Federal Tax Credit 2026: How to claim 30% back on your home solar installation under the IRA extension.

The Federal Tax Credit 2026 remains one of the most significant financial incentives for U.S. homeowners installing rooftop solar systems in 2026.

Extended under the Inflation Reduction Act (IRA), the federal Residential Clean Energy Credit allows eligible taxpayers to claim 30% of qualified solar installation costs against their federal income tax liability, provided systems meet Internal Revenue Service requirements.

Federal Tax Credit 2026

Key Fact	Detail
Credit Value	30% of eligible solar installation costs
Applicable Years	2022–2032 at full 30% rate
Filing Form	IRS Form 5695
Refund Type	Non-refundable, with carryforward allowed

Understanding the Federal Tax Credit 2026 in 2026

The Federal Tax Credit 2026 refers to the 30% Residential Clean Energy Credit available for qualifying home solar installations. Under Section 25D of the Internal Revenue Code, as amended by the IRA, homeowners can deduct 30% of the total cost of installing solar photovoltaic (PV) systems from their federal tax bill.

According to the Internal Revenue Service (IRS), eligible expenses include solar panels, inverters, wiring, mounting hardware, labor, permitting, and inspection costs. The IRA, signed into law in August 2022, restored the credit to 30% and extended it through 2032.

It is scheduled to decrease to 26% in 2033 and 22% in 2034 unless Congress acts again. “This credit significantly reduces upfront costs for homeowners transitioning to clean energy,” the U.S. Department of Energy (DOE) noted in guidance issued after the IRA’s passage.

Who Qualifies for the 30% Credit?

Eligible Homeowners

To claim the Federal Tax Credit 2026 in 2026, homeowners must:

• Own the solar energy system (leased systems do not qualify).
• Install the system on a primary or secondary residence located in the United States.
• Place the system into service during the tax year claimed.

According to IRS guidance, the system must be operational and capable of generating electricity. Signing a contract or making a deposit does not qualify unless installation is complete.

What Counts as Qualified Expenses?

The IRS allows taxpayers to include:

• Solar photovoltaic panels
• Solar battery storage systems (3 kWh capacity or greater, added in 2023 under IRA rules)
• Installation labor
• Electrical upgrades directly related to solar installation

Claim the Federal Tax Credit in 2026

Gather Documentation

Homeowners should retain:

• Itemized invoices
• Proof of payment
• Interconnection approval documents
• Manufacturer certifications

Tax professionals emphasize keeping these records in case of IRS review.

Complete IRS Form 5695

Taxpayers must file IRS Form 5695, titled “Residential Energy Credits,” along with Form 1040.

On Form 5695:

• Enter total qualified solar costs.
• Calculate 30% of those costs.
• Transfer the credit amount to Schedule 3 of Form 1040.

The IRS provides detailed instructions on its website to guide filers through each line.

Apply Credit to Tax Liability

The credit directly reduces federal income taxes owed. It is non-refundable, meaning it cannot create a refund beyond tax liability. However, unused portions may be carried forward to future tax years.

Example Calculation

If a homeowner installs a solar system costing $24,000 in 2026:

• 30% credit equals $7,200.
• If federal tax liability is $5,000, the taxpayer can apply $5,000 in 2026.
• The remaining $2,200 carries forward.

According to IRS instructions, there is no income cap to qualify.

Solar and battery project proposed for central northern Victoria gets EPBC all-clear just four months after joining the queue.. https://t.co/ass7dh9cBX

— Renew Economy (@renew_economy) February 16, 2026

Economic and Environmental Context

The IRA represents the largest federal investment in climate policy in U.S. history. According to analysis by the Congressional Budget Office and energy researchers at Princeton University, residential solar adoption is expected to grow substantially under the extended credit.

The Environmental Protection Agency (EPA) has noted that distributed solar systems reduce greenhouse gas emissions and relieve pressure on centralized power generation. Energy economists say the 30% credit has contributed to steady growth in rooftop solar installations nationwide.

“Tax credits play a critical role in accelerating consumer adoption of distributed clean energy technologies,” said an energy policy analyst at a major U.S. research university.

Differences Between Residential and Commercial Credits

The Federal Tax Credit 2026 applies specifically to residential taxpayers under Section 25D. Commercial systems fall under separate provisions, including the Investment Tax Credit (ITC) under Section 48.

Unlike commercial credits, residential systems do not require prevailing wage or apprenticeship compliance.

State Incentives and Net Metering

Federal incentives often work alongside state programs. Many states provide additional rebates or performance-based incentives. Net metering policies, regulated at the state level, allow homeowners to receive credits for excess electricity exported to the grid.

State rules vary widely. Homeowners should consult their state public utility commission or energy office for details.

Oversight and Compliance

Tax experts caution homeowners to avoid overstating eligible expenses. Only costs directly associated with solar installation qualify. The IRS has increased scrutiny of energy-related credits in recent years. Accurate documentation remains essential.

The Federal Tax Credit 2026 remains intact through 2032 under current law. Analysts expect continued strong residential solar growth through the decade. Whether Congress modifies or extends the credit beyond its scheduled phase-down remains uncertain. For now, homeowners installing solar in 2026 can still claim 30% under the IRA extension, provided they meet IRS eligibility criteria.

FAQs