Key Takeaway
Solar panel costs have dropped 70% in the past decade. The federal tax credit expired on December 31, 2025. The payback period got longer by about two years. The 25-year savings case didn't change.
The biggest thing that happened to residential solar in 2026 wasn't a technology breakthrough. It was a tax bill. The "One Big Beautiful Bill" killed the Section 25D Residential Clean Energy Credit: the 30% federal tax credit that had been knocking $6,000-7,500 off the average home solar installation since 2005. For homeowners who bought before December 31, 2025, nothing changed. For everyone else, the upfront math just got harder.
On a $25,000 system, the credit was worth $7,500. The net cost went from $17,500 to $25,000 overnight. Ohm Analytics projects residential installations will drop about 25% in 2026.
The question everyone is asking: should I still go solar without the credit? The short answer is yes for most homeowners, with a longer payback period and a stronger emphasis on state incentives, electricity rates, and whether you buy or lease.
Solar costs have fallen so far that the math works without subsidies
Residential solar cost roughly $4.00 per watt in 2015. By 2026, that's approximately $2.75-3.50 per watt. Global module prices fell 50% in 2023 alone. A typical 8 kW residential system costs $15,000-25,000 before incentives. After state incentives, most homeowners pay $12,000-22,000.
The IEA confirmed in its Electricity 2026 report that utility-scale solar PV is now the cheapest source of new electricity generation in the majority of countries worldwide. Residential rooftop solar competes against retail electricity prices (what you pay on your bill), and retail rates keep climbing.
The payback math without the federal credit
The payback period stretched by roughly 1.5-3 years. Before the credit, the national average was about 5-8 years. Now it's closer to 6-10 years.
Concrete example: an 8 kW system in a state with $0.18/kWh electricity costs $22,000 installed. It generates 10,000-12,000 kWh/year, saving $1,800-2,160 annually. Payback: roughly 10-12 years. After payback, you get 15-19 more years of essentially free electricity (panels are warrantied for 25 years, often produce for 30+).
In high-rate states (California, Massachusetts, Connecticut, New York, Hawaii at $0.25-0.45/kWh), the same system saves $3,300/year at $0.33/kWh, bringing payback to 6-7 years even without the federal credit. Total remaining savings: $50,000-65,000.
Solar leases and PPAs still get a tax credit (for now)
The Section 48E commercial Investment Tax Credit wasn't repealed alongside the residential credit. It was shortened (expiring end of 2027 instead of 2032), but it's still available to solar companies that own panels installed on your roof. This means solar leases and PPAs still benefit from a federal credit, with savings flowing through as lower monthly payments.
A lease or PPA means you don't own the panels, don't get equity benefits, and are locked into a long-term contract. But you pay nothing upfront, avoid all maintenance, and start saving from day one. For homeowners who can't afford $15,000-25,000 upfront, this is now the more attractive path.
Never sign a solar lease with escalator pricing that increases your rate over time. A fixed-rate lease protects you on both sides.
Your home gets more valuable whether or not you get a tax credit
Lawrence Berkeley National Laboratory found solar installations add approximately $4 per watt to resale value. On a 6 kW system, that's roughly $24,000 in added value. Homes with solar sell an average of 20% faster. Many states exempt solar from property tax assessments. This premium exists independently of the federal credit.
Battery storage changed the equation (but also lost its credit)
The Section 25D repeal hit batteries too. A Tesla Powerwall 3 costs $12,000-15,000 installed, now the full price with no 30% offset.
Batteries make sense for: homes with time-of-use rates (save $500-2,000/year by charging cheap, discharging during peak), and areas with frequent grid outages. For most homeowners, batteries don't yet make pure financial sense without the credit. If your state has good net metering, the grid effectively acts as a free, infinite battery.
The global picture: solar is winning regardless of US tax policy
The IEA projects solar PV capacity will exceed natural gas globally by 2026 and surpass coal by 2027. Global installed capacity has passed 1,053 GW. Solar generated over 1,600 TWh in 2023, a record 25% year-over-year increase. Over 7.3 million US homes already have panels. The trajectory is clear even without federal residential incentives.
The decision framework for 2026
Go solar now if: your electricity bill exceeds $150/month; you live in a state with high rates ($0.20+/kWh) or strong state incentives; you plan to stay 7+ years; and your roof gets good sun exposure. Strongest in California, Massachusetts, Connecticut, New York, New Jersey, Hawaii, and the Southwest.
Consider a lease or PPA if: you can't afford $15,000-25,000 upfront. The 48E commercial credit keeps lease pricing competitive through 2027.
Wait if: your roof needs replacement within 5 years; your electricity rate is below $0.12/kWh; or you're moving within 3 years.
Check your state's incentives. New York's Solar Property Tax Abatement covers up to 30% through 2035. New Jersey's SREC-II pays for every MWh your system produces. These programs can replace a significant portion of the lost federal credit.
The 30% credit made solar a no-brainer. Without it, solar is merely a very good financial decision for most homeowners: a 6-10 year payback on a 25-year asset that generates free electricity, adds $24,000 to your home value, and protects you from electricity rate increases for the rest of the time you live there. The math changed. The conclusion didn't.
