How did the federal solar tax credit work?
For most of the past decade, homeowners who paid for their own solar claimed the Residential Clean Energy Credit, also called the Section 25D credit. It was worth 30% of the total project cost, including panels, the battery, inverters, wiring, and installation labor.
It was a credit, not a deduction. A $30,000 system produced a $9,000 credit that came straight off the federal income tax you owed, dollar for dollar. It was claimed on IRS Form 5695 for the year the system was placed in service.
The credit was nonrefundable, which means it could only offset tax you actually owed. It would not pay you cash beyond that. Any unused amount rolled forward to the next tax year.
Did the credit cover home batteries?
Yes. Since 2023, standalone battery storage with a capacity of 3 kWh or more qualified on its own, even without solar attached. A battery added to a solar project was covered at the same 30% rate.
That mattered under PG&E NEM 3.0, where the battery is the load-bearing part of the system. The credit applied to the most financially important piece, not just the panels.
Was there an income limit on the solar tax credit?
No. The Residential Clean Energy Credit had no income cap. A household at any income level could claim it.
The one real limit was tax liability. Because the credit was nonrefundable, a homeowner with little or no federal income tax could not use the full 30% in a single year. The unused portion carried forward, but it was never a cash rebate.
Is the federal solar tax credit ending?
For homeowners buying their own system, it already has. Under the One Big Beautiful Bill Act, signed in July 2025, the Residential Clean Energy Credit no longer applies to expenditures made after December 31, 2025.
In plain terms: if you pay for a residential solar or battery system in 2026, there is no 30% federal Section 25D credit waiting for you at tax time. The credit that was set to run through 2032 under the Inflation Reduction Act was repealed years early.
This is why searches for whether the credit is ending climbed sharply through late 2025 and into 2026. Many homeowners are finding out only after the fact that the direct residential credit closed at the end of 2025.
What does losing the credit do to the price of solar in 2026?
For the homeowner-buys-it-directly cash path, it raises the real cost. A system that effectively cost $21,000 after a $9,000 credit on a $30,000 project now costs the full $30,000 if the only path considered is buying it yourself.
That single change is large enough to move a project from clearly worth it to a closer call. It is exactly why the question of how you pay for solar matters more in 2026 than it did a year ago.
Is there any federal credit left for solar in 2026?
Yes, but through a different part of the tax code. The commercial clean energy investment credit, which applies to businesses that own energy equipment, was not repealed alongside the residential credit. It remains available on its own phase-down schedule.
Because that credit follows the owner of the equipment rather than the resident, a business that owns a home energy system can claim it and pass the value to the homeowner. That is the basis of a third-party ownership program, and it is how some homeowners are still capturing federal credit value in 2026 even though the residential Section 25D credit is gone. You can see how this works on the Potrero Tax Credit Program page.
Tax rules depend on your specific situation, and the commercial credit has its own eligibility and timing requirements. Confirm any federal credit with a qualified tax professional before counting on it.
How Potrero approaches the 2026 tax credit gap
Potrero built the Tax Credit Program around this exact change. You pay for the system upfront in cash and receive an immediate 20% discount off the retail price. Potrero retains ownership of the hardware for the first six years so it qualifies for the commercial clean energy credit, then title transfers to you with no separate check required. There are no monthly payments, and no third-party financier optimizing the system against you.
The honest version is that the math is different in 2026 than it was in 2025, and the right structure now depends on your tax situation, your PG&E usage, and how long you plan to stay. The fastest way to see where you stand is to get an instant estimate for your address, then review the numbers together before anything is installed.