Is solar worth it in 2026 without the federal tax credit?
For more than a decade, the answer to "should I go solar?" leaned heavily on one number: the 30% federal tax credit. It quietly knocked roughly a third off the price of every residential system. That era ended on December 31, 2025. Under the 2025 budget law (the One Big Beautiful Bill Act), the residential clean-energy credit — Section 25D — no longer applies to systems placed in service after that date. If you buy panels with cash or a loan in 2026, your federal credit is $0.
That sounds like a death blow, and plenty of websites still showing 2025 numbers make it look like one. The reality is more nuanced — and in much of the country, solar is still a good investment. Whether it works for you now comes down to three things: your electricity rate, your state's incentives, and how you pay. This calculator and guide are built entirely around the 2026 rules, so the payback figure you see above reflects the world as it actually is this year.
Cash, loan, or lease: three very different 2026 outcomes
The financing choice has always mattered. In 2026 it matters more than ever, because it now decides whether the 30% credit is on the table at all.
- Cash purchase. You own the system outright, claim any state incentives, and keep 100% of the savings. You get no federal credit. This gives the best lifetime return in high-rate states, where the savings alone justify the cost.
- Solar loan. Same ownership and same state incentives as cash, with little or nothing down — but you pay interest (typically around 7–8% APR), which eats into lifetime savings. Still no federal credit. Best when you want ownership without the upfront check.
- Lease or PPA. A company owns the panels on your roof. You pay a fixed monthly lease or a per-kWh PPA rate that is set below your utility rate. The company keeps the 30% federal credit (claimed under the commercial Section 48E) and passes part of it back to you as the discount. You put $0 down and start saving immediately, but your total savings are smaller because someone else owns the asset.
In short: ownership maximizes savings but loses the credit; leasing keeps the credit but caps your savings. Use the financing toggle above to see how the same roof produces three different results.
Why your electricity rate decides everything
Solar's entire value is the utility power you don't buy. So the higher your rate, the faster panels pay off. The spread across the US is enormous — from under 12¢/kWh in Washington, Idaho and North Dakota to over 30¢ in California and Massachusetts, and a remarkable ~43¢ in Hawaii. The national average sits around 18.8¢/kWh (EIA, early 2026) and has been climbing roughly 9–10% year over year.
That single variable explains most of the difference in payback periods:
| State | Avg rate (¢/kWh) | Production (kWh/kW/yr) | 2026 cash payback* |
|---|---|---|---|
| California | 31.0 | 1,500 | ~6 years |
| New York | 23.0 | 1,200 | ~7 years (with $5k credit) |
| Texas | 15.0 | 1,450 | ~11 years |
| Arizona | 14.5 | 1,650 | ~10 years |
| Washington | 11.0 | 1,050 | ~18 years |
*Estimated payback for an owned 8 kW system at $2.75/W, 2026 rules. Your result depends on your usage, roof, and quotes.
State incentives are now the headline, not the footnote
With the federal credit gone for owners, state programs have gone from "nice bonus" to "the deciding factor." They vary wildly, and several were cut or replaced in 2025, so this is exactly where stale information costs people money. Here's where the strongest 2026 programs stand:
| State | Headline 2026 incentive |
|---|---|
| New York | 25% state tax credit (capped at $5,000) + NY-Sun upfront rebate + tax exemptions. |
| Massachusetts | SMART production payments (~$0.03/kWh for 10 yrs) + 15% state credit (capped $1,000). |
| New Jersey | SuSI/SREC-II payments ~$85–95/MWh for 15 yrs + 100% sales-tax exemption. |
| Illinois | Illinois Shines pays an upfront lump sum for ~15 years of renewable energy credits. |
| Arizona / New Mexico | State tax credits (AZ 25% up to $1,000; NM 10% up to $6,000). |
| Texas / Florida | No state credit, but strong property-tax exemptions and full-retail net metering. |
| Maryland | Flat $1,000 rebate ended in 2025; only the income-qualified Solar Access grant remains. |
Select your state in the calculator and any owner-eligible state credit is applied to your net cost automatically.
The lease/PPA path and the July 4, 2026 deadline
If you can't use an owned system's economics, the lease/PPA route is how you still touch the 30% credit in 2026 — but it comes with a clock. To qualify under Section 48E on the easier terms, a project generally must begin construction by July 4, 2026. Projects that start later must be placed in service by December 31, 2027 to qualify at all. After that window, new solar projects lose the credit entirely.
There's a live legal wrinkle worth knowing: on June 6, 2026, a federal court vacated IRS Notice 2025-42, which had removed the long-standing "5% safe harbor" for proving construction had begun. The ruling restored that safe harbor, making it easier for installers to lock in the deadline — but the matter was sent back to the IRS, so the mechanics could change again. If a lease or PPA is your plan, ask the installer in writing how and when they are securing the credit.
Want real numbers for your roof?
A calculator gets you in the ballpark. Competing quotes from licensed local installers tell you what solar actually costs where you live — and whether a lease beats buying for you.
Get matched with installersHow this calculator works
We aim to be transparent rather than magical. Here's the full method:
- System size. If you enter a bill, we convert it to annual kWh using your state's average rate and size the array to offset that usage (you can override the size under "Advanced").
- Production. Annual output = system size × your state's production factor (kWh per kW per year), which ranges from ~1,050 in the cloudy Northwest to ~1,800 in the Southwest.
- Cost. Gross cost = size × $/watt (default $2.75/W, editable). For owned systems we subtract any state tax credit and upfront rebate; the federal credit is $0 in 2026.
- Savings over time. Year-one savings = production × your electricity rate. We then grow savings by 3.5%/yr (rate escalation) and shrink output by 0.5%/yr (degradation) across a 25-year horizon, and find the year cumulative savings cover your net cost — that's your payback.
- Loan & lease. Loans add financing interest (≈7.5% APR, 20 yrs). Leases/PPAs assume $0 down with savings from a below-retail rate that escalates ~2.9%/yr.
Sources and reference data: U.S. Energy Information Administration (electricity rates), NREL PVWatts (production), EnergySage (installed costs), and the IRS/Treasury guidance implementing the 2025 budget law for the credit rules. For a precise, address-level production estimate, run your roof through NREL PVWatts.