Guide · Incentives
If your solar or battery system is installed in 2026, there is no federal tax credit on it. The 30% Residential Clean Energy Credit was terminated for any expense made after December 31, 2025, and the IRS counts the expense as made when the installation is completed, not when you sign or pay. Leased systems can still carry a business credit for the company that owns them, and California's property tax exclusion still applies through 2026.
Facts checked September 23, 2026
On July 4, 2025, the federal budget law known as the One Big Beautiful Bill Act became law. Among many other things, it ended the Residential Clean Energy Credit under Section 25D of the tax code, the credit that let homeowners take 30 percent of the cost of solar panels, batteries, and solar water heating off their federal income tax.
The IRS guidance is short and unambiguous: the credit "will not be allowed for any expenditures made after December 31, 2025." The same law ended the Section 25C credit for energy-efficient home improvements, which covered heat pumps, windows, doors, and insulation, for property placed in service after the same date.
This is the question we hear most, and the answer disappoints people. The IRS treats an expenditure as made "when the original installation of the item is completed." Signing a contract in 2025, paying a deposit in 2025, or even paying in full in 2025 does not matter if the crew finished the job in January 2026. The IRS says so directly: if installation is completed after December 31, 2025, the expense counts as made after that date and the credit cannot be claimed.
If your installer finished in 2025 and you have not filed yet, you still claim it on your 2025 return using Form 5695. If they finished in 2026, do not claim it. An installer who tells you otherwise is setting you up for a correction letter.
The law treated purchased and third-party-owned systems differently. When a leasing company or a power purchase agreement provider owns the system on your roof, it claims a business credit under Section 48E, not the homeowner credit. That business credit survived, with a deadline: solar projects must begin construction before July 5, 2026, or be placed in service before 2028, to qualify. Battery storage on its own was not caught by the solar cutoff at all and keeps its business credit on a longer schedule.
That difference is why lease and PPA offers are being pushed harder this year. The credit is real, but it belongs to the company that owns the system. You see it only as whatever discount they choose to build into your monthly payment. Three things to check on any lease or PPA quote:
VertX quotes owned systems, and we will put a lease or PPA offer you already have side by side with ours so you can compare the real lifetime cost. Sometimes the lease wins. Often it does not once the escalator is counted.
| Program | Status in September 2026 | What it means for you |
|---|---|---|
| Property tax exclusion (Revenue and Taxation Code 73) | In effect through the 2025-26 lien date; section repealed January 1, 2027 | Adding solar does not raise your assessed value. A system that qualifies before 2027 keeps the exclusion until the home is sold. |
| SGIP battery rebate, general market (SCE) | Closed | No rebate on a Powerwall for most households. |
| SGIP Residential Solar and Storage Equity (AB 209) | Waitlist | Income-qualified households only. We check eligibility but do not count on it in the quote. |
| SCE solar or battery rebate | None | SCE customers get the net billing tariff and time-of-use rates, not a rebate. |
| Azusa Light & Water rebates | Open, small | Bill credits for a heat pump water heater, smart thermostat, and EV charger. Nothing for solar or batteries. |
| Federal Solar for All grant ($250 million to California) | Terminated by EPA in August 2025; a federal judge vacated the termination on September 18, 2026, and EPA says it is weighing an appeal | Not a homeowner rebate. California's share is mostly community solar subscriptions for low-income households in SCE territory, with a small rooftop slice for municipal utility areas such as Azusa. No application exists yet, and nothing moves until the appeal question is settled. |
There is no California state income tax credit for solar and there never was one for general-market homeowners. The state's help has always come through net metering rules, the property tax exclusion, and targeted equity programs.
For most homes on SCE rates, yes, but the margin is thinner and the design matters more. The credit used to cover a large share of a mistake: an oversized array, a roof that needed replacing two years later, a battery that was never sized to the household. Without it, those mistakes come straight out of your payback.
What still drives the math in 2026:
We run the numbers on your actual 12 months of SCE usage, with and without a battery, and put the payback in writing. If it does not pencil for your house, we will say so.
Common questions
Only if the installation was physically completed by December 31, 2025. The IRS treats the expense as made when the original installation is completed, not when you signed or paid. A system finished in January 2026 gets no Section 25D credit even if it was paid in full in 2025.
No. The Residential Clean Energy Credit under Section 25D is not allowed for expenditures made after December 31, 2025, and there is no replacement credit for purchased home systems. The Section 25C credit for heat pumps, windows, and insulation ended on the same date.
Some are quoting the business credit under Section 48E, which the owner of a leased or power-purchase-agreement system can still claim on a tightening timeline. That credit goes to the leasing company, not to you. You only benefit through whatever discount they pass into the monthly payment. Anyone telling you a purchased system installed in 2026 earns a 30% credit is wrong.
Yes, for now. Under Revenue and Taxation Code Section 73, adding an active solar energy system does not count as new construction, so your assessed value does not go up because of the panels. The section is in effect for property tax lien dates through the 2025-26 fiscal year and is repealed January 1, 2027, but a system that qualified before that date keeps the exclusion until the property changes hands.
Probably not, unless your household is income-qualified. As of September 2026 the general-market Small Residential Storage budget and the Equity Resiliency budget for SCE customers are closed. The only open path is the income-qualified Residential Solar and Storage Equity budget funded by AB 209, and it is on a waitlist. We will check your eligibility, but we will not build a quote around money that may never arrive.
