Is Solar Still Worth It Without the Federal Tax Credit?

For years, a federal tax credit covered 30% of the cost of a home solar system. The One Big Beautiful Bill Act, signed on July 4, 2025, ended it early. If your system was installed after December 31, 2025, you can’t claim it.

That’s a real hit, but it doesn’t answer the question by itself. Whether solar pays off for your home still depends on the same handful of things: what you pay for electricity, how your utility credits solar power, how much sun your roof gets and what you pay for the system.

What changed in 2026

• The 30% Residential Clean Energy Credit (Section 25D) ended for systems whose installation was completed after December 31, 2025. If you installed in 2025 or earlier and couldn’t use the whole credit, the unused part can still carry forward to later tax years.
• Batteries and solar water heaters lost the credit at the same time, since the same credit covered them.
• Leases and power purchase agreements (PPAs) are treated differently. The company that owns the panels can still claim a business tax credit (Section 48E) for now. Projects that start construction after July 4, 2026 generally have to be in service by the end of 2027 to qualify.

The industry expects a slower year. SEIA and Wood Mackenzie project that U.S. home solar installations will fall about 23% in 2026, with more buyers moving to leases and PPAs.

What the numbers look like now

EnergySage’s marketplace data for September 2026 puts the average price at $2.60 per watt before incentives. An 8 kW system, a common size, averaged about $20,960.

Here’s how that system works out at three electricity prices. The example assumes each kilowatt of panels produces about 1,300 kWh a year, which is near the middle of the range for the lower 48 states. It also assumes your utility credits all of that power at the full retail rate, that prices rise 3% a year and that the panels lose 0.5% of their output each year.

Electricity price	First-year savings	Payback without the credit	Payback if the 30% credit still applied
13¢ per kWh (similar to North Dakota, Nebraska, Idaho)	About $1,350	About 13 years	About 10 years
18¢ per kWh (the U.S. average in 2026)	About $1,870	About 10 years	About 7 years
30¢ per kWh (similar to Massachusetts, New York, Rhode Island)	About $3,120	About 6 years	About 4.5 years

At the average U.S. price, losing the credit adds about three years to the payback period. That lines up with Wood Mackenzie’s estimate, reported by EnergySage, that the typical payback has gone from about 7 years to about 9. The table also shows how much your electricity price matters. A home paying 30¢ per kWh now pays off faster without the credit than a home paying 18¢ did with it.

These are rough numbers, and real ones depend on your quote, your roof and your utility’s rules. EnergySage reported an average payback of about 10.8 years for shoppers on its platform in September 2026. You can plug in your own bill with our solar calculator.

Where solar still makes the most sense

• Expensive electricity. In the first seven months of 2026, average residential prices were highest in Hawaii (about 46¢ per kWh), California (33¢), Massachusetts (30¢), Maine (30¢), New York (29¢) and Rhode Island (29¢), according to the U.S. Energy Information Administration.
• Full net metering. If your utility credits the power you send back at the retail rate, every kWh your panels make is worth the full price. Here’s how net metering and solar meters work.
• State incentives. Some states still pay for solar output. New Jersey’s ADI program pays a fixed amount per megawatt-hour for 15 years, Massachusetts’ SMART 3.0 program pays 3¢ per kWh for 20 years and Illinois Shines buys renewable energy credits from small systems. Our guide to solar rebates and incentives has more.
• A sunny, unshaded roof facing south, east or west.

Where it’s harder to make work

• Cheap electricity. North Dakota, Nebraska and Idaho averaged about 12¢ to 13¢ per kWh in early 2026. Paybacks there can run well past 12 years.
• Low credits for exported power. California moved new solar customers to a net billing tariff in April 2023. It credits exported power at much lower rates, roughly 75% less than before, so solar there works best when you use most of the power yourself.
• A roof that needs replacing soon. Taking panels off and putting them back later adds cost, so it usually makes sense to replace the roof first.
• Heavy shade from trees or nearby buildings.
• A move in the next few years. Studies have found that owned solar systems add to a home’s sale price, but you may not recover everything you paid, and leased systems add much less. More in will solar panels affect your property value.

What about leases and PPAs?

With a lease or PPA, a solar company owns the panels on your roof and you pay either a monthly fee or a set price for each kWh they produce. The company can still claim a federal credit, and some of that value can show up in a lower price for you. That’s a big reason these deals are becoming more common.

They have trade-offs. Contracts usually run 20 to 25 years, and many include an escalator that raises your payment 1% to 3% a year. If utility rates rise more slowly than that, your savings shrink. Selling your home also gets more complicated, because the buyer has to take over the contract or you have to buy it out. Before signing, ask how the company’s tax credit is reflected in the price you’re quoted. Our guide to “free” solar panels explains how these contracts work.

How to improve the math

• Get at least three quotes and compare them on price per watt. State averages in EnergySage’s data ranged from about $2.12 per watt in Florida to $3.81 in Alabama, and individual quotes vary even more.
• Size the system to your actual use. Extra panels rarely pay for themselves if the surplus power earns a low export rate.
• Watch financing costs. The Consumer Financial Protection Bureau found that hidden fees on solar loans often add 10% to 30% to the price. Paying cash or using a cheaper loan can shorten payback a lot.
• Look for local incentives on DSIRE, your state energy office’s website and your utility’s website.
• Add a battery only for a reason, such as backup power or a utility program that pays for stored energy. A typical 13.5 kWh battery costs about $15,650 installed and will lengthen payback on its own.

Sources

• IRS: FAQs on changes to Section 25D and other credits under the One Big Beautiful Bill
• SEIA and Wood Mackenzie: Solar Market Insight, Q3 2026
• EnergySage: Solar panel cost data
• EnergySage: Understanding your solar payback period
• EnergySage: Solar savings after the federal tax credit
• EIA: Average price of electricity by state, Table 5.6.B
• California Public Utilities Commission: Net energy metering and net billing
• CFPB: Issue spotlight on solar financing