The U.S. federal residential solar tax credit ended on December 31, 2025, altering the economics for homeowners considering rooftop solar. While panel prices hit near-historic lows and technology improves, state incentives now play a larger role. Businesses can still claim a commercial credit for leased systems.
More homeowners installed solar panels before the Section 25D Residential Clean Energy Credit expired at the end of 2025. This 30% credit, worth up to $9,000 on a $30,000 system, was phased out early by the One Big Beautiful Bill signed on July 4, 2025. Homeowners who claimed it before year-end retain their savings, but cash or loan purchases no longer qualify, extending payback periods by 2-4 years in many cases, according to EnergySage data showing national averages of $2.50-$3.50 per watt before incentives in early 2026. Panel efficiencies have risen to 22-24% with N-type TOPCon and HJT technologies, reducing the number needed for the same output without raising costs above older PERC panels. A remaining federal option, the Section 48E Clean Electricity Investment Credit, applies through at least 2027 for companies owning rooftop systems. Providers like Tesla offer leases or prepaid PPAs where they hold ownership for five years per IRS rules, passing savings to homeowners. State programs bridge the gap in key markets. New York's NY-Sun initiative provides $0.20-$0.80 per watt upfront plus a 25% tax credit up to $5,000. New Jersey's Successor Solar Incentive pays about $85.90 per megawatt-hour over 15 years, rising to $95.23 in 2026-27. Massachusetts' SMART 3.0 offers $0.03 per kWh over 10 years, improved with batteries. Oregon's Energy Trust rebates reach $5,500 for qualifying low-income households. Illinois Shines delivers $7,000-$11,000 upfront based on 15-year SRECs. South Carolina provides a 25% tax credit up to $35,000. Net metering persists in 38 states but faces cuts, like California's NEM 3.0. Batteries add $12,000-$35,000, though virtual power plants offer compensation. Solar remains viable in high-rate states like California and New York, with 6-10 year paybacks.