Solar in 2026: What Changed After the Tax Credits Expired

Solar in 2026: What Actually Changed After the Tax Credits Expired

If you've been putting off going solar because you figured the federal tax credit would always be there — surprise. The 25D residential clean energy credit expired on December 31, 2025, and the solar industry is having its "now what?" moment.

But here's the thing: solar didn't stop making financial sense overnight. The math just changed. And depending on where you live, what you pay for electricity, and how you structure the deal, solar in 2026 might still be one of the smartest things you can do with your roof.

Let's break down what's gone, what's still on the table, and whether the numbers still work without Uncle Sam's help.

What Tax Credits Actually Expired

The Big One: Section 25D (Residential Clean Energy Credit)

The Section 25D credit was the backbone of residential solar adoption for over a decade. It covered 30% of the total installed cost of a home solar system — panels, inverters, battery storage, labor, everything. On a $30,000 system, that was $9,000 back on your federal taxes.

As of January 1, 2026, it's gone. The One Big Beautiful Bill Act (OBBB) repealed it as part of a broader rollback of Inflation Reduction Act energy provisions. There's no step-down, no phase-out. It simply ended.

For homeowners who installed solar in 2025 but haven't filed taxes yet: you're fine. The credit applies based on when the system was placed in service, not when you file.

Section 30C: EV Charger Credit (Also Gone)

The $1,000 credit for home EV charger installation (Section 30C) ended in 2025 alongside the broader IRA rollback. If you install a Level 2 charger today, the full $500–$2,200 installation cost is on you. State and utility programs are now the only place to look for help on EV charger costs.

Section 25C: Energy Efficient Home Improvement Credit (Also Expired)

The 25C credit for energy-efficient upgrades — windows, doors, insulation, heat pumps, and water heaters — was repealed alongside 25D. Through 2025, homeowners could claim up to $3,200 per year for qualifying improvements ($2,000 for heat pumps and heat pump water heaters; $1,200 for windows, doors, insulation, and panel upgrades). Starting in 2026, that federal incentive is no longer available.

The practical takeaway: federal credits are not part of the math anymore for solar, batteries, EV chargers, heat pumps, or weatherization. Efficiency upgrades still pay back through lower energy bills — they just don't come with a check from the IRS.

What Solar Actually Costs Now

Let's talk real numbers. In Q1 2026, the installed cost of residential solar sits between $2.50 and $3.50 per watt, depending on your market, roof complexity, and equipment choices.

For a typical home, here's what that translates to:

• Small system (5 kW): $12,500–$17,500
• Average system (8 kW): $20,000–$28,000
• Large system (12 kW): $30,000–$42,000
• Solar + battery (8 kW + 13.5 kWh): $33,000–$45,000

Without the 30% federal credit, that $28,000 average system costs $28,000 — not the $19,600 it would have been last year. That's an $8,400 difference, and it's making people pause.

But panel prices themselves have dropped roughly 15% over the past two years thanks to global oversupply and manufacturing competition. The credit going away was partially offset by hardware getting cheaper. Partially.

Is Solar Still Worth It Without the ITC?

This is the question everyone's asking, and the honest answer is: it depends on your electricity rate.

The Math That Still Works

If you're paying $0.15/kWh or more for electricity (and that includes most of California, the Northeast, and Hawaii), solar still pencils out. Here's a simplified example:

• System cost: $26,000 (8 kW system, no credit)
• Annual production: ~10,500 kWh
• Electricity rate: $0.22/kWh
• Annual savings: ~$2,310
• Simple payback: ~11.2 years
• 25-year net savings: ~$31,750 (accounting for 2% annual rate increases)

That's still a solid return — roughly 8–9% annualized, which beats most fixed-income investments. The payback period is longer than the 7–8 years it was with the credit, but the system still prints money for 15+ years after it pays for itself.

The Math That Doesn't Work (Yet)

If your electricity rate is below $0.10/kWh — common in parts of the Southeast, Midwest, and Pacific Northwest — the payback stretches to 15+ years, and the ROI gets thin. In those markets, solar was always a tougher sell, and losing the credit pushes it further out.

The Wild Card: Net Metering

Your payback calculation is only as good as your net metering policy. States where utilities buy back excess solar at full retail rate (like New Jersey) make the math much better than states that pay wholesale or have shifted to time-of-use billing (like California's NEM 3.0).

Check your utility's current net metering policy before running the numbers. It matters more than the panel brand.

Alternatives: Leases, PPAs, and What's Left

Solar Leases and Power Purchase Agreements (PPAs)

With the ITC gone for homeowners, solar leases and PPAs are having a moment. Here's why: commercial solar installers can still access tax benefits through Section 48E (the clean electricity investment credit for businesses), which means they can offer lower lease rates than you'd expect.

A typical PPA in 2026 might offer:

• Rate: $0.12–$0.18/kWh (locked for 20–25 years)
• Escalator: 1–2.9% annually
• $0 down with no maintenance responsibility

The catch? You don't own the system, you don't build equity in it, and the escalator can eat into savings over time. But if your alternative is paying $0.25/kWh to the utility with 4% annual increases, a PPA at $0.14/kWh with a 2% escalator is still a win.

Solar Loans

Solar loan rates have crept up with broader interest rate trends. Expect 5.5%–8.5% APR for a 15–25 year solar loan in 2026. Without the tax credit to offset the cost, monthly loan payments are higher, and in some cases the monthly payment exceeds the monthly electricity savings for the first few years.

Run the numbers carefully. A loan that's cash-flow negative for the first 3–4 years but positive after that can still be a good deal — but only if you're staying in the home long enough.

State-Level Incentives That Still Exist

The federal credit is gone, but states haven't stopped playing. Here are some of the strongest remaining incentives:

• New York: NY-Sun program offers up to $0.20/watt in direct rebates, plus a state solar tax credit up to $5,000 (state-level, separate from the expired federal credit)
• Massachusetts: SMART program provides performance-based incentives for 10 years
• California: Self-Generation Incentive Program (SGIP) covers up to 25% of battery storage costs for qualifying homeowners
• Illinois: Adjustable Block Program provides renewable energy credits worth $3,000–$5,000
• New Jersey: Successor Solar Incentive (SuSI) pays $85–$90 per MWh for 15 years
• Connecticut: Residential Solar Investment Program provides direct rebates up to $0.16/watt
• Maryland: Clean Energy Grant Program offers $1,000 for solar installations

Some states also offer property tax exemptions (your home value goes up from solar, but your property tax doesn't) and sales tax exemptions on solar equipment. These aren't as flashy as a 30% federal credit, but they add up.

What About Battery Storage?

Battery storage — primarily the Tesla Powerwall, Enphase IQ, and Franklin Home Power — lost its federal credit along with solar. A home battery system runs $10,000–$18,000 installed in 2026.

Without the credit, batteries are harder to justify on pure economics alone. But they make sense if:

• You experience frequent power outages
• Your utility has time-of-use rates with big peak/off-peak spreads
• You want energy independence and are willing to pay for it
• Your state offers battery-specific incentives (California's SGIP, for example)

For most homeowners in 2026, we'd say: get the solar now if the math works, and plan for a battery addition later as prices continue to drop.

The Bottom Line: Should You Go Solar in 2026?

Yes — if you meet these criteria:

• Your electricity rate is above $0.14/kWh
• Your roof has good sun exposure (south or west facing, minimal shading)
• You plan to stay in the home for at least 8–10 years
• Your state has decent net metering or solar incentives
• You can pay cash or get a loan under 7% APR

If you check three or more of those boxes, solar is still a strong investment even without the federal credit. The payback is longer, but the 25-year economics are still compelling.

If your electricity is cheap and your state has no incentives? Consider a PPA to lock in a lower rate without the upfront cost, or wait and reassess in 2027 as panel prices continue their downward trend.

Either way, don't let the expiration of one tax credit convince you that solar is dead. It's not. The economics shifted, but for tens of millions of homeowners, the sun is still printing money on the roof. It just takes a little longer to see it.

Get your personalized solar estimate — we'll run the numbers for your specific home, electricity rate, and state incentives. No sales pitch, just math.