If you have been researching solar in Houston and reading about a 30% federal tax credit, there is an important update: the rules changed in 2025. The Residential Clean Energy Credit under IRC §25D — which allowed homeowners to claim 30% of their solar system cost directly on their federal tax return — expired on December 31, 2025 under the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025. Systems installed on or after January 1, 2026 no longer qualify for that direct homeowner credit.

The good news: Houston homeowners in 2026 can still access up to 40% in savings from day one — through a different structure called Third-Party Ownership (TPO). Understanding how the 2026 incentive landscape works is worth a few minutes of reading before making a decision. The complete overview of texas solar incentives 2026 explains how this benefits Houston homeowners specifically.

What Happened to the Federal Solar Tax Credit?

The One Big Beautiful Bill Act (H.R. 1), signed July 4, 2025, amended IRC §25D to terminate the Residential Clean Energy Credit for solar expenditures made after December 31, 2025. This eliminated a credit that had been extended through 2032 under the Inflation Reduction Act of 2022. The OBBBA accelerated that timeline by approximately nine years — with no phase-down period for new installations.

[Source: One Big Beautiful Bill Act (H.R. 1), signed July 4, 2025; IRC §25D as amended by OBBBA; Section 48E Clean Electricity Investment Tax Credit]

How Houston Homeowners Still Access Federal Solar Savings in 2026

While direct homeowner claims under §25D are no longer available for new 2026 installations, federal incentives still exist — they are now accessed through Third-Party Ownership (TPO) arrangements.

Under TPO, a company like Solstice Solar installs and owns the solar system on your home. That company is a commercial entity and qualifies for the Section 48E Clean Electricity Investment Tax Credit (30%). The company factors those savings into the pricing structure for the homeowner — delivering up to 40% savings from day one, with no upfront cost and no tax forms to file.

[Source: Section 48E Clean Electricity Investment Tax Credit (IRC §48E); Solstice Solar, Solar Incentives Page (solsticesolar.com/solar-incentives/); Solar Permit Solutions, ‘Section 25D Expiration: Homeowner Options in 2026,’ February 2026]

Texas State Incentives That Still Apply in 2026

Regardless of the ownership model, Texas state-level incentives remain fully in effect for 2026:

Property Tax Exemption (Texas Tax Code §11.27): The added home value from a solar installation is generally exempt from Texas property taxes under §11.27. This applies whether the system is homeowner-owned or TPO. To claim this exemption, homeowners typically file Form 50-123 with their county appraisal district.

Sales Tax Exemption (Texas Tax Code §151.317): Solar energy devices remain exempt from Texas’s 6.25% state sales tax. This applies at the point of purchase and reduces the effective cost of equipment for the TPO provider, which is generally reflected in the homeowner’s pricing.

[Source: Texas Tax Code §11.27 (Property Tax Exemption); Texas Tax Code §151.317 (Sales Tax Exemption); Texas Comptroller of Public Accounts]

Who TPO Solar Is Best For

TPO arrangements work particularly well for homeowners who want immediate bill savings with no upfront investment, no tax paperwork, and no maintenance responsibility. Under Solstice Solar’s current program, the system is installed, owned, and maintained by Solstice for the duration of the prepaid agreement period — after which ownership transfers to the homeowner.

Homeowners who prefer to own the system outright from day one can still purchase solar without a federal credit in 2026 — and the economics, while different, can still represent a strong long-term investment given rising Texas electricity rates.

FEOC Compliance: What It Means for Your System

For TPO projects claiming the §48E credit in 2026, federal FEOC (Foreign Entity of Concern) restrictions apply to equipment. At least 40% of the manufactured product value must come from non-FEOC sources. This affects which panels, inverters, and batteries can be used in TPO installations — and is one reason why working with an established installer who maintains FEOC-compliant vendor lists matters in 2026.

[Source: OBBBA FEOC Requirements; Section 48E Clean Electricity Investment Tax Credit requirements]

To understand exactly what savings are available for your home under the 2026 TPO model, schedule a free solar consultation texas with a Solstice Solar advisor who can walk through your specific situation.

FAQ

Q: Can I still carry forward a 2025 solar tax credit into 2026? Yes. If your system was installed and operational by December 31, 2025, any unused portion of the §25D credit can be carried forward to future tax years. The OBBBA did not change the carry-forward provision for qualifying 2025 installations.

Q: Is TPO solar the same as a lease? TPO is the broader category. Solar leases (fixed monthly payment) and PPAs (pay-per-kWh) are both TPO structures. Prepaid TPO arrangements — where a single upfront payment covers the agreement period — are also available and often deliver the highest long-term savings.

Q: Does the Texas property tax exemption apply to TPO systems? Yes. Even though the TPO provider owns the system during the agreement period, the property tax exemption under §11.27 generally applies to the added home value from the solar installation. Consult with your county appraisal district to confirm the application process.

Q: When does the §48E TPO pathway expire? The Section 48E credit for TPO solar projects is available for systems placed in service through December 31, 2027, for projects that begin construction by July 4, 2026.