Solar After the Federal Tax Credit: What's Left in 2026

This guide is for homeowners weighing solar in 2026, now that the 30% federal tax credit for homeowner-owned systems has ended. It explains exactly what changed, what support is still out there, how leases and power purchase agreements fit in, and how to tell whether solar can still pay off for your home.

What changed

The One Big Beautiful Bill Act, signed on July 4, 2025, brought forward the end of two federal credits that many homeowners relied on:

• Residential Clean Energy Credit (Section 25D). This was a 30% credit for solar panels, home batteries and some other equipment you owned. The IRS says it is not allowed for expenditures made after December 31, 2025, and that an expenditure counts as made when installation is completed. A system paid for in 2025 but finished in 2026 does not qualify.
• Energy Efficient Home Improvement Credit (Section 25C). This offered up to $2,000 a year for qualifying heat pumps and other upgrades. It is not allowed for property placed in service after December 31, 2025.

The practical effect is simple: if you buy a solar system with cash or a loan and it is installed in 2026, there is no federal tax credit to subtract from the price. On a typical system that is a difference of several thousand dollars, so the economics have to stand up on their own.

If you installed in 2025 or earlier

If your installation was completed by December 31, 2025, you can still claim the 25D credit for that tax year on IRS Form 5695. If the credit was larger than your tax bill, the unused amount can generally be carried forward to later years. A Congressional Research Service analysis in September 2025 noted that the 2025 law did not change the carryforward rules. Check the details with a tax professional, since your situation may differ.

What support is still available

Federal support for homeowner-owned systems has gone, but state, local and utility programs have not, and they vary widely. The best single place to look is DSIRE (dsireusa.org), a database of incentives by state, along with your state energy office and your utility's website.

State income tax credits

A few states offer their own credit. New York, for example, offers a state credit of 25% of qualifying solar equipment costs, up to $5,000, and its rules also cover some leases and power purchase agreements. Amounts, caps and eligibility differ by state and can change, so check before you count on one.

Rebates and performance payments

Some states and utilities pay an upfront rebate, or pay you for the power your system produces over a number of years. In a few states you can sell solar renewable energy credits (SRECs) or similar certificates. These can make a real difference, but programs often have limited budgets and waiting lists.

Property and sales tax exemptions

Many states exempt the added value of a solar system from property tax, and some exempt solar equipment from sales tax. These do not cut the price as dramatically as the federal credit did, but they help.

Low-income and community programs

Some states run solar programs for income-qualified households, and community solar (subscribing to a share of a larger local array) is available in a number of states for people who rent or have unsuitable roofs.

Leases and power purchase agreements

With a lease or a power purchase agreement (PPA), a company owns the panels on your roof. You pay a monthly lease payment, or a set price for each kWh the system produces. Because the company owns the equipment, it falls under business tax credits rather than the homeowner credit that ended.

Those business credits have their own, tighter deadlines for solar. Under the 2025 law, solar projects that began construction after July 4, 2026 must be placed in service by the end of 2027 to qualify, and new sourcing rules limit components from certain foreign suppliers. Credits for battery storage run for longer, with a phase-down for projects starting construction after 2033. How any of this applies to a given home system depends on details the company controls, and whether any of the benefit reaches you as a lower price is entirely up to the company.

That makes leases and PPAs more prominent in 2026, and they can be a reasonable choice if you cannot or do not want to pay upfront. But they come with trade-offs:

• You do not own the system, and you will not get any incentives tied to ownership.
• Contracts often run 20 to 25 years, and many include an annual escalator that raises your price each year.
• Selling your home can be more complicated, because the buyer must take over the contract or you must buy it out.
• You need to know who pays to remove and reinstall panels if your roof needs work.

Ask every lease or PPA provider: what is my price in year one and in the final year, what is the total I will pay over the contract, and is any tax credit you receive reflected in my price?

Does solar still pay in 2026?

For some homes, yes. For others, not any more, or not yet. Four things decide it:

1. Your electricity price. The higher it is, the more each solar kWh is worth. The EIA's US average residential price for January to July 2026 was 18.19 cents per kWh, but state averages ranged from around 12 cents in North Dakota to more than 33 cents in California and over 46 cents in Hawaii.
2. How your utility credits exports. Under full net metering, a kWh you export is worth roughly what you pay to import one. Many states and utilities have moved to net billing, which credits exports at a lower rate. California's Net Billing Tariff, in place since 2023, is the best-known example.
3. Your sun and roof. Orientation, tilt, shade and local climate decide how much a system produces.
4. The installed price and how you pay. Lawrence Berkeley National Laboratory found that the median price of homeowner-owned residential systems fell to around $3.60 per watt in 2025, before incentives, with large differences between installers. Equipment costs in 2026 have faced upward pressure from tariffs, so get current quotes rather than relying on last year's numbers.

Batteries in 2026

Home batteries have become far more common: Lawrence Berkeley National Laboratory found that 37% of new residential solar systems in 2025 were paired with storage, up from 25% the year before. A battery can make sense when your utility pays little for exports, when you are on a time-of-use rate with expensive evenings, or when you want backup power during outages. But it adds substantially to the price, and the federal credit for homeowner-owned batteries has ended along with the solar credit. Treat backup power as a comfort and resilience purchase first, and check whether any state or utility program helps pay for it.

How to improve the numbers

• Get several quotes. Prices for similar systems vary widely between installers. See How to Compare Solar Quotes Like for Like.
• Size to your use. Under net billing, a system sized to cover your daytime use often earns a better return than one sized to export a lot.
• Cut waste first. Efficiency improvements can reduce the size of system you need.
• Pay as little interest as you can. Cash or a low-rate loan beats an expensive one. Watch for loans with added dealer fees.
• Shift use into sunny hours where your rate plan rewards it, such as running laundry or charging an electric vehicle at midday.
• Check every local incentive before you sign, as some must be reserved in advance.

When it may be better to wait or skip solar

• Your roof needs replacing soon. Do the roof first.
• Your payback is longer than about 20 years even on good assumptions.
• Your utility is in the middle of changing its solar export rules and the outcome is unclear.
• You plan to move within a few years and do not want a lease or loan to complicate the sale.
• The only way to pay is an expensive loan.

Next steps

• Solar Cost Calculator: run the numbers without the federal credit.
• Find your state: local incentives, prices and export rules.
• The Solar Buyer's Checklist
• Request free quotes: we reply within 24 hours.

Reviewed October 2026. General information, not financial, tax or legal advice; results are individual. How we research our guides.