Quick definition
The ITC was, for over a decade, one of the biggest financial incentives supporting US residential and commercial solar. Under Section 25D, a homeowner who bought and owned a qualifying solar system, whether with cash or a loan, could claim a percentage of the total installed cost directly against their federal tax bill for that year. That homeowner-claimed version of the credit expired December 31, 2025, under the One Big Beautiful Bill Act signed into law July 4, 2025: systems installed in 2026 or later no longer qualify for it.
A separate, business-claimed version of the credit, under Section 48E, still applies to commercial solar and to third-party-owned residential systems like leases and PPAs, where the company that owns the equipment claims the credit rather than the homeowner.
At a glance: homeowners who buy a solar system outright in 2026 or later get no federal ITC; only third-party-owned lease or PPA systems still pass through a version of the credit, via Section 48E, in how those arrangements are priced.
Why it matters
The ITC was one of the single biggest drivers of US residential solar adoption growth for years, since it meaningfully lowered the effective cost of a system for anyone who owned it outright. That's exactly why its expiration matters so much: the One Big Beautiful Bill Act ended the homeowner-claimed Section 25D credit with no step-down or phase-out period, cutting it off entirely for systems installed starting January 1, 2026, roughly seven years earlier than the 2032 to 2034 phase-out originally scheduled under the Inflation Reduction Act. For the numbers behind Investment Tax Credit (ITC), the quick financing comparison tool in our Financing section walks through the calculation step by step.
This is exactly why ownership structure matters more than ever when comparing solar financing options in 2026 and beyond. A cash purchase or solar loan no longer earns the homeowner any federal tax credit. A PPA or lease routes a version of that credit, now filed under Section 48E, to the third-party owner instead, and that value may still be baked into how those companies price their offers, but it's a business credit the homeowner never claims directly.
For anyone who completed a qualifying installation by December 31, 2025, the 30% Section 25D credit still applies for that tax year, and any unused amount can typically be carried forward. But that eligibility window has closed for new installations, which is why it's worth checking current federal guidance rather than relying on older marketing or outdated online information that still describes a 30% homeowner credit as available going forward. The Department of Energy's page on what changed for the solar tax credit explains the current rules for homeowners and businesses.
Where you'll see this
The federal ITC calculator works out the dollar value of the credit for your specific system cost.
Since the credit's terms have shifted over time, the federal ITC step down timeline tool tracks how the applicable rate has changed and what current guidance says.
This term comes up in every US solar financing conversation, in tax filing documentation for system owners, and any savings projection comparing cash purchase or loan ownership against a PPA or lease. The IRS page for the residential clean energy credit sets out who can claim it and for which systems.
Related terms
Frequently asked
Historically, yes: the ITC went to whoever owned the solar equipment, whether through cash purchase or a solar loan, while homeowners with a PPA or lease didn't claim it themselves since a third party owned the system. As of 2026, this distinction matters even more, since the homeowner-claimed Section 25D credit has expired entirely for new installations; only the business-claimed Section 48E credit, used by third-party lease and PPA providers, is still active.
It's a tax credit, which is a direct dollar-for-dollar reduction in tax owed, not a deduction that only reduces taxable income. A credit is generally more valuable than a deduction of the same nominal amount.
For a system that qualified before the Section 25D credit expired at the end of 2025, the ITC can typically be carried forward to future tax years if it exceeds what you owed in the year you claimed it, though a tax professional should confirm how this applies to your specific situation, since carryforward rules can be detailed.
Under the now-expired Section 25D credit, standalone battery storage did qualify even without accompanying new solar panels. That homeowner-claimed pathway ended along with the rest of Section 25D for anything installed in 2026 or later. The business-claimed Section 48E credit remains available to third-party-owned systems, but checking current federal guidance or a tax professional is the safest way to confirm what applies to a specific project now.