Solar in 2026, without the federal tax credit
If you research rooftop solar today, most of what you will read assumes a 30% federal tax credit. That advice is out of date, and the gap is large enough to change whether the decision makes sense.
What changed
The Residential Clean Energy Credit — Section 25D — let homeowners claim 30% of the cost of a solar installation against their federal taxes. Under the Inflation Reduction Act it was scheduled to run at 30% through 2032.
The One Big Beautiful Bill, signed on July 4, 2025, terminated it on December 31, 2025.
Two details matter about how it ended:
There was no step-down. Previous expirations of the solar credit tapered — 30% to 26% to 22% across several years. This one did not. It went from 30% to nothing on a single date.
It applies to systems you buy. If you purchase a system in 2026, whether with cash or a loan, the federal credit is zero. Not reduced. Zero.
What still exists
One route remains, and it is worth understanding precisely because it is easy to misread.
The business credit, Section 48E, is still available through 2027. It applies to third-party-owned systems: leases and power purchase agreements, where a company owns the panels on your roof and you either rent them or buy the power they produce.
The important part: that credit is claimed by the system's owner, not by you. Whether any of its value reaches you depends entirely on how the company prices the lease or PPA. It might be passed through in full, in part, or not at all. It is a reason to compare third-party offers carefully against a cash purchase — not a reason to assume you are still getting 30% off.
What this does to the numbers
We price solar against real utility tariffs, hour by hour, so we can show the effect concretely rather than in the abstract.
Take a 7 kW system in Atlanta on Georgia Power's residential schedule, at $3.00 per watt installed. That is $21,000. It produces about 9,800 kWh a year and saves somewhere between $811 and $1,449 annually, depending on how exported power is credited.
- With the old 30% credit, the system effectively cost $14,700. Payback: roughly 10 to 18 years.
- In 2026, with no credit, it costs the full $21,000. Payback: roughly 14 to 26 years.
The credit was not a rounding error. Removing it adds four to eight years to a payback period that was already long.
What this does not change
Three things are worth keeping in view, because the honest picture is not uniformly negative.
State and local incentives still exist, and in some states they are now worth more than the federal credit was. They vary enormously and we do not model them. Your state energy office is the place to check, and it is the first call worth making.
Rising electricity prices shorten payback. Every figure above holds today's rates flat for the life of the system, which is conservative. US residential electricity prices have been rising — the national average was 18.44 cents per kWh in September 2026, up 6.2% year over year. If that continues, real payback arrives sooner than these numbers suggest.
Your tariff matters more than you would think. On the same roof, in the same city, with the same hardware, payback on Georgia Power's time-of-use schedules runs several years shorter than on a flat rate. Solar produces at midday and households consume in the evening, so which hours your tariff prices highly determines what your generation is actually worth.
How to decide now
Get the arithmetic done on your actual tariff, not on a national average. The spread between tariffs within a single utility is often wider than the spread between states. You can run that comparison here.
Do not size the system to your annual usage. With the credit gone and exported power often poorly compensated, a smaller system frequently pays back faster than a larger one. We wrote about why that happens.
Find out what your utility pays for exported power before you sign anything. For roughly half of what a typical system generates, this is the number that decides the outcome — and it is set by state rules and your utility, not by the installer.
Treat any quote that mentions a 30% federal credit as a red flag. For a purchased system in 2026, it does not exist. An installer still quoting it is either working from stale material or hoping you are.