What the IRS says about 25D
The IRS Residential Clean Energy Credit page, last updated 2026-07-04, says the credit "equals 30% of the costs of new, qualified clean energy property for your home installed anytime from 2022 through December 31, 2025" and that "the credit is not available for any property placed in service after December 31, 2025." You claim it with Form 5695 for the tax year the property is installed, "not merely purchased", and you can carry forward unused credit. Source: IRS.
The IRS page still contains a sentence about a phase-out beginning in 2033. It conflicts with the cutoff stated on the same page and with the statute below, so this site relies on the cutoff and the statute.
What the law changed
Public Law 119-21, approved 2025-07-04, section 70506 amended 25D(h) so the credit does not apply "with respect to any expenditures made after December 31, 2025", and struck the 2033 and 2034 step-downs to 26 and 22 percent. The statute says expenditures made; the IRS page says placed in service. The IRS reconciles the two in its OBBB fact sheet FS-2025-05 (2025-08-21), FAQ 7: section 25D(e)(8)(A) treats an expenditure as made "when the original installation of the item is completed", so a system paid for in 2025 but finished in 2026 gets no 25D credit. Sources: Public Law 119-21, IRS FS-2025-05.
Section 48E and third-party-owned systems
A lease or power purchase agreement (PPA) means someone else owns the panels. The owner, not the homeowner, would claim any federal credit. Section 70513 of the same law added a cutoff to Section 48E: it does not apply to wind or solar property "placed in service by the taxpayer after December 31, 2027", and that termination applies to facilities whose construction begins after 2026-07-04. Since that date has passed, a system whose construction starts now must be placed in service by 2027-12-31 for its owner to claim 48E. IRS Notice 2025-42 (Internal Revenue Bulletin 2025-36) repeats both dates and removes the 5 percent safe harbor for most projects, keeping it for solar of 1.5 MW or less. Sources: Public Law 119-21, Notice 2025-42.
The new leasing limit in 48E(i), headed "wind and solar leasing arrangements", denies the credit for property described in 25D(d)(1) and (d)(4), which are solar water heating and small wind, when leased to a third party. Rooftop solar electric property, 25D(d)(2), is not named (26 U.S.C. 25D). No primary page read for this guide says in plain words that leased rooftop solar still qualifies, and none says that a lessor passes a credit to the customer. Treat any such promise in a sales pitch as something to verify in writing.
What this means when you compare offers
- For a cash or loan purchase installed in 2026, there is no 25D credit. The calculator starts incentives at $0.
- A lease or PPA price may or may not reflect any credit the owner receives. Ask how the price was set.
- Compare the lease or PPA total over its whole term, including any yearly escalator, with the cost of owning.
- The cash vs lease vs PPA comparison sets these out side by side.
Questions
Is there still a Texas solar credit?
The PUCT says the state offers no grants or rebates for solar panels. Texas does exempt the added property value; see the property tax guide.
Can I still carry forward a 2025 credit?
The IRS page says unused 25D credit can be carried forward to reduce tax in future years.
Did the deadline change for batteries?
For a homeowner, yes: the 25D termination covers every 25D expenditure made after 2025-12-31, and the IRS lists battery storage among 25D property. Battery rules under 48E for third-party owners were not checked.
This page is general information, not advice for your situation. Ask a licensed tax professional about your return.