Solar Tax Credit for a 2026 Installation: Why Your 2025 Deposit Doesn't Count.

A homeowner signs a solar contract in November 2025, pays an $8,520 deposit that month, and watches the install date slide from December to February when the racking ships late. The panels go up on February 11, 2026. His federal solar tax credit for that 2026 installation is zero. Not reduced, not prorated, zero, and the $8,520 that left his account in 2025 does nothing to change it.

Section 70506 of the One Big Beautiful Bill Act, signed July 4, 2025, struck the old termination date in §25D(h), which had carried the credit through property placed in service in 2034, and replaced it with a flat cutoff: the credit does not apply with respect to any expenditures made after December 31, 2025. Eight years of runway disappeared in one sentence.

The trap is in the definition. Section 25D(e)(8)(A) says an expenditure is treated as made when the original installation of the item is completed. Not when you sign. Not when you pay. Treasury and the IRS confirmed it in Fact Sheet FS-2025-05 on August 21, 2025: if installation is completed after December 31, 2025, the expenditure is treated as made after that date, and the credit is gone. Some installers spent last fall selling a 2025 prepayment as a way to lock the credit in. It never worked, and the fact sheet said so in plain terms.

The same rule cuts the other way, which matters if your 2025 return is still open. Installation completion is the test, not inspection and not permission to operate. A system the crew finished on December 30, 2025 belongs on the 2025 return even if the city signed off in January and the utility took until March to energize it. Get the completion date from the installer in writing, because that document is the whole case.

Two neighbors bought the same array from the same installer and paid the same deposit in November.

The $2,625 Homeowner A could not use is not lost. Section 25D(c) makes the credit nonrefundable but carries the excess into the following tax year, and P.L. 119-21 left that rule alone. It lands on line 16 of Form 5695 and then on his 2026 return, on a credit that no longer exists for anyone starting fresh. The Congressional Research Service reads it the same way in Insight IN12611: the carryforward rules were not changed, so expenditures made before the end of 2025 can still deliver credit in later years.

Section 25D never covered a pure rental anyway. It reaches a dwelling unit used as a residence by the taxpayer, and §25D(e)(7) allocates the credit away when more than 20% of the use is business use. A landlord's path was always §48E, the clean electricity investment credit, and §48E is still on the books in 2026.

For a small rental or commercial array the §48E credit is 30%. The base rate is 6%, but the one-megawatt exception lets a facility under 1 MW of net output take the full rate without meeting the prevailing wage and apprenticeship requirements, and no rooftop on a duplex is anywhere near that. Depreciation stacks on top. Solar equipment is 5-year MACRS property, §50(c)(3) cuts the basis by half the credit, and the remaining 85% is eligible for 100% bonus depreciation. On a $60,000 array that's an $18,000 credit and $51,000 of first-year depreciation.

The deadline is the part to watch. OBBBA added a termination for wind and solar to §48E: a facility placed in service after December 31, 2027 gets nothing unless construction began within 12 months of the July 4, 2025 enactment. That window closed on July 4, 2026, so a project starting today has to be in service by the end of 2027. If you did start earlier and are relying on it, Notice 2025-42 kept the 5% cost safe harbor only for solar facilities of 1.5 megawatts alternating current or less, which covers most rental rooftops, and pushed everything larger onto the physical work test.

The third-party route still exists for a homeowner, and it's worth pricing rather than worshipping. Under a lease or a power purchase agreement the installer owns the system and claims §48E itself. OBBBA cut leased solar water heating and small wind property out of §48E and left leased solar electric alone. The credit is real. Whether any of it reaches your monthly payment depends on how the installer prices the deal, so ask for the payment schedule with and without the credit and compare it against a cash purchase. I wouldn't sign one on the assumption that 30% is being passed down.

The verdict is short. If you're shopping for residential solar in 2026, price it as a utility bill decision, because no federal credit sits behind it. The energy efficient home improvement credit under §25C went out the same night, terminated by OBBBA §70505 for property placed in service after December 31, 2025, which takes the $3,200 a year for heat pumps, windows, and insulation with it. Both provisions now turn entirely on a date, the same way the car loan interest deduction turns on where a vehicle was assembled, and neither one cares what you intended when you signed.