Federal solar programs: full history and what still applies

The 30% Investment Tax Credit expired December 31, 2025. This guide explains what it was, the Inflation Reduction Act programs that preceded its end, and the federal tools that remain available to homeowners today.

The federal solar ITC: 2006 to 2025

Expired December 31, 2025. The 30% federal solar ITC is no longer available for residential systems installed after this date. Homeowners who installed and placed systems in service on or before December 31, 2025 may still claim the credit on their tax return for that year. Consult a tax professional if your system straddles the deadline.

The federal Investment Tax Credit for residential solar was created by the Energy Policy Act of 2005 and first applied to systems installed in 2006. Over its 19-year life it became the single most powerful driver of US residential solar adoption, reducing the effective cost of a typical home system by roughly $6,000 to $9,000.

The credit worked as a direct offset against your federal income tax liability. If your system cost $30,000 and the credit rate was 30%, you claimed a $9,000 credit. Any unused credit could roll over to subsequent tax years. It was not a refundable credit: if you owed less than $9,000 in federal tax, you would carry the remainder forward.

2006

ITC created at 30%

The Energy Policy Act of 2005 established a 30% credit, capped at $2,000, for residential solar systems placed in service from January 1, 2006. The credit was initially set to expire after 2007 but was extended repeatedly.

2008

Extended through 2016

The Emergency Economic Stabilization Act of 2008 extended the 30% credit through December 31, 2016 and removed the $2,000 cap that had previously limited residential claims.

2015

Extended through 2021 with step-down schedule

The Consolidated Appropriations Act, 2016 (enacted December 2015) extended the credit with a planned reduction: 30% through 2019, 26% in 2020, 22% in 2021, and then expiration for residential systems.

2020

Extended at 26%, step-down delayed

The Consolidated Appropriations Act, 2021 (enacted December 2020) delayed the step-down schedule. The 26% rate was extended through 2022 and the 22% rate moved to 2023.

2022

Inflation Reduction Act restores 30% through 2032

The Inflation Reduction Act of 2022 (IRA) retroactively restored the credit to 30% for systems installed in 2022 and extended that rate through December 31, 2032, with a planned step-down to 26% in 2033 and 22% in 2034.

2025

Residential credit ends December 31, 2025

Reconciliation legislation signed July 4, 2025 (Public Law 119-21) ended the residential clean energy credit (Section 25D) for expenditures made after December 31, 2025. An expenditure counts as made when the installation is completed. The 30% credit ended seven years before the IRA's 30% rate was scheduled to end in 2032.

2026 and beyond

No federal credit for homeowners who buy

There is no federal tax credit for homeowners who buy a new residential solar system in 2026. Systems owned by a third party (lease or power purchase agreement) may still qualify for a separate commercial credit under different rules, so ask any installer how it is priced. State and utility programs remain the main source of incentives for homeowners going solar today.

IRA programs that remain partially active

Not all IRA programs were repealed. Several provisions targeted at low-to-moderate income households, rural electric cooperatives, and multifamily housing remain active as of October 2026, though their funding has been reduced and subject to ongoing regulatory review. Always confirm current status directly with the administering agency before making decisions based on these programs.

Program Administering agency Who it serves Status as of Oct 2026
Rural Energy for America Program (REAP) USDA Agricultural producers and rural small businesses Active. Grants cover up to 50% of eligible project costs for renewable energy systems including solar.
USDA Community Facilities Grant USDA Rural Development Rural community organizations and nonprofits Active for essential community facility projects. Solar as part of facility construction qualifies.
HUD Green and Resilient Retrofit Program (GRRP) HUD HUD-assisted multifamily housing Partially active. New awards paused; existing awards proceeding. Contact HUD for your project status.
Tribal Energy Loan Guarantee Program Dept. of Energy Federally recognized tribes Active. Loan guarantees available for tribal renewable energy development.
Home Energy Rebates (HEEHRA / HEAR) State energy offices (DOE-funded) Low- and moderate-income households Varies by state. Many states continue programs with existing appropriated funds. Check your state energy office.

Verify before acting: Federal program status changes frequently. This table reflects publicly available information as of October 2026. Contact the relevant agency directly or visit your state energy office for confirmed eligibility and funding availability before relying on any of these programs for a purchase decision.

PACE financing: what it is and its risks

Property Assessed Clean Energy (PACE) financing is a mechanism, not a grant or tax credit, that lets homeowners borrow money for solar and other energy upgrades and repay the loan through their property tax bill. It is available in about 20 states and is administered by local governments or their program partners.

How PACE works

A PACE lender covers the upfront cost of your solar installation. You then repay the loan over 5 to 30 years as an assessment added to your annual property tax bill. Because repayment is tied to the property, not to you personally, PACE lenders do not require a strong credit score and the assessment transfers to the new owner if you sell.

The risks

PACE loans have been the subject of significant consumer protection concerns. The assessment takes priority over your mortgage in a foreclosure, which means lenders may be reluctant to refinance or buy a home with an outstanding PACE lien. Interest rates are often higher than traditional home equity loans. Monthly payment structures can be confusing because the assessment is folded into the property tax bill. The Consumer Financial Protection Bureau has issued guidance on PACE loan disclosures; a rule finalized in 2024 requires lenders to comply with mortgage lending protections.

Alternatives to consider first

Before choosing PACE, compare it against a home equity loan, a home equity line of credit, or a personal solar loan. If you have sufficient equity and good credit, traditional financing typically offers lower rates and does not create a tax-priority lien on your property. Some states also offer low-interest green bank loans specifically for solar that are more favorable than PACE.

How to maximize savings without the federal ITC

State income tax credits

29 states offer their own solar tax credit, independent of the federal ITC. New York (25%), Massachusetts (15%), and South Carolina (25%) lead among currently active programs. These are real dollar reductions in your state income tax bill.

Active in 29 states

Utility rebates

Many utilities offer upfront cash rebates for solar installation, often $300 to $2,000 per kilowatt of capacity. These are separate from any tax credit and reduce your installation cost directly. Check your utility's website or your state page here.

Varies by utility

Net metering credits

44 states require utilities to credit you for excess electricity your panels send to the grid. The rate and policy vary considerably. Strong net metering rules significantly improve solar economics even without the ITC.

Active in 44 states

Property tax exemptions

More than 35 states exclude the added home value from solar when calculating property taxes. A system that adds $20,000 to your home value could otherwise raise your annual property tax by $200 to $400. The exemption prevents that increase.

Active in 35+ states

Sales tax exemptions

About 25 states waive sales tax on solar equipment at point of purchase. At a 7% state sales tax rate, this saves roughly $2,100 on a $30,000 system. You benefit at purchase with no paperwork or waiting period.

Active in 25 states

SREC markets

States with Renewable Portfolio Standards and active Solar Renewable Energy Certificate markets let you sell the environmental value of your power output. New Jersey, Pennsylvania, Ohio, and Maryland have active markets where SRECs have sold for $150 to $450 each in recent years.

Active in select states

Frequently asked questions

I installed solar in 2025. Can I still claim the 30% credit?

Yes, if your system's installation was completed on or before December 31, 2025. The tax code treats the expenditure as made when the original installation is completed, which can differ from when your utility gives permission to operate. You claim the credit on IRS Form 5695 for the tax year in which the installation was completed. Consult a tax professional to confirm your eligibility, especially if installation and interconnection spanned late 2025 and early 2026.

Could Congress bring back the solar ITC?

Congress can pass legislation at any time. The ITC was extended or restored multiple times over its history. Whether and when a future Congress might reinstate a residential solar credit is a legislative and political question that this site cannot predict. If your decision to go solar depends on a reinstated federal credit, monitor legislative developments through sources such as the Solar Energy Industries Association or your congressional representatives' offices.

Does the federal credit expiration affect commercial or utility solar?

The 2025 reconciliation legislation primarily targeted residential and small commercial credits. Large commercial and utility-scale solar projects may retain different credit structures under IRC Section 48, though this area is subject to ongoing IRS guidance. Commercial solar developers and their tax advisors should review the specific statutory language and any IRS guidance issued after August 2025.

What is the best remaining federal option for a low-income household?

The Home Energy Rebates (HEEHRA and HEAR) programs, administered through state energy offices with DOE funding, remain active in many states for qualifying households. Eligibility is typically based on area median income (AMI), with income-qualified households able to access rebates for solar and other energy efficiency measures. Contact your state energy office directly for current availability, funding status, and how to apply.

State incentives fill much of the gap

29 states offer tax credits, 35+ exempt solar from property taxes, and utility rebates add thousands more. Browse your state to see the full picture.

Browse all states