The federal solar tax credit ended. What that means for Arizona homeowners in 2026
Section 25D was repealed by Public Law 119-21 and does not apply to expenditures made after December 31, 2025. The trigger is when installation was completed, not when you paid. Here is what remains, and what it does to Arizona payback math.
In this article
- Is the federal solar tax credit still available in 2026?
- What the credit was worth, year by year
- What “expenditure” means, and why it is the only date that matters
- What still exists in Arizona
- What a system costs now versus a year ago
- What now drives the math instead
- What about leases and power purchase agreements?
- What else ended at the same time
- The practical takeaway
- Related reading
The 30 percent federal Residential Clean Energy Credit no longer exists. Section 25D of the Internal Revenue Code was repealed by Section 70506 of Public Law 119-21 (opens in a new tab), signed July 4, 2025. The credit does not apply to any expenditure made after December 31, 2025.
The IRS states it without qualification. Its Residential Clean Energy Credit page (opens in a new tab), last reviewed July 4, 2026, describes a credit equal to “30% of the costs of new, qualified clean energy property for your home installed anytime from 2022 through December 31, 2025.” The 2025 Form 5695 instructions (opens in a new tab) say: “You can’t claim residential clean energy credits for expenditures made after December 31, 2025.”
For an Arizona homeowner installing today, the federal contribution is zero. On a median 8 kW system that is roughly $8,000 that used to be there and is not.
0%
Federal residential solar tax credit for systems completed in 2026
26 U.S.C. § 25D, repealed by Pub. L. 119-21 § 70506
down from 30% through 2025
Is the federal solar tax credit still available in 2026?
No. There is no residential federal tax credit for solar installed in 2026, and nothing in current law restores it.
The only people who can still claim 25D are those whose installation was completed on or before December 31, 2025 and who have a 2025 return to file or amend, or who have an unused credit balance carrying forward from a prior year. Both situations are described in the Form 5695 filing guide.
What the credit was worth, year by year
Federal residential solar tax credit rate, 2021 to 2026
Section 25D credit percentage applied to qualified residential solar costs, by the year the expenditure was made.
View the numbers as a table
| Year | Value (%) |
|---|---|
| 2021 | 26% |
| 2022 | 30% |
| 2023 | 30% |
| 2024 | 30% |
| 2025 | 30% |
| 2026 | 0% |
Sources: 26 U.S.C. § 25D; Inflation Reduction Act of 2022; Pub. L. 119-21 § 70506. The 2033 and 2034 step-down percentages were struck entirely by the 2025 repeal.
The shape of that chart is the story. Before the repeal, the credit was scheduled to run at 30 percent through 2032, then step down to 26 percent in 2033 and 22 percent in 2034. Section 70506 struck the step-down entirely. There was no glide path. The credit went from 30 percent to nothing on a single date.
What “expenditure” means, and why it is the only date that matters
This is where most of the remaining confusion lives, and it decides real money.
The statutory trigger is not the contract date, not the deposit date, and not the date you were approved for financing. Under 26 U.S.C. § 25D(e)(8)(A), an expenditure is treated as made when the original installation of the item is completed.
The IRS restated this in its FAQ on the Public Law 119-21 modifications (opens in a new tab). If installation completed after December 31, 2025, the guidance says the expenditure “will be treated as made after December 31, 2025, which will prevent the taxpayer from claiming the section 25D credit.”
The 2025 Form 5695 instructions use the same rule: costs are “treated as being paid when the original installation of the item is completed.”
I paid a deposit in 2025 but the system finished in 2026. Do I qualify?
No. Paying in 2025 does not preserve the credit if installation finished after the deadline. A November 2025 deposit on a system completed in February 2026 produces no federal credit.
This is worth stating plainly because it was a live risk through the back half of 2025. Anyone who signed on the assumption that a signature or a payment locked the credit, and whose project then slipped past year end, lost it.
The one case where the completion date is not the whole answer
For a newly constructed or reconstructed home, the expenditure is treated as made when your original use of the structure begins, rather than at installation. That timing rule sits in the same statutory subsection and is repeated in the Form 5695 instructions.
What still exists in Arizona
The federal repeal did not touch state law. Arizona’s credit is enacted under state income tax statute and is unaffected.
| Incentive | Status in 2026 | Value | Authority |
|---|---|---|---|
| Federal Residential Clean Energy Credit | Repealed for expenditures after 2025-12-31 | Was 30% | Pub. L. 119-21 § 70506 |
| Arizona Solar Energy Credit | Active, no sunset in the statute | 25% of cost, $1,000 lifetime cap per residence | A.R.S. § 43-1083 |
| Arizona sales tax deduction, equipment | Active | Removes state transaction privilege tax from equipment | A.R.S. § 42-5061(M) |
| Arizona property tax treatment | Active | System adds no assessed value | A.R.S. § 42-11054(C)(2) |
A.R.S. § 43-1083 (opens in a new tab) contains no expiration date. It provides a credit of “twenty-five percent of the cost of the device,” and states that “the maximum credit in a taxable year may not exceed one thousand dollars.” The cap is cumulative across years for the same residence, so it maxes out at $4,000 of system cost. On any normally sized system, the state credit is a flat $1,000.
It is also nonrefundable, with a carryforward of up to five consecutive taxable years, and leases and power purchase agreements are disqualified. The full Arizona incentives picture covers the statutes and the forms in detail.
What a system costs now versus a year ago
Illustrative comparison, with the assumptions stated. A homeowner-purchased $24,000 system, identical hardware, one completed in 2025 and one completed in 2026.
Net cost of an identical $24,000 system, 2025 versus 2026
Gross cost, total tax credits, and net cost after credits, for a homeowner-purchased system completed in each year.
View the numbers as a table
| Category | Completed 2025 ( $) | Completed 2026 ( $) |
|---|---|---|
| Gross cost | 24000 $ | 24000 $ |
| Tax credits | 8200 $ | 1000 $ |
| Net after credits | 15800 $ | 23000 $ |
Illustrative. Assumes a $24,000 homeowner-purchased system, a 30% federal credit of $7,200 in 2025, the $1,000 Arizona credit in both years, and sufficient tax liability in each year to use both credits in full. Not a quote or a market price.
The gap is $7,200, and it is entirely federal. Two households with the same roof, the same hardware, and the same utility can be $7,200 apart on net cost based only on which side of December 31, 2025 the installation finished.
That number assumes enough tax liability to absorb both credits in the year claimed. A household with a $3,000 federal liability in 2025 would not have captured the full $7,200 that year, though the unused portion would carry forward.
What now drives the math instead
With incentives reduced to a flat $1,000, the variables that determine whether an Arizona system pays for itself have shifted, and they are all utility-side.
The export rate. APS pays 6.171 cents per kWh for exported power under Rate Rider RCP, Tranche 2025, effective September 1, 2025 through August 31, 2026. That rate has fallen 10 percent every year since 2017. APS solar buyback rates explained has the full tranche history.
Your self-consumption share. Power used in the house offsets a retail rate several times higher than the export credit. This is now the single largest lever in the calculation, and it is a function of household schedule, not equipment.
Retail rate direction. APS has asked the Arizona Corporation Commission for a 15.99 percent revenue increase. Every approved increase raises the value of a kilowatt-hour you avoid buying.
Before the repeal, a 30 percent credit was large enough to mask a mediocre self-consumption profile. It no longer is. Is solar worth it in Arizona? works the payback arithmetic under the current numbers.
What about leases and power purchase agreements?
Different section of the tax code, different rules, and a shorter runway than most coverage implies.
A leased or third-party-owned system is not the homeowner’s property, so 25D never applied to it. The owner of that equipment is a business claiming a business energy credit, and any benefit reaches the homeowner only indirectly, through whatever pricing the agreement contains.
That business credit is also on a clock. Section 70513 of Public Law 119-21 terminates the clean electricity investment credit under Section 48E for an applicable solar facility placed in service after December 31, 2027, with the amendment applying to facilities whose construction begins after July 4, 2026.
There is a second consequence in Arizona specifically. A leased system does not qualify for the state credit either. The Form 310 instructions state that a device under a lease or power purchase agreement “does not qualify for this credit.” Ownership structure now determines whether the only remaining consumer incentive in Arizona is available at all, which is a bigger deal than it was when a 30 percent federal credit sat behind it.
What else ended at the same time
The solar credit was not the only repeal in the same chapter of Public Law 119-21.
| Credit | Section of Pub. L. 119-21 | Effect |
|---|---|---|
| Residential Clean Energy Credit (25D) | § 70506 | Terminated for expenditures after 2025-12-31 |
| Energy Efficient Home Improvement Credit (25C) | § 70505 | Terminated for property placed in service after 2025-12-31 |
| Clean Vehicle Credit (30D) | § 70502 | Terminated |
If you made qualifying efficiency upgrades in 2025 alongside solar, both credits are claimed on the same form. Part I of Form 5695 handles solar and battery storage; Part II handles insulation, windows, doors, and heat pumps.
The practical takeaway
For a system completed in 2026, the federal credit is not a planning variable. It is zero, and it should be treated as zero in every calculation.
Arizona’s $1,000 credit is real and worth claiming, but it is a flat amount, not a percentage, which means it shrinks as a share of cost on larger systems rather than scaling with them.
Everything else in the return now comes from the utility relationship: what you avoid buying, what you are paid for what you export, and which rate plan you are on.
Federal and state authorities in this article were verified against govinfo.gov, irs.gov, and azleg.gov on August 9, 2026. Tax law changes. Confirm current rules with a tax professional before filing.
Related reading
- Arizona solar incentives and tax credits covers every state incentive that survived, with statute citations.
- IRS Form 5695 filing guide explains how to claim a 2025 credit you have not filed yet, and how carryforward works.
- Arizona solar rebates in 2026 separates real utility rebates from the ones that do not exist.
- Is solar worth it in Arizona? runs payback with the post-2025 numbers.
- Incentives
- Solar Basics
- APS
- Arizona
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