How to Claim the Solar Tax Credit Before It Ends
Updated: Sep 24
If you have been putting off solar for your Northern California home, you have probably heard the news. The federal solar tax credit that helped homeowners cut the cost of going solar has changed in a major way.
For over a decade, homeowners could claim 30% of a solar system's cost back on their federal taxes. That incentive ended for new residential purchases on December 31, 2025.
If you feel confused, you are not alone. Searches for “solar tax credit going away” climbed as the deadline passed, and many homeowners are still working from outdated information.
Solectric has spent more than 18 years installing solar across Sacramento and Northern California, and ranks in the top 1% of California contractors. This guide gives you straight answers: what the solar tax credit was, what changed, who can still claim it, and what real savings remain in 2026.
No sales pitch. Just the facts you need to make a smart decision for your home.
What Is the Federal Solar Tax Credit?
The federal solar tax credit is a dollar-for-dollar reduction in the federal income taxes you owe. Its official name is the Residential Clean Energy Credit, sometimes called Section 25D.
Here is how it worked. When you bought and installed a home solar system, you could claim 30 percent of the total project cost as a credit on your federal return.
That covered more than panels. It included inverters, wiring, labor, and battery storage added to the system.
A credit is not the same as a deduction. A deduction lowers your taxable income. A credit comes straight off your tax bill.
For example, a $25,000 system created a $7,500 credit against what you owed the IRS that year. There was no income limit and no dollar cap, and any unused portion could roll into future tax years.
Why did this matter so much here? Electricity rates in Northern California are among the highest in the country. The credit shortened the payback period and made monthly savings add up faster.
One misconception is worth clearing up. The credit was never a rebate check or an instant discount. You had to owe federal taxes to use it, and you claimed it when you filed.
The Solar Tax Credit Is Going Away: What Changed in 2026
For homeowners who buy their own system, the solar tax credit is going away, and for new 2026 purchases it is already gone.
Here is what happened. The One Big Beautiful Bill Act, signed into law in July 2025, ended the Residential Clean Energy Credit for expenditures made after December 31, 2025.
The Inflation Reduction Act had locked the 30 percent credit in through 2032. The 2025 law repealed it roughly seven years early, with no phase-down and no grace period.
The IRS confirms this directly. Its instructions for Form 5695 state that you cannot claim residential clean energy credits for expenditures made after December 31, 2025.
What this means in plain terms:
If you pay for a residential system in 2026, there is no 30 percent federal solar tax credit waiting at tax time.
Signing a contract or leaving a deposit before the deadline was not enough. The system had to be installed and placed in service by December 31, 2025.
The credit did not shrink gradually. It ended on a hard date.
This is the piece many homeowners miss. Some companies still advertise a “30% federal credit” on new residential systems. For a cash or loan purchase in 2026, that claim is no longer accurate.
That is why it pays to work with a local company that gives you current numbers. The solar tax credit story changed fast, and the honest math looks different now.
Who Can Still Claim the Solar Tax Credit
Not everyone is out of luck. One group of homeowners can still claim the solar tax credit, and there is a narrow window to do it.
If your system was installed and turned on by December 31, 2025, you can still claim the 30 percent credit on your 2025 tax return. The credit is tied to the year your system was placed in service, not the year you file.
You claim it on IRS Form 5695, filed with your federal return. There is no income limit, and unused credit can carry forward if your tax bill is too small to use it all at once.
Timing matters right now. The standard deadline to file a 2025 return was April 15, 2026.
If you requested an extension, you have until October 15, 2026 to file and claim the credit. If you already filed and left it off, you can generally amend your 2025 return.
A few reminders for anyone claiming on a 2025 install:
You must own the system. Leases and power purchase agreements do not qualify for the homeowner.
Keep your invoices, contract, and proof the system was placed in service in 2025.
The credit is nonrefundable, so it offsets taxes you owe rather than paying out as cash.
If this is your situation, do not leave money on the table. This is the last realistic chance to claim the federal credit on a system you own, and a tax professional can confirm your eligibility.
What Solar Incentives Remain in 2026
The federal credit for owned systems is gone, but solar in Northern California still makes financial sense. Several programs remain for 2026.
Federal credit through third-party ownership
The commercial version of the clean energy credit still exists for business-owned systems. When you go solar through a lease or power purchase agreement, a company owns the system and can claim that credit, then often passes part of the value back to you through a lower rate. These programs have their own federal deadlines, so timing still matters.
California battery rebates
The state's Self-Generation Incentive Program has offered rebates for home battery storage, with the largest amounts reserved for equity and fire-risk customers. Funding is limited and varies by utility, so check current availability before counting on it.
Property tax exclusion
California does not add the value of a new solar system to your property tax assessment. Solar can raise your home's value without raising that bill.
Net billing under NEM 3.0
How you are credited for exported power is set by the California Public Utilities Commission's net billing rules, and it shapes your entire system design.
Notice what is missing. There is no California state income tax credit for solar.
The takeaway for 2026 is simple. Savings now come from designing a system around how you actually use power, not from one large federal check. Solectric builds every design around the programs that apply to your address.
Your Options for Going Solar in 2026
Without a federal credit sweetening a cash purchase, how you pay for solar matters more than ever. There are three main paths, and Solectric walks through all of them on its solar financing page.
Cash purchase
Pros: lowest lifetime cost, highest long-term savings, and full ownership of the system and any added home value.
Cons: largest upfront cost, with no federal credit to offset a new 2026 install.
Best for: homeowners with cash who want the fastest payback and full ownership.
Solar loan
Pros: little or no money down, you still own the system, and payments often land near or below your old utility bill.
Cons: interest adds to the total cost.
Best for: owners who want ownership and long-term savings without a large upfront check.
Lease or power purchase agreement
Pros: little to no upfront cost, and this is the main way federal credit value still reaches a homeowner in 2026, through the provider.
Cons: you do not own the system, savings are usually smaller, and terms can affect a future home sale.
Best for: owners who want lower bills with no ownership.
There is no single best option. A cash or loan purchase almost always wins on lifetime savings if you can use it. A lease or PPA can still lower your bill and keeps a slice of federal credit value in play. The key is comparing real numbers for your home.
Choosing the Right Approach for Your Home
The best setup depends on a few specific things about your home and your utility. Walk through these before you sign anything.
Your utility
This is the big one in the Sacramento region. If SMUD serves your home, you use SMUD's own net metering rules, and SMUD is not under the state's NEM 3.0 net billing tariff.
If PG&E serves your home, you fall under NEM 3.0, which pays much less for the power you export. You can read the details on Solectric's NEM 3.0 page.
Under NEM 3.0, a battery changes the math. Storing midday solar and using it during the pricey evening hours is how PG&E customers protect their savings.
Your energy use
Heavy evening usage points toward solar plus storage. Steady daytime usage may need less battery.
Your roof
Age, angle, shading, and space all affect how much you can produce.
Your budget and goals
Are you after the lowest bill, backup power during outages, energy independence, or added home value? Your answer points toward cash, a loan, or a lease.
A rule of thumb for the region: PG&E customers usually benefit from adding a battery, while many SMUD customers pencil out with solar alone. The right call always comes from your actual bill and usage.
Working with Solectric
Solectric is a family-owned company based in West Sacramento, founded by Daniel Navarrete in 2015. The process is built to be clear from the first call to the day your system turns on.
It runs in five stages: a no-pressure consultation, a custom system design, permitting, professional solar installation, and activation with your utility. Each design is built around your home and the programs that apply to it.
What sets Solectric apart is its track record: more than 18 years of experience, over 3,600 installations, top 1% of California contractors, and SunPower Authorized Dealer status. Service areas include Sacramento, Elk Grove, West Sacramento, and the greater Northern California region.
Solectric also follows the protections in California's Solar Consumer Protection Guide, which warns homeowners about inflated savings claims and outdated incentive promises.
“When the federal credit went away, a lot of homeowners felt like the door had closed. It hasn't. The math still works in Sacramento, but only if someone shows you the real numbers instead of a sales pitch. That is the whole reason I started Solectric.”
Daniel Navarrete, Founder, Solectric
Frequently Asked Questions
Is the solar tax credit really gone in 2026?
For homeowners who buy their own system, yes. The 30 percent Residential Clean Energy Credit ended for expenditures made after December 31, 2025. If your system was placed in service in 2025, you can still claim it on your 2025 return. New cash or loan purchases in 2026 do not qualify.
I signed my contract in 2025. Can I still claim the credit?
Only if the system was installed and placed in service by December 31, 2025. A signed contract or deposit alone does not qualify. The credit follows the placed-in-service date, so the timing of the installation is what counts, not the paperwork.
Does solar still save money here without the credit?
In most cases, yes. Northern California rates are high, so offsetting your usage still adds up. The savings now depend more on smart design, your utility, and whether you add a battery than on a single federal check.
How much does a solar system cost now?
Costs vary with system size, your roof, and whether you add storage. A good installer gives you a custom quote based on your actual energy use rather than a one-size price. Financing can spread the cost into monthly payments near your old bill.
What is NEM 3.0, and does it affect me?
NEM 3.0, the net billing tariff, sets how PG&E, SCE, and SDG&E credit the power you export. It pays less than older net metering, which makes batteries more valuable. SMUD customers in Sacramento follow SMUD's own rules and are not under NEM 3.0.
Do solar panels need much maintenance?
Not much. Panels have no moving parts and usually need only occasional cleaning and monitoring. Quality equipment carries long warranties, and a reputable installer can handle service if anything comes up.
How long does installation take?
The install itself is often one to three days. The full timeline, including design, permitting, and utility approval, usually runs several weeks and varies by jurisdiction and utility.
Ready to Go Solar in Sacramento?
The solar tax credit that shaped a decade of solar decisions has ended for new residential purchases, but going solar in Sacramento still pays off. If your system was placed in service in 2025, claim your credit before the filing window closes. If you are planning a 2026 project, the smart move is a system designed around your utility, your usage, and the incentives that still apply.
The one thing that has not changed is the value of honest, local expertise. Solectric will show you the real numbers for your home, with no pressure and no outdated promises.
Ready to see what solar looks like for your home? Request a free quote or call Solectric at (916) 719-0074.
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