What Happened to the Solar Tax Credit?
The short version: if you buy solar panels for your home in 2026 with cash or a loan, the federal tax credit is gone. The 30% Residential Clean Energy Credit — which for years let homeowners knock tens of thousands of dollars off the cost of a new solar system — expired for residential purchases on December 31, 2025.
The One Big Beautiful Bill, signed into law in the summer of 2025, ended the credit for homeowners who own their systems. This is the single most important thing to understand before going solar in 2026, and many homeowners are still finding out too late.
But the credit hasn’t completely disappeared. It still exists — just not for you directly if you buy. Here’s what you need to know.
What the 30% Credit Was (and Why It Mattered)
From 2022 through 2025, the Residential Clean Energy Credit allowed homeowners to claim 30% of the total cost of their solar panel system as a direct tax credit — not a deduction, but a dollar-for-dollar reduction in what you owed the IRS.
On a $30,000 system, that was $9,000 back at tax time. It was arguably the single most powerful financial incentive for residential solar in American history, and it drove a massive wave of installations across the South.
It’s gone for buyers. What remains is more complicated.
What Still Qualifies in 2026
The 48E Investment Tax Credit for commercial and business-owned renewable energy remains in effect through 2027. This matters for homeowners because of how solar leases and PPAs work.
When you lease solar panels, the solar company — not you — owns the system. That means they can claim the 48E commercial tax credit. A well-run solar company should pass those savings through to you in the form of lower monthly payments.
| Financing Type | Who Gets the Tax Credit | Benefit to Homeowner |
|---|---|---|
| Cash purchase | Nobody (credit expired) | None |
| Solar loan | Nobody (credit expired) | None |
| Solar lease | Solar company (48E) | Lower monthly payments |
| Power purchase agreement (PPA) | Solar company (48E) | Lower per-kWh rate |
| Prepaid lease | Solar company (48E) | Lower upfront cost |
The key word is “should.” Not every solar company passes the full benefit through to the customer. When getting lease quotes, ask specifically: how does your pricing reflect the 48E tax credit? A company that can’t answer that clearly isn’t being fully transparent.
State Credits: What Still Exists in 2026
South Carolina
South Carolina has the strongest remaining state-level solar incentive in the Southeast: a 25% state income tax credit on the cost of your solar system, capped at $3,500 per year (claimable over multiple years). Combined with a property tax exemption for solar installations, SC remains one of the best states in the South for solar buyers.
Florida
Florida exempts solar installations from both property taxes and sales taxes (no 6% state sales tax on solar equipment). These aren’t as dramatic as the old federal credit, but they’re real money.
North Carolina
NC offers a property tax exemption for solar installations but no state income tax credit. Duke Energy’s net metering program remains in place, which significantly improves ROI.
Georgia
Georgia has no state solar tax credit and no statewide net metering requirement. Georgia Power’s buyback rate is well below retail. This makes Georgia one of the harder states for solar buyers in 2026 — leasing or battery storage tend to make more financial sense here.
Tennessee
No state income tax means no state solar tax credit. TVA’s Green Power Switch program exists but has caps and limited participation.
Alabama
Alabama has no state solar incentives and some of the more restrictive utility buyback policies in the South.
Battery Storage: Does the Tax Credit Still Apply?
This is where things get slightly better for buyers. Standalone battery storage systems — purchased separately from solar panels — may still qualify for incentives in 2026 depending on how they’re installed and used. The rules depend on whether the battery is charged primarily from solar.
If you’re already generating solar power and looking to reduce your dependence on the grid, pairing your system with a home battery like the EcoFlow PowerOcean can significantly improve your ROI — especially in states like Georgia where utility buyback rates are well below retail. Consult a tax professional about your specific situation before assuming you get no credit benefit on battery additions.
The Bottom Line for Southern Homeowners in 2026
- If you’re buying: The federal credit is gone. Price solar accordingly — and compare it against lease options before committing.
- If you’re leasing: The credit still flows through the solar company. Push for transparent pricing that reflects it.
- If you’re in South Carolina: The 25% state credit makes buying significantly more attractive than in neighboring states.
- If you want battery storage: Get a quote now and consult a tax professional — the rules are still being interpreted.
Get Personalized Solar Quotes for Your Home
The best way to understand what solar costs — and what it saves — for your specific home is to get quotes from local installers. Prices, utility rates, and remaining incentives vary significantly by location.
Compare Free Solar Quotes in Your State →
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