Is there a federal solar tax credit in 2026?

No, not for a homeowner who buys a system. The 30 percent Residential Clean Energy Credit under section 25D ended for expenditures made after December 31, 2025, under the One Big Beautiful Bill Act. Systems completed by that date can still claim it on the 2025 return.

Can I still get the credit by leasing solar panels?

Not personally. The company that owns a leased or power-purchase system may claim the separate business credit under section 48E, and some of that value can reach you as a lower monthly payment. You never claim a federal credit on your own return for a leased system.

Which states still help with solar costs?

New York offers a 25 percent state tax credit up to $5,000. New Jersey pays $77 per megawatt-hour in production incentives over 15 years. California offers net billing at about 8 cents for exported power, battery rebates, and a property tax exclusion. Programs vary widely and should be confirmed in writing.

Home › Solar Panel Payback Calculator › Are Solar Panels Worth It Without the Tax Credit?

The solar ledger · Table No. 40

Are Solar Panels Worth It Without the Tax Credit?

The credit was worth $6,476 and 4.11 years of payback on the default system. Solar still pays where the rate, the sun, or a state program carries the math.

Filed October 28, 2026 · figures checked against 2026 sources

What ended, and exactly when

For most of two decades, a homeowner who bought solar panels could claim 30 percent of the cost as a federal tax credit. The Residential Clean Energy Credit, section 25D of the tax code, covered the system with no dollar cap: a $30,000 system meant a $9,000 credit, a $50,000 system a $15,000 credit. The Inflation Reduction Act had set the 30 percent rate to run through 2032, stepping down to 26 percent in 2033 and 22 percent in 2034. That schedule is gone. The One Big Beautiful Bill Act, Public Law 119-21, signed July 4, 2025, terminated the credit for expenditures made after December 31, 2025. The cutoff is a cliff, not a phase-down. There is no grandfathering and no begin-construction safe harbor for section 25D. The credit went from 30 percent to zero on January 1, 2026.

What counts is when installation was completed, not when the contract was signed or the deposit was paid. The IRS confirmed this in guidance published in August 2025: an expenditure under section 25D is treated as made when the original installation of the item is completed, so a system finished in 2026 does not qualify even if it was paid for in 2025. The distinction matters, because the last months of 2025 saw a rush of installations, and some of them finished on the wrong side of the line. A system completed by December 31, 2025 can still claim the credit on the 2025 return, filed on Form 5695, and any unused part carries forward, since the credit is nonrefundable and can only reduce tax owed. A system completed in 2026 cannot, and an installer who suggests otherwise is selling a 2025 product in 2026.

The same law ended the credit for standalone home batteries of 3 kilowatt-hours or more, which had qualified under section 25D from 2023. In 2026, a homeowner-owned battery gets no federal credit. Its value has to come from backup power, time-of-use savings, self-consumption under net billing, and whatever state or utility program applies. California's Self-Generation Incentive Program, for example, still offers battery rebates, with funding that varies. The battery question is now a state and utility question, not a federal one, and it should be priced that way.

What the credit was worth, in payback years

At the defaults in this calculator, the credit was worth $6,476: 30 percent of the $21,588 system cost. With the credit, the net cost would have been $15,112, the payback 8.01 years, and the 25-year net $41,285. Without it, the net cost is the full $21,588, the payback is 12.12 years, and the 25-year net is $34,809. The credit's end added 4.11 years to the payback and removed $6,476 from the 25-year return. That is the honest size of the change, and it is also the size of the trap in comparing old and new advice. Any article, calculator, or salesperson quote that still shows an 8-year payback for this system is showing a 2025 payback, with a credit that no longer exists, and the 4-year difference is not a rounding difference. It is the whole subsidy, silently included.

EnergySage's marketplace data tell the same story from the market's side. The median quoted price rose 3.2 percent in the first half of 2026, from $2.49 to $2.57 a watt, and the average estimated payback lengthened from 10.1 to 10.9 years, with a methodology change contributing to the rise alongside the credit's end. Installers adjusted to a world where the customer pays the full price and the Treasury pays nothing. Some of that adjustment shows up as higher quoted prices. Some shows up as a shift toward third-party ownership, where the federal support still exists in a different form, claimed by a different taxpayer.

What is left: leases, state programs, and the business credit

The federal support did not vanish entirely. It moved. A separate credit, section 48E, still exists for the business that owns a solar system, and in a residential lease or power purchase agreement, that business is the finance company, not the homeowner. The company can claim the credit for systems placed in service by December 31, 2027, or where construction began by July 4, 2026, and some of that value can be passed through as a lower monthly payment. The homeowner never sees a credit on a tax return, and never owns the system, but may pay less per month than under a purchase. The comparison that matters for a lease is the payment against the bill saving, over the full term, including any escalator. A lease payment that rises 3 percent a year will eventually eat the saving it was sold on, and the contract should be read for that clause before anything else.

State and utility programs are the other remaining support, and they vary enormously. New York offers a state tax credit of 25 percent of the cost, up to $5,000, plus sales and property tax exemptions and net metering, and the state credit reaches lease and power purchase customers directly on agreements of at least 10 years. New Jersey pays production incentives, $77 per megawatt-hour for systems registered after July 26, 2026, over 15 years, which rewards making power rather than buying equipment. California has no state income tax credit for solar, but it has net billing that pays about 8 cents a kilowatt-hour for exported power, battery rebates, a property tax exclusion, and programs for low-income households and renters. These are not footnotes. In New York, a $5,000 state credit on the default system cuts the net cost to $16,588 and the payback to 8.72 years, nearly restoring the federal credit's effect. In a state with no program at all, the payback is the full 12.12 years, and the household should know that before it signs.

Property tax treatment deserves its own check. Many states exclude the added value of a solar system from property tax assessment, which means the system does not raise the annual tax bill. Where no exclusion exists, the tax rise is a real annual cost that the payback figure never sees. The same applies to sales tax on the equipment, which some states exempt and some do not. Both are state-by-state, both are confirmable in writing, and both belong in the quote comparison alongside the price per watt.

The new insight

The credit's end did not make solar uneconomic. It made solar local. With the credit, the national payback for the default system was 8.01 years almost regardless of address, because $6,476 of federal money flattened the differences. Without it, the payback is 4.52 years in Hawaii and 18.61 years in Washington, and the state incentive, the export rule, and the property tax exclusion decide as much as the panels do. The question to ask an installer in 2026 is no longer what the federal government pays. It is what your state, your utility, and your roof pay.

Who should still buy, and who should wait

Solar still pays, without the credit, where the rate is high, the sun is strong, the export credit is fair, or a state program fills part of the gap. California at 7.11 years under net billing, Hawaii at 4.52, New York at 7.85, and Arizona at 10.41 on sun alone all clear the bar with room to spare, and the 25-year nets, $74,752 to $133,944 in the calculator's state table, are the reason the bar is worth clearing. The case is strongest of all for households whose bill is already large, because a large bill means a large amount of retail-priced power to displace, and the system that displaces it is priced per watt, not per bill. A household paying $300 a month does not need a different system from a household paying $180. It needs the same system working on a bigger bill, which is why the calculator's bill input changes the suggested size rather than the payback.

Waiting is the better answer in four cases. First, a household that will move before the payback year arrives, unless the local market demonstrably pays for solar at resale. Second, a household in a low-rate, low-sun state with no state program, where the payback runs past 15 years and the 25-year net is thin. Third, a household whose roof needs replacing, where the right order is roof first, panels second. Fourth, a household that would have to finance at a high rate with dealer fees, where the loan can cost more than the bill saving it was meant to create. In each case the honest advice is not that solar is bad. It is that this house, this year, is not the house solar pays for, and the money is better kept until one of the four conditions changes.

For everyone else, the decision rule is simple. Price the system at its gross cost, with no federal credit anywhere in the quote. Confirm the state and utility incentives in writing. Run the calculator with the quoted size, price, rate, sun, and export credit. If the payback is inside the time the household will stay, and the 25-year net is positive after the inverter replacement, solar still works in 2026. It works more slowly than it did in 2025, by 4.11 years at the defaults, and it works unevenly across the country. But it works on arithmetic now, not on subsidy, and arithmetic is a more durable reason to buy than a tax credit ever was.