash or a loan, that credit is gone. It expired at the end of 2025. The credit still exists in the tax code, and you will still hear it talked about, but for a homeowner who buys their own system it is no longer yours to claim.

That sounds like bad news, and for cash and loan buyers it largely is. But the full picture is more specific than “the credit is gone,” and the specifics are exactly where a 2026 solar pitch can mislead you. This is general information, not tax advice; your own situation is for a tax professional. What follows is the map.

Two different credits, and which one died

There have always been two separate federal solar tax credits, and almost nobody outside the industry knew there were two, because for years they pointed at the same 30% number.

The one homeowners used is called Section 25D, the Residential Clean Energy Credit. When you bought a solar system with cash or a loan, you claimed 25D on your own tax return, and it knocked 30% of the system’s cost off what you owed the IRS. That is the credit in every pitch you have heard for the last decade.

Section 25D is the one that died. Under the federal tax law signed in July 2025, it was terminated for systems where installation is completed after December 31, 2025, with no gradual phase-down: it went from 30% to nothing at the stroke of midnight. The date test matters more than people realize, and it is a place sales pressure lives. It is not the date you signed, and not the date you paid a deposit; it is the date your system is finished and installed. A homeowner who put money down in 2025 on a system that gets installed in 2026 does not get the credit. So if anyone selling you a 2026 system shows you a 30% credit subtracted from the price of a system you would own, that number is wrong, and you should stop and ask them to explain it.

The other credit, Section 48E, the Clean Electricity Investment Credit, did not die. But it was never the homeowner’s credit. It is a commercial credit, claimed by a business that owns power-producing equipment. And that distinction is the whole story of solar economics in 2026.

Why you will still hear “30%” in 2026

Because 48E is alive, the 30% credit is still very much in play, just not for people who buy their own systems. It is claimed by the company that owns the system on a lease or a power purchase agreement, the arrangements where a third party owns the panels on your roof and you either rent them or buy the power they produce.

On a lease or PPA, you do not own the equipment, so you claim nothing and file no federal tax form for it. The leasing company owns the system and claims the 48E credit. That is entirely legal and ordinary. It is also why, in 2026, the residential solar industry is pushing leases and PPAs much harder than it used to: for a company, the lease is now the only structure left that carries a federal credit, because the homeowner-ownership credit is gone.

There is one more piece worth knowing, in a single sentence: that 48E credit has real cash value to the leasing company, because the company can sell it to another business for cash even if it has no tax bill of its own. You have no role in any of that. But it explains why there is value in the deal that can be shared with you, which brings us to the only question that actually matters to your wallet.

The question that decides whether a lease is good or bad

Here is the honest part, in both directions. A 2026 lease or PPA is not a scam, and it is not automatically a bad deal. It is now the only way for a California homeowner to get any benefit at all from the federal credit, it does not require you to have a big tax bill to use it, and it usually takes maintenance and performance worries off your plate. For some households it is a genuinely good fit.

But the lease is also the structure where the money can most easily disappear into the pricing, because how much of that 48E credit reaches you depends entirely on how the deal is priced, and that is not something the proposal will spell out for you. The leasing company captures the credit. Whether it passes the value along to you, in a lower monthly payment or a lower prepaid price, or simply keeps it, is a choice baked into numbers you cannot see from the outside. There is no published, reliable figure for how much typically gets passed through; in a standard monthly lease it is genuinely hard to tell from the paperwork. Marketed discounts on prepaid leases, where the benefit is at least visible, tend to be in the range of twenty to thirty-five percent off the retail price, but treat any specific number a salesperson quotes you as a claim to verify, not a fact.

So the test is not “is there a tax credit.” It is “how much of it actually reaches me.” Three ways to find out before you sign: ask for the full cash-purchase price of the same system and compare it against the total of all the lease payments over the full term, in today’s dollars; get the annual escalator in writing, the percentage your payment rises each year, and model it across the whole twenty-to-twenty-five-year term rather than judging the deal by year one; and simply ask the company, in writing, how much of the tax credit it is passing through to you. A company that is passing real value along will answer. One that will not put it in writing has told you something.

Two footnotes that sound scary and mostly are not

Two things may come up, or may be used to create urgency, so here is the plain version of each.

The 2026 deadline you may hear about is real, but it is the leasing company’s deadline, not yours. For the 48E credit on a leased solar system, the company that owns the system generally needs to have started construction by around the middle of 2026 to lock the credit in for systems finished over the next few years. Large lease providers have been stockpiling equipment to meet that date. For you, this means a provider that has done its part can keep offering credit-backed leases past that date, but it also means some of the urgency in a 2026 pitch is genuine rather than invented. The way to handle real urgency is the same as the way to handle fake urgency: slow down enough to run the comparison above. (Standalone home batteries, worth noting, sit on a much longer federal timeline than solar panels do, with their full credit running years further out, which is part of why you will see batteries pushed alongside or instead of panels.)

The “American-made parts” rules do not land on you. The 2026 law adds requirements that a leased system use enough equipment from approved, non-restricted sources for the company to claim the credit. This narrows which panels and batteries a leasing company will offer, but it generally does not disqualify ordinary California systems, which are built to comply, and the responsibility for meeting it sits entirely with the company claiming the credit, not with you. It is the leasing company’s homework, not yours.

What this means in California specifically

California homeowners feel the loss of the homeowner credit more sharply than most, because it landed on top of another change. Since 2023, under the billing rules known as NEM 3.0, the credit you earn for the solar power you send back to the grid was cut by roughly three-quarters. So a 2026 California homeowner buying their own system now faces both a longer payback, with no federal credit to shorten it, and far less value for exported power than buyers got a few years ago. That combination is the real reason a battery has gone from optional to close to essential for the math to work here, and it is the reason leases and PPAs have taken over so much of the market. (If your power comes from a municipal utility such as LADWP or SMUD rather than PG&E, SCE, or SDG&E, you are outside NEM 3.0 and the export math may be friendlier; check which applies to you.)

None of this means solar stopped being worth it in California. Electricity rates here keep climbing, and a well-designed system, especially one paired with storage, still pays off for many households over its life. What changed is that the easy 30% discount a homeowner could once count on is gone for buyers, and the only place the credit still lives is inside a lease whose pricing you have to read carefully. The credit did not disappear. It moved to the other side of the table.

Where to go from here

If a 2026 proposal in front of you leans on the tax credit, the move is to figure out which structure you are actually being offered and run the comparison above. Our guide to reading a solar proposal walks through the rest of the numbers a proposal tends to lean on. And for the specific question of whether a particular lease is passing real value through to you, that is the kind of read the practice can do on your actual documents.

The Installer’s View is an independent solar advisory practice for California homeowners. We do not sell, install, or finance solar equipment. This article is general educational information, not tax, legal, or financial advice; federal tax law is detailed and changes, and whether you can claim any credit depends on your own circumstances, so confirm anything here with a licensed tax professional before you rely on it.