The Solar Tax Credit Expired in 2026. Here Are Your Best Options Now.

The federal solar Investment Tax Credit for residential systems — Section 25D of the tax code — expired on December 31, 2025. There's a lot of confusion about what this means, so let's be precise: if you buy and own a new solar system placed in service in 2026 or later, there is no federal tax credit. Zero percent.

This article covers exactly what expired, what incentives are still available, and a straightforward comparison of every option for going solar in 2026 — including the situations where waiting or not going solar at all might be the right call.

What Exactly Expired (and What Didn't)

Gone: The residential solar tax credit (Section 25D). This used to cover 30% of the cost of a solar system you purchased and owned. For a $30,000 system, that was a $9,000 tax credit. As of 2026, that credit is 0% for new installations. If you installed solar in 2025 or earlier and haven't claimed the credit yet, you can still claim it on your 2025 taxes — it hasn't been retroactively removed.

Still alive: The commercial/business solar tax credit (Section 48E). This credit is still available at 30% (with potential bonuses up to 50% for domestic content and energy community qualifications) for systems owned by businesses. This is the credit that solar leasing and PPA companies use to reduce their costs — and it's why $0-down solar programs still exist in 2026 even though the residential credit is gone.

Still alive: California SGIP (Self-Generation Incentive Program). This state program provides rebates for battery storage systems, typically $200 to $1,000 per kWh of storage capacity depending on the budget step. SGIP can be combined with any solar installation type. Check current availability at the SGIP website. Note: SGIP funds are limited and allocated on a first-come basis.

Still alive: Local utility rebates. Some municipal utilities and Community Choice Aggregators (CCAs) offer their own solar and storage incentives. These vary widely by location. Your installer or PPA provider can usually identify what's available in your area, or you can check the DSIRE database for a comprehensive list of incentives by ZIP code.

Your Four Options for Going Solar in 2026

Option 1: Cash Purchase

How it works: You buy the system outright. You own it. All the energy savings are yours.

Typical cost: $25,000 to $40,000 for a 7-10 kW system with battery, depending on your roof and local installation costs.

Payback period: Roughly 9 to 12 years without the tax credit, depending on your utility and usage. After payback, electricity is essentially free for the remaining 15+ years of the system's life.

Best for: Homeowners with cash available who plan to stay in their home for 15+ years and want maximum long-term savings. Over 25 years, this option produces the most total savings of any approach.

Where to compare quotes: EnergySage lets you compare multiple installer quotes side by side. Get at least 3 quotes before deciding.

Option 2: Solar Loan

How it works: You finance the full purchase price through a solar loan. You own the system and make monthly loan payments.

What to watch out for: Without the 30% tax credit to pay down the loan balance early, your monthly payments will be higher than they were for people who financed in 2024-2025. In many cases, the loan payment exceeds the utility savings for the first several years, meaning you're paying more per month until the loan is paid off. Watch for dealer fees hidden in loan terms — these can add 15-30% to the true cost of the system.

Best for: Homeowners who want to own their system but don't have the cash for a full purchase. Make sure the math works by comparing your projected loan payment + remaining utility bill versus your current utility bill. If the loan payment alone exceeds your current bill, the terms may not be favorable.

Option 3: Solar Lease

How it works: A company installs panels on your roof and you pay a fixed monthly lease payment, regardless of how much the system produces. You don't own the system.

Pros: $0 down, predictable payments, maintenance included.

Cons: You pay the same amount in cloudy months when the system produces less. Lease payments sometimes include annual escalators (1-3% per year), which can eat into savings over time. Read the escalator clause carefully — a 2.9% annual escalator means your payment increases roughly 50% over 15 years.

Best for: Homeowners who want simplicity and don't want to think about their energy system at all. Less optimal for maximum savings.

Option 4: Power Purchase Agreement (PPA)

How it works: A company installs solar (and often a battery) on your roof at no cost. You pay a fixed per-kWh rate for the electricity the system produces. You don't own the system. The company claims the Section 48E commercial tax credit, which is why they can offer a rate below utility prices.

Typical PPA rate: 18 to 25 cents per kWh, compared to 34.5 to 46 cents per kWh from California utilities. Some PPAs have annual escalators; some offer flat rates for the full term. Flat-rate PPAs provide the most predictable savings.

Pros: $0 down, immediate savings from day one, maintenance and warranty included, battery often included. Your payment is tied to actual production, so you only pay for energy you receive.

Cons: You don't build equity in the system. If you sell your home, the PPA must transfer to the buyer (most are transferable, but the buyer must qualify). Total savings over 25 years are less than a cash purchase because the PPA company keeps their margin.

Best for: Homeowners who want immediate savings with no upfront cost or risk, especially now that the residential tax credit is gone. The PPA effectively passes the benefit of the still-available commercial tax credit to you in the form of a lower rate.

Side-by-Side Comparison

When Solar Doesn't Make Sense (Even Now)

Not every situation calls for solar, regardless of the tax credit situation. You should probably hold off if your monthly electric bill is under $100 (the savings may not justify the complexity of any solar arrangement), if you need a new roof within the next 3-5 years (replace the roof first), if your roof faces north with heavy shade and no viable alternative mounting location, or if you're planning to sell your home within 1-2 years (a PPA transfer adds complexity to the sale, and you won't recoup a cash purchase).

What About Waiting for the Tax Credit to Come Back?

This is a fair question. The residential credit has been extended and revived by Congress multiple times in the past, so it's possible it could return. However, there's no pending legislation to restore it as of early 2026, and the current political environment doesn't suggest it's imminent.

If you wait and rates continue rising at 6-12% per year, you may end up paying significantly more in utility bills during the waiting period than you would have saved from a restored credit. For example, if you're paying $300/month and rates rise 10%, that's an extra $360 in the first year alone. Over 2-3 years of waiting, that adds up to $1,000+ in additional utility costs — and there's no guarantee the credit returns.

The Bottom Line

The residential solar tax credit is gone, and that changes the math — particularly for cash purchases and loans, where the payback period is now 3-5 years longer. But solar hasn't stopped making sense in California. The state's electricity rates are so far above the national average that the economics still work, especially through PPAs and leases that leverage the still-available commercial tax credit. The right option depends on your financial situation, how long you plan to stay in your home, and whether you prioritize ownership or simplicity.