Are Solar Panels Worth It in 2026?

What changed: the end of the 30% credit

From 2022 through 2025, the Residential Clean Energy Credit took 30% off the cost of solar panels, solar water heaters and home batteries. The budget law signed on July 4, 2025, moved its end date from 2034 to the end of 2025. The IRS now states that the credit "is not available for any property placed in service after December 31, 2025," and that you claim it for the year a system is installed, not the year you paid for it.

What that means for you:

• Installed and working by December 31, 2025: claim 30% on your 2025 return with Form 5695. If the credit was bigger than your tax bill, the unused part carries forward to later years.
• Installed in 2026 or later: no federal credit, even if you signed the contract or paid a deposit in 2025.
• Leased panels and power purchase agreements: the company that owns the system claims a separate business credit (section 48E), not you. Under the same law, solar projects generally keep that credit if they began construction by early July 2026 or are placed in service by the end of 2027. Some of that value may still show up in lease and PPA prices through 2027.

Be wary of any salesperson in 2026 who promises you a 30% federal tax credit on panels you buy for your home. Ask them to show you the IRS rule in writing.

How long solar takes to pay off now, by state

These results come from our solar payback calculator with the same inputs for every state: 900 kWh a month (about the U.S. average), a system sized to cover 100% of yearly use, $3.00 per watt installed, no incentives, rates rising 3% a year and panels losing 0.5% of output a year. California, Arizona and Hawaii use net billing (half the power used at home, exports credited at 30% of retail). All other states assume full net metering.

"25-yr net" is total savings over 25 years minus what you paid, before inverter replacement and without discounting future dollars. Arizona shows why sun alone isn't enough: it is one of the sunniest states, but cheap power and low export credits put it near the bottom.

A worked example: Texas

Texas averages 5.4 peak sun hours. One kilowatt of panels makes about 5.4 × 365 × 0.77 = 1,518 kWh a year after real-world losses. A home using 10,800 kWh a year needs 7.1 kW, which rounds up to eighteen 400-watt panels, or 7.2 kW. At $3.00 per watt, that's $21,600. Valued at 16.03¢ per kWh, the system saves about $1,737 in year one, and the running total passes $21,600 at about 10.9 years. Under the old 30% credit, the same system would have cost $15,120 and paid back in about 7.9 years. So the credit's end added about three years in Texas.

The five numbers that decide it

Change one input at a time on the Texas example and you can see what really matters:

1. Your electric rate. It sets the value of every kWh. At 30¢ you save about twice as much per panel as at 15¢. Use the energy charge from your bill, not the total divided by kWh, because fixed monthly fees don't go away with solar.
2. How exports are credited. Under full net metering, power you send to the grid at noon offsets power you buy at night at the full rate. Under net billing, exports earn less. California moved new customers to net billing in 2023, and other utilities have followed. Ask your utility for its current tariff before you sign anything.
3. Price per watt. Compare quotes on cost per watt, not the total. Marketplace quotes averaged about $2.60 per watt in 2026, while Berkeley Lab's median for owner-bought systems installed in 2025 was about $3.60.
4. Sun and shade. The state averages assume a south-facing, unshaded roof. East or west roofs make roughly 10% to 20% less. Heavy shade can cut much more.
5. How long you stay. If you'll move before the payback year, you're betting that buyers will pay you back for the panels. Some do, but it isn't guaranteed.

State, utility and local incentives

With the federal credit gone, local programs carry more weight. They come and go, and many have budgets that run out. The forms they take:

• Rebates from a state energy office or utility, paid per watt or as a flat amount. A $2,000 rebate on the Massachusetts example cuts payback from 7.1 to 6.6 years.
• State tax credits, sometimes a percentage of cost with a dollar cap.
• Performance payments, such as solar renewable energy certificates (SRECs), paid for each MWh your system makes in states that have them.
• Property tax exemptions, so the added home value doesn't raise your tax bill, and sales tax exemptions on equipment.

The best place to look is DSIRE, the Database of State Incentives for Renewables and Efficiency, run by the N.C. Clean Energy Technology Center at NC State University. Search your ZIP code, then confirm each program on the agency's or utility's own site. Enter any rebate or state credit in the calculator's incentive fields.

Cash, loan, lease or PPA

Loans. Check whether the payment beats the savings. Our Texas system ($21,600) financed at an example rate of 8% for 20 years costs $181 a month, or $43,400 in total. It saves about $145 a month in year one. Money flows out until rising rates close the gap. In August 2024 the CFPB reported that many solar loans hide "dealer fees" in the loan amount, often pushing the cost 30% or more above the cash price, and that the fees often don't appear in the advertised APR. A 20% fee on our example raises the payment to $217. Ask every installer for the cash price, and compare with a loan from your own bank or credit union.

Leases and PPAs. You save from day one if the payment is below what the panels would save, and the company maintains the system. The FTC lists the catches: you don't own the system, you can't claim incentives, payments can rise every year, and leaving early can be hard and costly. Do two checks. First, compare the first-year payment with your first-year savings. Second, compare the yearly escalator with how fast your utility rates rise. A 2.9% escalator against 2% rate growth eats your savings over 20 years.

Selling the house. Owned panels go with the house. A loan is usually paid off at closing. A lease or PPA must be taken over by the buyer, often after a credit check, or bought out. Read the transfer terms before you sign.

When solar usually isn't worth it

• Your roof has less than about 10 years left. Replace it first, or plan on paying thousands to remove and reinstall the panels later. Our roofing calculator prices a new roof.
• Trees or neighboring buildings shade the roof for much of the day.
• Your power costs less than about 13¢ per kWh and exports earn little.
• You expect to move within a few years.
• The payback in an honest calculation runs past 15 years. Inverters and repairs often cost money before year 25.

Cutting use is usually cheaper than making power. Check what each appliance costs with the electric bill calculator before you size a system. If you plan to buy an electric car, run the EV charging cost calculator too, because the extra use changes the right system size and makes daytime solar more valuable.

Getting quotes, and when to call a pro

• Get at least three quotes and compare price per watt, panel and inverter warranties, production estimates and who handles permits and the utility hookup.
• Check the production estimate yourself with NREL's PVWatts tool or our calculator. A quote that promises more kWh than the sun allows is a red flag.
• Walk away from pressure to sign the same day, contracts you can't take home to read, and promises of "free" solar or a federal credit that no longer exists.
• Check the installer's license with your state contractor board and complaints with your attorney general.

Solar is a licensed-pro job for most homes. A grid-tied system needs a building and electrical permit, an inspection under the National Electrical Code and the utility's approval before it turns on. Panels make voltage whenever light hits them, so DIY work on wiring and the main panel isn't a place to learn.

Common questions

Sources

Checked October 29, 2026. Payback figures come from the HomeOutlay solar payback calculator; its own "Sources and assumptions" section documents sun hours, rates and losses. The 8% loan rate and the $2,000 rebate are examples, not market data. This guide is educational and isn't tax or financial advice.

• IRS, Residential Clean Energy Credit (updated July 4, 2026): no credit for property placed in service after Dec. 31, 2025; claim in the year installed; carryforward.
• Public Law 119-21 (One Big Beautiful Bill Act), signed July 4, 2025: 25D termination and the 45Y/48E phase-out for wind and solar.
• IRS Notice 2025-42 (Aug. 2025): beginning-of-construction rules for wind and solar facilities under 48E.
• DSIRE, N.C. Clean Energy Technology Center (accessed Oct. 2026): state, utility and local incentives.
• FTC, Solar Power for Your Home: lease, PPA, loan and PACE trade-offs; selling a home with solar.
• CFPB, report on solar financing and the Issue Spotlight (Aug. 7, 2024): dealer fees of 30% or more above cash price.
• EIA, Electric Power Monthly, Table 5.6.B: average residential price by state, Jan. to Aug. 2026.
• Berkeley Lab, Tracking the Sun: median installed price of about $3.60 per watt for 2025, and EnergySage marketplace data for the $2.60 figure (June 2026).
• NREL PVWatts (NREL is now the National Laboratory of the Rockies): production estimates and the sun-hour data behind the calculator.
• California Public Utilities Commission, Net Billing Tariff (Decision 22-12-056).