*Tax Credit Update*
The Federal Solar Tax Credit Changed —
Here's What California Homeowners Need to Know
The 30% federal solar tax credit for homeowner-purchased systems expired December 31, 2025 — nearly a decade early — due to the One Big Beautiful Bill Act (OBBBA). If you're considering solar in 2026, the landscape has shifted. But California homeowners still have meaningful options, and solar still makes strong financial sense. Here's the full picture.
If you've been thinking about going solar, you've probably heard about the federal tax credit that used to knock 30% off the cost of your system. For a typical installation here on the Central Coast, that was often $8,000 to $12,000 back in your pocket at tax time.
That credit is no longer available for homeowners who purchase their systems outright with cash or a loan. But before you put solar on hold, it's worth understanding exactly what changed, what's still on the table, and why going solar in California still pencils out for most households.
The One Big Beautiful Bill Act, signed July 4, 2025, overhauled the clean energy incentives set up under the 2022 Inflation Reduction Act. The biggest hit for homeowners: the early termination of Section 25D — the Residential Clean Energy Credit — which had been expected to hold at 30% all the way through 2032.
The new law ended it entirely for expenditures made after December 31, 2025. No phase-down, no partial credit — a hard stop nearly a decade ahead of schedule.
| System Type | Previous Credit | Status | Deadline |
|---|---|---|---|
| Homeowner-purchased solar (cash or loan) | 30% ITC through 2032 | Expired | Dec 31, 2025 |
| Solar leases & PPAs (third-party owned) | 30% ITC | Ending '27 | Dec 31, 2027 |
| Standalone battery storage (homeowner-owned) | 30% ITC | Expired | Dec 31, 2025 |
| Battery storage (third-party owned) | 30% ITC | Still Active | Through 2032 |
| Commercial solar (businesses, schools, churches) | 30% ITC | Ending '27 | Dec 31, 2027 |
Yes — and here's the honest reasoning. California's solar economics were never built solely on the federal credit. Our state has some of the highest electricity rates in the country, strong net metering policies, and more sunshine than almost anywhere else in the US. Those fundamentals are unchanged.
Without the federal credit, payback periods lengthen somewhat — but rising PG&E rates work in the opposite direction. For most Central Coast homeowners, solar still pays for itself well within the system's 25-year lifespan.
— Sandbar Solar & Electric TeamPG&E rates have continued to climb, and that trend isn't reversing. Every kilowatt-hour your panels generate is one you're not buying from the grid at an ever-increasing price.
California Net Energy Metering (NEM 3.0)
You still earn bill credits for excess power sent back to the grid. Pairing solar with battery storage lets you maximize self-consumption and cut your grid dependence significantly.
Self-Generation Incentive Program (SGIP)
California's SGIP provides rebates for battery storage systems, particularly for customers in high fire-threat areas or those on medical baseline rates. Still funded and available.
California Property Tax Exclusion
Solar installations that increase your home's value by $20,000–$30,000 won't trigger higher property taxes. That's a meaningful, ongoing benefit.
Leases & PPAs (Federal Credits Still Apply Through 2027)
Third-party owned systems still qualify for federal credits through 2027 — and installers typically pass those savings on through lower monthly payments.
Increased Home Value
Homes with solar sell faster and for more. In Santa Cruz and Monterey, a solar-plus-storage system is an increasingly expected asset among buyers.
The expiration of the homeowner credit makes this decision more nuanced. Here's the straightforward breakdown:
Still offers the best long-term return. You own the system, keep all electricity savings, and benefit fully from home value increase. The payback period is longer without the 30% credit, but you're building equity in an asset that performs for 25+ years.
Can make sense if you want low or zero upfront cost and predictable monthly payments. The tradeoff: you don't own the system, which can complicate home sales or refinancing. At Sandbar, we walk you through both options with real numbers — no pressure in either direction.
Unfortunately, no. The 30% residential credit (Section 25D) ended on December 31, 2025 with no transition period. State incentives through California remain available, and your long-term electricity savings are unchanged.
If your system was installed and expenses incurred before December 31, 2025, you were eligible regardless of whether you paid cash or used a loan. Expenses after that date no longer qualify for the residential credit.
Absolutely — more so now. Under NEM 3.0, battery storage significantly improves the financial case for solar. SGIP rebates are still available in California, and third-party-owned storage still qualifies for federal credits through 2032.
Yes. We work with homeowners on both purchased and third-party financed systems and will model both scenarios with real numbers for your household.
Every home is different. The best way to find out is a free custom quote from our team — we run real numbers, not ballpark estimates.
Yes — headquartered at 2656 Mission St., Santa Cruz. No national call centers, no franchises — just local experts who stand behind every install.