More homeowners are installing solar, but 2026 brings a significantly changed financial landscape. The federal residential solar tax credit, a cornerstone of solar economics for two decades, expired on December 31, 2025. At the same time, panel technology has advanced and prices have reached near-historic lows. Here is what you need to know before making a solar investment this year.

The most consequential shift for anyone considering rooftop solar in 2026 is the expiration of Section 25D, the Residential Clean Energy Credit. That 30% credit, which was worth up to $9,000 on a $30,000 system, is no longer available for home solar installations. The One Big Beautiful Bill, signed July 4, 2025, accelerated the phase-out that the Inflation Reduction Act had originally extended through 2034. Homeowners who installed and claimed the credit before year-end keep their savings.

However, one federal credit remains available through at least 2027. The Clean Electricity Investment Credit (Section 48E), the commercial counterpart to the expired residential credit, was preserved in the One Big Beautiful Bill. It is available to businesses that own solar installations, including systems installed on residential rooftops. A solar company that owns a system on your roof can claim a 30% tax credit on its investment and pass a portion of that value to homeowners through lower pricing on leases, power purchase agreements (PPAs), or prepaid arrangements.

Under IRS rules, a solar company must retain genuine ownership of the system for at least five years. It cannot simply transfer ownership on day one and pocket the credit. This has given rise to offers referred to as prepaid PPA and “deferred ownership” products. You pay upfront and take full title to the system after the required holding period, which is typically six years. Providers including Tesla, which launched its 25-year solar lease with a year-five buyout option in October 2025, have recast their leasing offers to meet this IRS requirement. Utility Dive reporting confirms that TPO providers will continue to offer pass-through credits for leasing agreements in 2026 and 2027.

State and Local Incentives Step Into the Federal Gap

While the federal residential credit is gone, state programs offer meaningful savings in many markets. Many of these programs run on a block system, which is worth understanding before you shop. The state sets aside a fixed pool of money for each region, called a block. When that pool runs out, a new block opens, but at a lower rebate rate. This means the longer you wait, the less you’ll receive. Applying early, before your regional block fills, locks in the higher rate.

The best states for solar incentives in 2026 include:

• New York: The NY-Sun program, run by the state energy authority NYSERDA, cuts your installation bill upfront. Your installer simply charges you less, so there’s no rebate application to file and no waiting for a check. How much you save depends on where you live: homeowners in New York City and surrounding areas served by Con Edison get about $0.40 per watt off their system cost, while those upstate get around $0.20 per watt. Income-qualified households get $0.80 per watt regardless of region. On top of the rebate, New York offers a state income tax credit worth 25% of your system cost, up to $5,000, plus exemptions from both sales tax on equipment and property tax on the added home value.
• New Jersey: The Successor Solar Incentive program pays you for every unit of electricity your panels produce, for 15 years after installation. The current rate is about $85.90 per megawatt-hour — one megawatt-hour equals 1,000 kilowatt-hours, roughly what a typical home uses in a month — an you will receive payments every three months. A standard 8 kW rooftop system earns around $825 per year this way, or about $12,000 over the life of the contract. The rate is set to rise to $95.23 for the 2026–27 program year. Your installer handles the initial registration, but you’ll need to log your system’s monthly production in the state tracking system to keep the payments coming. New Jersey also offers full retail-rate net metering, meaning the utility credits your bill at the same rate you’d pay for grid electricity, and solar equipment is exempt from the state’s 6.625% sales tax.
• Massachusetts: The state’s SMART 3.0 program pays solar owners a fixed rate of $0.03 per kilowatt-hour produced over 10 years. There’s a catch. The program calculates your actual payment by subtracting your current utility rate from that base, and Massachusetts electricity rates have risen high enough that solar-only homeowners currently receive little to nothing through SMART. Where the program still delivers real money is when you pair solar with a battery; adding storage unlocks a bonus payment that can bring your total SMART rate to around $0.05 per kilowatt-hour, worth roughly $500 per year for a typical system. Low-income households receive double the base rate. Think of SMART as a strong reason to add a battery to your solar system, not as a standalone solar rebate.
• Maryland: Maryland used to offer a flat $1,000 grant to any homeowner who installed solar, but that program ended in June 2025. Its replacement, the Maryland Solar Access Program, is more generous but limited to income-qualified households. It pays $750 per kilowatt of installed capacity, up to $7,500. All Maryland homeowners, regardless of income, still benefit from three solid incentives: net metering that credits excess solar production at the full retail electricity rate with no expiration on rollover credits; an active market for Solar Renewable Energy Certificates (SRECs) currently paying $60–$80 per megawatt-hour of production; and exemptions from both state sales tax on equipment and property tax on the added home value from the installation.
• Oregon: The Energy Trust of Oregon provides two levels of rebate depending on your income. Most PGE and Pacific Power customers receive a flat $2,500 off their system cost at the point of sale; your installer applies it directly, so you never pay the full price upfront. If your household income falls below the program’s threshold (a family of four earning up to roughly $120,000 often qualifies), you can move into the Solar Within Reach program, which pays $0.90 per watt up to $5,500, meaning a typical 7 kW system could receive the full $5,500, covering a substantial share of the total cost. Oregon is one of the better states for solar economics in two additional ways. First, the state has no sales tax, so you pay nothing extra on panels, inverters, or installation labor, a savings of several hundred to over a thousand dollars compared to most states. Second, the added value your solar system brings to your home is excluded from your property tax assessment, so your tax bill won’t rise after installation. Only customers of Portland General Electric (PGE) and Pacific Power qualify for Energy Trust rebates. If you’re served by a different utility, these programs don’t apply, and Oregon’s incentive picture looks considerably thinner.
• Illinois: Illinois has one of the most distinctive solar incentive structures in the country through the Illinois Shines program. Most state SREC programs pay you a small amount each year for the electricity your panels produce. Illinois flips that model. Instead of annual payments, the program calculates how many energy credits your system is expected to generate over its first 15 years, then pays the estimated value of all of those credits upfront, in a single payment. For most homeowners, this works out to between $7,000 and $11,000, applied as a discount on your system cost. The payment goes first to your installer, who is required to pass the full amount on to you — either as an upfront reduction in what you pay, or as a separate check. Because of administrative processing, the payment typically arrives within one to two years of installation rather than at the moment you sign your contract. Make sure your installer spells out exactly how and when you’ll receive the money before you commit.
• South Carolina: Offering one of the most generous state-level solar tax credits in the country, 25% of your total system cost, with a maximum credit of $35,000. Unlike a rebate, which reduces what you pay upfront, a tax credit reduces what you owe the state at tax time, dollar for dollar. On a $25,000 system, that’s $6,250 back against your state income tax bill. The state caps the annual payout at $3,500 per year. If your credit exceeds that amount, you carry it forward and to subsequent years until the full credit is used. South Carolina also offers full retail-rate net metering, meaning the utility credits your bill at the same rate you’d pay for grid electricity when your panels send excess power back to the grid.

Property tax exemptions, which prevent your assessment from rising after you add solar, and sales tax exemptions on equipment are available in many additional states. Use the DSIRE database to find what’s current in your state, as programs change.

2026 Solar Prices: Near Historic Lows, Without Federal Help

As of early 2026, the national average installed cost for a residential system runs approximately $2.50–$3.50 per watt before incentives, according to EnergySage’s marketplace. Actual prices vary significantly by region, and many states offer additional tax credits.

Cons

No Federal Tax Credit for Purchased Systems

In past years, the 30% federal credit was often the deciding factor that made solar financially compelling. A $25,000 system effectively cost $17,500 after the credit. That leverage is gone for homeowners who buy their systems with cash or a loan in 2026. The financial case for solar is still compelling in many markets, particularly states with high electricity rates, but payback periods are roughly 2–4 years longer without the federal subsidy.

Solar Recycling Infrastructure Remains Underdeveloped

The state of solar panel recycling in the U.S. has improved marginally but remains inadequate for the volume of panels approaching end-of-life. Most residential panels installed in the 2000s and early 2010s are now 15–20 years old and approaching their rated lifespan. The SEIA’s PV Recycling Program is a voluntary industry effort, but its capacity does not match the growing volume of end-of-use panels.

Net Metering Policies Are Eroding in Key States

Net metering, a billing mechanism that compensates solar owners for excess electricity they give back to the grid, is available in approximately 38 states and Washington, D.C., but the terms are increasingly unfavorable. California’s Net Billing Tariff, referred to as NEM 3.0, took effect April 15, 2023, and reduced consumer generation rates by roughly 75%. Arizona, Indiana, and Nevada have made similar moves toward lower rates. Understanding your utility’s specific net metering structure is now more important than ever when evaluating whether solar makes financial sense. Ask prospective installers to model your savings under the actual export rate your utility will pay, not just the retail electricity rate.

Solar Batteries Remain a Significant Added Cost

Home battery storage is still a significant investment even as prices have gradually come down. The most popular options, including the Tesla Powerwall 3 and the modular Enphase IQ Battery 5P, work very differently, and so do their costs. If you want enough battery capacity to run a typical home through a full night without solar input, you need roughly 25 kWh or more, so plan on paying $25,000 to $35,000 for the installed system regardless of brand. That nearly doubles the cost of a solar-only system for many households.

The Powerwall 3 is a single unit that holds 13.5 kWh of energy and includes a built-in solar inverter, making it an all-in-one solution for most homes. Expect to pay $12,000 to $17,000 after installation. The Enphase IQ Battery 5P is designed differently to store just 5 kWh, and they stack. A single unit runs about $8,500 installed and provides enough to power essential systems during an outage. But most homes need two to four units for meaningful coverage, pushing costs to between $15,000 and $30,000 depending on how much backup capacity is needed. This is the most flexible system because you can start small and add units over time.

One way to improve the financial case for a battery is to enroll in a Virtual Power Plant (VPP) program, where your utility pays you for occasionally drawing on your stored energy during high-demand grid periods. These programs are available in roughly half of U.S. states, though the compensation varies enormously. Some programs offer modest bill credits, while others, like Massachusetts’ ConnectedSolutions program, pay between $233 and $275 per kilowatt of enrolled battery capacity per year.

Check with your utility, not your state, to take the first step toward joining a VPP. The Clean Energy States Alliance’s VPP program page is the most current source of information directory.

Tariffs Have Pushed Equipment Costs Higher

Import tariffs on solar panels, particularly from China, Cambodia, Vietnam, and Malaysia, have added upward pricing pressure that partially offsets the efficiency gains from technology improvements. Equipment prices are not as low as they would be in an unrestricted global market.

Pros

Panel Technology Has Advanced Substantially

The industry has undergone a major technology transition since 2019. The dominant PERC (Passivated Emitter and Rear Cell) technology has given way to N-type TOPCon and HJT panels, which achieve 22–24% efficiency in commercial production. Back-contact (IBC and ABC) panels now approach 25%. This matters practically: higher efficiency means fewer panels are needed to generate the same output. The technological shift has not added cost. TOPCon panels are competitive with older PERC pricing.

Community Solar Continues to Expand Access

For renters, those with shaded properties, or homeowners who prefer not to deal with installation, community solar farms remain a viable alternative. Subscribers receive credits on their utility bills for their share of the farm’s production, typically at a 5–15% discount to retail electric rates. The community solar market has matured considerably since 2021, with strong programs now available in New York, Illinois, Massachusetts, Minnesota, Colorado, Maryland, Maine, and New Jersey. Some programs offer $0 down with month-to-month cancellation.

Solar Remains a Sound Long-Term Investment in the Right Markets

Despite the loss of the federal tax credit, solar continues to pencil out in many markets, driven by steadily rising utility rates. Residential electricity prices have increased in 44 of 50 states over the past three years. States with rates above 20 cents/kWh — including California (30+ cents in many areas), Massachusetts, Connecticut, New York, and Hawaii — still offer payback periods of 6–10 years even without the federal credit, with substantial savings over a 25-year system life.

Solar makes the strongest financial sense when: your roof is south- or southwest-facing with minimal shading; your monthly electricity bill exceeds $150; your state has meaningful incentives or a strong net metering policy; and you plan to stay in your home for at least 7–10 years. Tools like EnergySage and the National Renewable Energy Laboratory’s PVWatts calculator can help you model site-specific returns before committing to a quote.

More Reputable Installers and Better Warranties Than Ever

The residential solar installation market has continued to mature. Most major manufacturers now offer 25-year product and performance warranties as standard; Maxeon backs its panels with a 40-year warranty. There are typically several well-reviewed local and regional installers in most markets, which helps keep prices competitive. A labor warranty, which covers defects in installation workmanship, is typically offered by the installer rather than the manufacturer, so installer financial stability matters—you want them to be there later, if problems arise.

Get at least three competing bids and compare cost-per-watt figures to evaluate quotes fairly across different system sizes. Verify installer credentials through NABCEP certification and check recent reviews on SolarReviews.

Solar Is Still The Better Option 2026

Despite 2026 being a genuinely mixed year for home solar economics, equipment costs are at or near historic lows, panel technology is better than ever, and solar remains a compelling long-term investment in high-electricity-cost markets. But the loss of the 30% federal tax credit is a real setback for homeowners, effectively adding back years to the payback period.

The affordability math depends on where you live, your electricity costs, your state’s incentive programs, and your financing approach. In states like New York, New Jersey, Massachusetts, Maryland, Oregon, and South Carolina — where strong state programs partially replace the federal credit — solar economics remain solid. In states with low electricity rates and minimal state incentives, the case is harder to make at 2026 prices.

Before signing any contract, use the DSIRE database to identify all state and local programs available to you, get at least three installer quotes, and understand your utility’s actual net metering or export compensation terms. The decision to go solar is site-specific national averages are a starting point, not the answer.

Editor’s Note: Originally published on March 25, 2021, this article was updated in March 2026 to reflect current pricing, tax credit changes, and technology.

The post Should You Go Solar In 2026? appeared first on Earth911.

https://earth911.com/eco-tech/solar-pros-and-cons/