Federal Solar Tax Credit Ended: What DMV Homeowners & Businesses Need to Know in 2026

The Federal Solar Tax Credit Has Ended for Homeowners — Now What?

On July 4, 2025, Congress signed the One Big Beautiful Bill Act (OBBBA), which eliminated the 30% residential solar Investment Tax Credit (Section 25D) effective January 1, 2026. For homeowners, this means there is no longer a federal tax credit for purchasing and installing solar panels or home battery storage systems.

But this does not mean solar is no longer worth it. Far from it. Here is what has changed, what still works in your favor, and why 2026 remains a smart year to go solar in the DMV.

What Exactly Was Eliminated?

The Residential Clean Energy Credit (Section 25D) allowed homeowners who purchased solar systems outright (cash or loan) to claim 30% of the total cost as a dollar-for-dollar tax credit. This credit — which covered panels, inverters, labor, batteries, and permitting — is now gone for any system installed after December 31, 2025.

Key details:

• Systems fully installed by December 31, 2025 still qualify for the full 30% credit
• Unused credits from 2025 installations can still be carried forward to future tax years
• Simply paying for a system in 2025 is not enough — installation must be complete

What About Leased Solar and PPAs?

There is a significant silver lining. The commercial/utility-scale ITC (Section 48E) was not fully eliminated — it was given a phase-out timeline. Solar companies that own the panels (as in lease or PPA arrangements) can still claim credits on systems where construction begins before July 5, 2026.

This means leased solar systems and Power Purchase Agreements (PPAs) may still carry federal credit benefits, passed through to homeowners as lower monthly payments. If you are considering solar in 2026, a lease or PPA structure may offer better economics than in previous years.

Commercial Solar: A Narrowing Window

For businesses, the Section 48E ITC at 30% is still available but with strict deadlines:

Construction Start Date Credit Available Must Be In Service By Before July 5, 2026 30% ITC December 31, 2030 July 5, 2026 or later 30% ITC December 31, 2027

The OBBBA also reinstated 100% first-year bonus depreciation for commercial solar purchased between January 2025 and the 2029 tax year. Combined with the 30% ITC, this can reduce effective system costs by 50–60% in the first year for qualifying businesses.

Critical deadline for business owners: Begin construction before July 5, 2026 to lock in the most favorable terms.

State & Local Incentives Are Now More Important Than Ever

With the federal residential credit gone, state-level programs carry the full weight of making solar affordable. The good news: the DMV has some of the strongest state incentives in the country.

Maryland

• SRECs (Solar Renewable Energy Certificates): Earn $55–$70 per SREC for every 1,000 kWh your system produces. A typical 8 kW residential system generates 8–10 SRECs annually, worth $440–$700 per year in ongoing income.
• Certified SRECs (Brighter Tomorrow Act): Systems on rooftops or parking canopies installed before January 2028 earn the higher $70 rate.
• Property Tax Exemption: 100% exemption — your home value increase from solar is not taxed.
• Sales Tax Exemption: 6% sales tax waived on solar equipment and installation.
• Energy Storage Tax Credit: 30% state credit up to $5,000 for battery storage systems.
• Maryland Solar Access Program (MSAP): Up to $7,500 in grants ($750/kW) for low and moderate-income households.

Total Maryland state savings: $9,000–$12,500 on a typical residential system — even without the federal credit.

Washington DC

• SRECs at ~$400–$415 each: DC has the most valuable SRECs in the nation thanks to its aggressive 100% renewable energy mandate by 2032. An 8 kW system can earn $3,200–$4,150 annually in SREC income alone.
• Property Tax Exemption: Solar equipment value excluded from property assessments.
• Net Metering: Full retail rate credit for excess energy sent to the grid.
• Solar for All Program: Free solar installations for qualifying low-income residents (up to $10,000 value).

Virginia

• Property Tax Exemption: Up to 80% of solar equipment assessed value exempt from property taxes.
• Net Metering: Available for systems up to 25 kW (residential) or 1 MW (commercial).

The Bottom Line: Solar Still Makes Financial Sense

Even without the federal credit, solar remains a strong investment in the DMV for three reasons:

1. Electricity costs keep rising — Pepco, BGE, and Dominion rates have increased 3–5% annually. Solar locks in your energy cost at today's prices for 25+ years.
2. State incentives fill the gap — Maryland and DC incentives alone can offset $9,000–$15,000+ of system costs.
3. Energy independence — With grid outages increasing 78% over the past decade, owning your power source is increasingly valuable.

A typical 8 kW residential system in Maryland now pays back in 7–10 years through state incentives, SREC income, and electricity savings. In DC, payback can be as fast as 4–6 years thanks to high SREC values.

What Should You Do Now?

If you missed the 2025 federal credit deadline, don't wait for Congress to act. State incentives, rising electricity rates, and panel price reductions mean the economics still work — and programs like the Brighter Tomorrow Act have their own expiration dates.

Get a free solar quote from Aduu Solar and we will show you exactly what incentives you qualify for and what your actual payback timeline looks like in 2026.

This article reflects policy as of February 2026. Tax and incentive programs change — consult a qualified tax professional for advice on your specific situation.