Is Solar Worth It in 2026? What Changed After the Federal Tax Credit Ended

Solar can still be worth it in 2026, but the math is less forgiving than it was. The federal Residential Clean Energy Credit (section 25D) is not allowed for expenditures made after December 31, 2025, so a homeowner who buys a system in 2026 pays the full price unless state or local incentives apply. Whether it pays off now depends mostly on your electricity rate, how much you use, your sunshine and roof, what you pay per watt, and how your utility credits the power you export.

What changed for solar in 2026

For years, the 30% federal tax credit was the single biggest lever in residential solar economics. That lever is gone for homeowners who buy. According to the IRS's FAQs on the termination of energy credits, the 25D credit "will not be allowed for any expenditures made after December 31, 2025." The timing rule matters: for installed equipment, an expenditure is treated as made when the original installation is completed, not when you sign a contract or pay a deposit. A system you paid for in late 2025 but that was finished in 2026 does not qualify.

Two things did not change. First, solar panels still produce electricity you would otherwise buy from your utility. Second, installed prices have kept drifting down over the long term. Berkeley Lab's 2026 data update on distributed solar reports that installed prices fell by $9–11 per watt across customer segments over the past two decades, and that host-owned residential prices fell another $0.5/W (inflation-adjusted) from 2024 to 2025. Lower prices offset part of the lost credit, though not all of it for most buyers.

Leases and power purchase agreements (PPAs) are a separate case, because the solar company, not you, owns the system. EnergySage's H1 2026 marketplace report says third-party-owned projects can still qualify for federal incentives through 2027, and it found the share of installers quoting lease or PPA options rose sharply during the first half of 2026. See our guide to solar lease vs buy vs PPA for how that trade-off works.

The five things that decide whether solar is worth it for you

1. Your electricity rate. Every kilowatt-hour your panels produce is worth roughly what you would have paid for it, so higher rates mean faster payback. The average US residential price was 18.16¢ per kWh in August 2026, but rates differ widely by state and utility. Check yours on our electricity rates by state page.
2. How much electricity you use. A home that uses more power can offset more of its bill. The Department of Energy suggests starting with your utility bill to find how much electricity you use on average each month.
3. Sun, shade and roof. DOE notes that panels typically perform best on south-facing roofs with a slope between 15 and 40 degrees, and that heavy shade from nearby trees may rule out rooftop panels altogether.
4. What you pay per watt. Quotes vary a lot between installers. Berkeley Lab found median prices among the top-100 residential installers ranged from $2.7 to $6.5 per watt for 2024 installs (2025 data update). More on this in our solar panel cost guide.
5. How exports are credited. If your utility offers full retail net metering, power you send to the grid at midday is worth about as much as power you buy at night. Under net billing or other export tariffs, it can be worth less. Read net metering explained before you sign anything.

How to estimate your own payback

You don't need a spreadsheet to get a first answer. Simple payback is the net cost of the system divided by the yearly value of the electricity it produces.

1. Find your annual usage. Add up 12 months of kWh from your bills. For reference, the average US home used 1,152 kWh in August 2026.
2. Estimate production. Use NREL's free PVWatts Calculator, which estimates the energy production of grid-connected PV systems for a specific address, or our solar panel calculator.
3. Value that production. Multiply the kWh you will use on-site by your retail rate. Multiply exported kWh by your utility's export credit rate (which may be the retail rate or something lower).
4. Get the net cost. Take the quoted price and subtract any state, local or utility incentives you qualify for. The DSIRE database lets you search incentives by ZIP code.
5. Divide. Net cost ÷ annual savings = years to break even. Compare that with how long you plan to stay in the home and how long the equipment is warrantied.

A hypothetical example: say a quote is for a 7 kW system at $3.00 per watt, or $21,000, with no incentives. If PVWatts and your rate suggest the system saves $1,500 a year, simple payback is 14 years. If your rate were higher and the same system saved $2,100 a year, payback would be 10 years. These figures are for illustration only; your own numbers will differ.

When solar tends to make more sense, and when it doesn't

Factor	Points toward "worth it"	Points toward "think twice"
Electricity rate	High residential rate	Low rate, so each kWh saved is worth less
Export credits	Retail-rate net metering	Low export rates or high fixed charges
Roof	Unshaded, south-facing, 15–40° slope, recently replaced	Heavy shade, or roof needs replacing soon
Time in home	Plan to stay many years	Likely to move before payback
Price	Competitive quote from several bids	Single high-pressure quote
Incentives	State or utility rebates available	No incentives where you live

The roof point deserves emphasis. DOE's step-by-step guide for consumers says to make sure your roof can support panels and notes that installing solar together with a roof replacement can save money. Removing and reinstalling panels later to re-roof adds cost.

What the evidence says about bill savings

Savings depend heavily on where you live. DOE's savings explainer walks through several household examples. One describes a New York couple paying $150 a month on a solar loan while saving $220 a month on electricity, and another describes an Ohio family whose $100 monthly lease payment is offset by $150 in avoided electricity charges. These are illustrations, not promises. Your results depend on your rate, usage, roof and the deal you sign.

The long-run price trend also helps. Berkeley Lab reports that the median residential system grew to 7.7 kW in 2025 while prices kept falling, a sign that buyers are getting more capacity for their money than a decade ago.

Ways to improve the numbers without the federal credit

• Get at least three bids. DOE's Energy Saver planning guide recommends at least three bids with the same characteristics, and says cost per watt and estimated cost per kWh are the most useful metrics for comparing installers.
• Cut usage first. The same guide suggests low-cost efficiency measures, such as a home energy audit and LED lighting, before choosing solar, so you don't pay for panels to power waste.
• Size to your actual load. Oversizing can backfire if export credits are low. Size the system to your real usage, not to the biggest array your roof can hold.
• Check state and utility programs. Some states and utilities still offer rebates, performance payments or tax credits. Search DSIRE by ZIP code.
• Read the contract carefully. The FTC warns against companies that pressure you for a quick decision and recommends comparing detailed bids, including warranties and any production guarantee.

Bottom line

Without the 25D credit, solar in 2026 is a closer call for buyers. It still tends to work best for homeowners with high electricity rates, good export credit rules, an unshaded roof in good condition, and plans to stay put. If your rates are low, your roof is shaded, or your utility pays little for exported power, the payback can stretch well past a decade. Run your own numbers rather than relying on a sales projection.

Next steps

Start with your state's figures on our solar payback by state page, then plug your own usage and rate into the solar panel calculator.