The Inflation Reduction Act and solar in California: what changed, and what is left

What the Inflation Reduction Act did for home solar

The IRS summarized the change in fact sheet FS-2022-40, published in December 2022: the IRA “extended the residential clean energy property credit through 2034, modified the applicable credit percentage rates, and added battery storage technology as an eligible expenditure.” The rate was 30% of qualified expenditures for property placed in service from 2022 through 2032, then 26% in 2033 and 22% in 2034. Batteries needed a capacity of at least 3 kilowatt-hours (IRS, checked September 23, 2026).

The credit was always tied to your own home. The same fact sheet says the property had to be in the United States and used as a residence by the taxpayer, and that landlords could never use it for homes they rent out and do not live in. It was also nonrefundable: it could not exceed the tax you owed, though the unused part could carry forward.

What changed in 2025

Public Law 119-21, enacted July 4, 2025, rewrote that timeline. The IRS now says the residential clean energy credit “will not be allowed for any expenditures made after December 31, 2025.” Timing turns on completion, not payment: an expenditure is treated as made “when the original installation of the item is completed” (IRS OBBB FAQs, checked September 23, 2026). A deposit paid in 2025 does not rescue a system that was switched on in 2026. The same law ended the separate energy efficient home improvement credit for property placed in service after December 31, 2025.

Sources: IRS FS-2022-40 and IRS OBBB FAQs, checked September 23, 2026.

If your system was finished in 2025 or earlier

The credit still applies to a system whose installation was completed by December 31, 2025. The IRS describes it as 30% of the cost of new, qualified clean energy property for your home installed from 2022 through that date, including solar panels and batteries of 3 kilowatt-hours or more. Any amount above your tax bill carries forward to later years. Because the rules on qualifying costs and carryforwards are detailed, confirm your claim with a tax professional.

California’s IRA rebates: heat pumps, not panels

The IRA also sent rebate money to the states. In California, the Energy Commission runs two programs: Home Electrification and Appliance Rebates (HEEHRA) and Home Owner Managing Energy Savings (HOMES). HEEHRA offers single-family homes up to $8,000 toward a heat pump HVAC system for households under 80% of area median income, and up to $4,000 for those between 80% and 150%. Multifamily properties can receive up to $14,000 per unit for heat pumps, electric cooking and drying equipment, and electrical panel upgrades and wiring. Solar panels are not on the list (CEC, checked September 23, 2026).

Availability is the bigger problem. As of February 24, 2026, the CEC says HEEHRA rebates for single-family home retrofits are “fully reserved statewide,” multifamily rebates are still being processed and HEEHRA Phase II is not available. Check the CEC page for the current status before you plan around one.

Leases and PPAs after the credit ended

The residential credit was figured on what you paid for qualified property installed at your home. With a lease or a power purchase agreement the solar company owns the equipment, and your payments are for the use of the system or its power. Whether a leasing company can still claim a separate business credit on a new lease, and whether that shows up in your price, is outside what this page could confirm. The practical step is simple: if a 2026 proposal shows a price “after tax credit,” ask which credit, who claims it, and what the price is without it. The differences between owning and leasing are laid out in the comparison of cash, loan, lease and PPA.

What still lowers the cost of solar in California in 2026

• Property tax exclusion. The Board of Equalization says a qualifying active solar system “will not result in either an increase or a decrease in the assessment of the existing property.” The statute is scheduled to sunset on January 1, 2027 (BOE, checked September 23, 2026).
• Low-income programs. DAC-SASH provides no-cost rooftop systems to income-qualified homeowners in disadvantaged communities, and SGIP offers incentives to low-income customers who pair solar with storage (CPUC, checked September 23, 2026).
• A lower installed price. Without a federal credit, the quote itself matters more. Compare at least three itemized bids using the guide to choosing a California solar company.

The full picture of what is left, including what to do when a 2026 quote still counts the credit, is in the overview of California solar incentives. For the cost side, see the statewide guide to solar panel cost; for batteries, the SGIP battery rebate status.