The Homeowner Solar Credit Ended. What Panels Really Save Now.

The Q3 2026 US Solar Market Insight from Wood Mackenzie and the Solar Energy Industries Association (SEIA), published in September 2026, cuts against the idea that more households are adding panels: 995 MW was installed in the second quarter, down 12% from a year earlier, and a 23% drop is forecast for the full year. For a household weighing solar now, the 30% federal credit for buying a system is gone, so payback is longer and depends more on what your utility pays for power you send to the grid.

Key takeaways

Rooftop solar output keeps growing (up about 11% in 2025, per EIA), but new residential installations are shrinking.
The homeowner credit under section 25D is not allowed for expenditures made after December 31, 2025, and the IRS treats an expenditure as made when installation is completed, not when you pay.
In the worked example below (7 kW at $3.50 per watt), simple payback without the credit is about 15 years if exports earn the full retail rate and about 23 years if they earn 4 cents per kWh. With the old 30% credit it would have been 10.5 to 15.5 years.
Leased and PPA solar panels can still earn a federal credit for the company that owns them, subject to construction deadlines, and nothing guarantees the savings reach you.

What it means for you

Buying with cash or a loan: plan on no federal credit and run the numbers at your own export rate.
Offered a lease or PPA: the owner gets the credit; check the escalator and home-sale terms.
California customers of PG&E, SCE or SDG&E: net billing makes self-use worth more than exports.
Installed in 2025: the 25D credit still applies, and unused credit can be carried forward.
Renters and condo owners: community solar is the usual route.

Solar is growing, new sales are not

The US Energy Information Administration (EIA) estimates output from small-scale solar (systems under 1 MW, mostly rooftops, homes and businesses together). Its Electric Power Monthly table 1.1.A shows 83,918 thousand MWh in 2024 and 93,148 in 2025 (preliminary), an increase of about 11%.

The flow of new systems is a different story. The SEIA/Wood Mackenzie Q3 2026 summary (page updated September 10, 2026) reports 995 MW of residential installations in Q2 2026, down 12% from a year earlier and 10% from the previous quarter, and now expects a 23% contraction in 2026, with growth returning in 2027. It links the slump partly to the end of the section 25D credit and puts residential system pricing at $3.36 per watt, down 1.4% from a year earlier. These are industry figures.

What the credit change covers

Buying: the 25D deadline

The One Big Beautiful Bill Act, signed July 4, 2025, ended the residential clean energy credit (section 25D, 30% of qualified costs). The IRS's FAQs on the law (FS-2025-05, August 21, 2025) say the credit "will not be allowed for any expenditures made after December 31, 2025." Paying by that date does not help if installation finishes later, because under section 25D(e)(8)(A) an expenditure is treated as made when the original installation is completed. The IRS credit page says the credit is claimed for the year the property is installed, not merely purchased.

So a system finished in 2026 or later gets no 25D credit, whatever the contract date. Systems completed in 2025 still need to meet the usual conditions: a US main home or a second home you don't rent out, new equipment, and no claim for landlords who don't live there.

Leasing: the 48E route and its dates

Section 48E is a business credit claimed by the system's owner. The tax code (26 U.S.C. 48E(i)) denies it for leased solar water heating and small wind property, but not for leased solar electric panels, and SEIA's outlook cites "continued TPO tax credit eligibility" for third-party-owned systems. Section 48E(e)(4), added by the 2025 law, ends the credit for solar property placed in service after December 31, 2027, and the law applies that cutoff to projects whose construction began after July 4, 2026, as IRS Notice 2025-42 explains. That date has passed, so a provider that did not start in time must finish the system by the end of 2027.

A federal court vacated Notice 2025-42 on June 6, 2026, which affects how providers prove construction began, not the statutory dates. The law also limits the credit when a system has too much "material assistance" from prohibited foreign entities; IRS Notice 2026-15 gives interim rules for measuring it. The Federal Trade Commission (FTC) notes that lease and PPA tax credits go to the owner and that the contract should say who gets them. Whether any of it reaches you through a lower rate is a contract term, not a rule.

A 7 kW payback example

Illustrative example with round assumptions, not a quote for any home.

System: 7 kW, close to the 7.2 kW median for 2024 residential installs. Price: $3.50 per watt, or $24,500, the 2024 median for cash-purchase systems in Berkeley Lab's October 2025 data update (gross price before incentives; the overall residential median was $4.0 per watt and loan-financed systems $4.7).
Production: 1,300 kWh per kW per year (9,100 kWh in year 1), assumed for a moderately sunny site.
Retail rate: 18.31 cents per kWh, the US residential average for July 2026 in EIA table 5.6.A (released September 24, 2026). It is a single summer month, so your annual average and your state's rate may differ. Held flat for the whole period.
Use: 60% of production offsets your own use at the retail rate; 40% is exported.
Degradation: 0.5% per year. No maintenance, inverter, financing or battery costs.

Year-1 savings = kWh x (self-use share x retail rate + export share x export rate)
Payback = years until cumulative savings equal net cost (interpolated within the final year)

Net cost is $24,500 without a credit and $17,150 with the old 30% credit ($7,350 off). The three export rates are illustrative, not any utility's tariff.

Export rate	Year-1 savings	Payback, no credit	Payback, old 30% credit
18.31 cents (full retail)	$1,666	15.2 years	10.5 years
9 cents	$1,327	19.3 years	13.3 years
4 cents	$1,145	22.6 years	15.5 years

The lost credit adds about 5 to 7 years in every row; dropping the export rate from full retail to 4 cents adds about 7 years without the credit. At 4 cents with no credit, cumulative savings over a 25-year horizon (an assumption used here) reach about $27,000 against a $24,500 cost, so the net gain is small.

Price moves the answer as much as the export rate. At the loan-financed median of $4.7 per watt ($32,900), payback runs about 20.7 to 30.9 years across the three export rates. At SEIA's figure of $3.36 per watt ($23,520), it runs 14.6 to 21.6 years. Rising retail rates would shorten all of these and falling rates would lengthen them. To run your own numbers, enter your system's net cost and yearly savings in the payback calculator.

Export rates decide the outcome

California under net billing

California's Net Billing Tariff, the successor to NEM 2.0, applies to customers who submitted an interconnection application on or after April 15, 2023, according to the California Public Utilities Commission (CPUC). The CPUC says it applies in the territories of the large investor-owned utilities, PG&E, SCE and SDG&E; other utilities in the state have their own tariffs. Exports are credited at values from the CPUC's Avoided Cost Calculator, which are usually lower than import rates, although they can exceed the retail rate on late summer evenings. Customers already on NEM 2.0 can stay on it for 20 years from interconnection.

Power you use yourself is therefore worth more than power you export, so sizing to daytime use matters more than maximizing panels. A battery shifts this balance and is outside this example.

Where retail net metering remains

Where exports still earn near the retail rate, the first table row applies, but that can change: the North Carolina Clean Energy Technology Center's 50 States of Solar report for Q3 2025 describes utilities continuing to move to net billing, and its Q2 2026 release counted 53 net metering actions in one quarter. Get your utility's current tariff in writing.

Leases, loans and sales pitches

With a lease or PPA you pay monthly or per kWh instead of buying the system. The FTC warns that "your monthly lease payments can increase over time" under some contracts and says to check when and by how much. Illustrative example: a 2.9% annual escalator makes the year-20 payment about 1.72 times the first (1.029 to the 19th power), so compare that path with your utility's past rate increases.

For loans, the Consumer Financial Protection Bureau's August 7, 2024 report found that hidden "dealer fees" often raise a loan's cost by 30% or more above the cash price and are frequently left out of the stated APR. It also found loans presented at a "net cost" that assumes the tax credit. With 25D gone, a quote that still assumes a 30% credit on a 2026 installation deserves a direct question.

This article is general education, not tax, legal or financial advice; a tax professional can confirm how a specific system and tax year are treated.

Frequently asked questions

How do I estimate my own production?

The National Renewable Energy Laboratory's PVWatts calculator estimates the output of grid-connected systems from your location, basic design inputs such as size, tilt and orientation, and optional economics. Compare its annual kWh with the installer's estimate.

How fast do panels lose output?

An NREL review of degradation rates that pulled together nearly 2,000 published measurements found a median of about 0.5% per year. At that rate, a system produces roughly 88% of its first-year output after 25 years (0.995 to the 25th power). Individual systems vary.

I signed a contract in 2025. Can I still claim the credit?

Only if the installation was completed by December 31, 2025. The IRS FAQ says paying by that date does not secure the credit if the property is installed afterward. If your 2025 credit was larger than your tax, the IRS credit page says the unused part can be carried forward to future years.

What happens to a leased system if I sell the house?

The FTC suggests asking whether the contract can transfer to the buyer, whether you must give the company written notice first, and whether the buyer must meet credit requirements or pay fees. The answer is set by your contract, so read those clauses before signing.

Is community solar an option if I rent?

Often, depending on your state and utility. The Department of Energy's community solar basics describe projects in which the benefits flow to multiple customers; subscribers typically pay a monthly fee and receive a credit on their electric bill. Compare the fee with the credit and read the cancellation terms.

A checklist before you sign

Get written quotes with price per watt, size, expected annual kWh (check it in PVWatts) and who claims any federal credit.
Ask your utility, not only the installer, for the current export rate and any planned tariff changes.
Rerun the payback with your own retail rate and self-use share, at half today's export rate and at zero.
For a loan, ask for the cash price and the financed price separately; the difference shows any dealer fee.
For a lease or PPA, find the escalator, term, buyout price and home-sale transfer terms.