Solar After the ITC Expired: Is Going Solar Still Worth It in 2026?
What expired (and what didn't)
Three different IRA-era credits get conflated in solar conversations:
- Section 25D — Residential Clean Energy Credit (30%): EXPIRED for systems placed in service on or after 2026-01-01. Systems installed by Dec 31, 2025 still claim on 2025 tax return.
- Section 48E — Investment Tax Credit (commercial / TPO): STILL IN EFFECT. Bonus rates for domestic content and energy communities reduced after 2026-01-01, but the 30% baseline remains. This is the credit a leasing or PPA company claims on a residential rooftop.
- Section 25C — Energy Efficient Home Improvement Credit: STILL IN EFFECT. Covers heat pumps ($2,000/yr cap), EV chargers, insulation, windows. NOT solar panels.
How the math changes
Take a 7 kW residential install with $21,000 gross cost (about $3.00/W installed). On 2025 economics:
- Federal 25D credit (30%): −$6,300
- State / utility programs: variable, often $1,000–$3,000
- Net cost: ~$11,700–$13,700
On 2026 economics (post-25D-expiration):
- Federal 25D credit: $0
- State / utility programs: same as before
- Net cost: $18,000–$20,000
That's 35–40% more cash out of pocket for the same system. Payback shifts from roughly 7–9 years (national average) to 11–14 years for most ratepayers — but the spread by state is now much wider.
State-by-state reality check
Three things determine whether 2026 solar is still good for you:
- Retail electricity rate: the higher the rate you pay, the more value each kWh of self-generation has. Hawaii ($0.42/kWh), California ($0.32), New York ($0.25), Massachusetts ($0.27), Connecticut ($0.27) → solar still strongly positive. Texas average ($0.16), Florida ($0.14), Mississippi ($0.13) → marginal without state help.
- Net-metering structure: 1:1 net metering (most states) compensates exports at retail rate, the best case. Net billing or avoided-cost (California NEM 3.0, Hawaii CSS, some IL utilities) compensates much less, often forcing storage to keep economics viable.
- State incentives: still vary. NY-Sun, Massachusetts SMART, Illinois Shines, Connecticut Solar Energy, NJ TREC — all active. Combined with state tax credits (NY 25%, MA 15%, etc.), state stacking can still produce 5–8 year payback.
Where solar still pencils in 2026
- Hawaii. Highest electricity rates in the country; payback under 6 years even without 25D. CSS net-billing requires storage, but high rates make storage attach economical.
- California (with storage). NEM 3.0 + state SGIP rebates + high rates → payback 9–12 years. Without storage, payback stretches well past 15 years; not advised.
- Massachusetts. SMART program adders, state credit, NEM at retail → payback 6–8 years.
- New York. NY-Sun MW Block + state 25% credit + NEM → payback 7–9 years.
- Connecticut, New Jersey, Rhode Island. SREC programs sustain economics.
Where it stretches without 25D
Texas (most utility territories outside Austin Energy), Florida (despite property-tax exemption, low electricity rates suppress savings), Arizona (declining net-metering), Mississippi, Alabama, Kentucky, West Virginia — payback in these markets typically lands in the 14–18 year range without the federal credit, vs 9–12 with it. Solar still works, but the financial case is weaker; the case shifts toward grid-resilience and energy independence rather than pure ROI.
The TPO / lease alternative
If your state remains favorable but you don't want the upfront cost without the 25D tax benefit, third-party-owned (TPO) systems — leases and power purchase agreements (PPAs) — let the system owner claim the Section 48E commercial credit. The homeowner sees the benefit as a lower monthly bill rather than a tax credit. TPO arrangements typically save 10–25% off utility rates with no upfront cost; the tradeoff is a long-term contract (15–25 years) and complexity at home sale.
EnergySage, SunRun, Sunnova, Sunpower (post-Maxeon), and Tesla Solar all offer TPO. Compare the effective rate against your utility's projected escalation; TPO with a fixed escalator clause may not save what its marketing claims if utility rates rise less than the contract assumes.
Storage is now even more important
Without 25D, every kWh you self-consume matters more (you're paying full retail to avoid exports at non-1:1 compensation). California NEM 3.0 forces storage; other states are headed in similar directions. The economics of pairing a battery (LFP, $8K–$13K installed for 10 kWh) with new PV are stronger in 2026 than they were in 2025, partially offsetting the loss of 25D.
See our whole-home backup comparison for product picks; theLFP vs NMC guide covers chemistry tradeoffs.
Honest verdict
Solar still pencils, but only if your state does the work the federal credit used to do.
If you're in HI, CA (with storage), MA, NY, CT, NJ, or RI — the math still works, often with state programs filling much of the gap. If you're in TX, FL, AZ, or most of the Southeast outside high-rate utility pockets, payback stretches into territory where solar is more about grid resilience and long-term inflation hedge than pure ROI. Plug your state and your actual electricity rate into our ROI calculator with federal credit set to 0% for an honest answer.
Sources
- [1]IRS Form 5695 — Residential Energy Credits — Authoritative on credit eligibility and timing rules
- [2]DOE Solar Energy Technologies Office — Tax Credit Page — Plain-language explainer on Section 25D and 48E
- [3]EIA Electric Power Monthly — State-level retail rate data referenced above
- [4]CPUC Decision 22-12-056 (NEM 3.0) — California net-billing tariff
- [5]NYSERDA NY-Sun MW Block — Active New York program
- [6]MA Department of Energy Resources SMART Program — Active Massachusetts program