What Every Homeowner Needs to Know
The 25D tax credit is gone — and that’s actually good news for most homeowners. Here’s why solar has never been more accessible, and how to take advantage of the new landscape.
The residential 25D tax credit expired at the end of 2025 — but commercial solar incentives under Section 48E are now flowing directly to homeowners through leases and energy service agreements. For most families, going solar in 2026 is cheaper than it was in 2025, with $0 down options that cut electric bills by 20–50% from day one.
The 25D Credit Expired. Here’s What That Actually Means.
For over a decade, the Section 25D Investment Tax Credit was the headline incentive for homeowners going solar — a 30% federal tax credit applied directly against what you owed the IRS. It was powerful if you had the tax liability to absorb it. At the end of 2025, it expired as scheduled under current law.
Predictably, the chatter online shifted to doom:”Solar doesn’t make sense anymore.”That narrative is wrong — and in many cases, the opposite is true.
The real story:The expiration of 25D didn’t kill solar incentives. It shifted them. The Section 48E clean energy investment credit — designed for commercial and utility-scale projects — now creates a powerful pathway for homeowners through third-party ownership structures like leases and Energy Service Agreements.
Understanding this shift is the difference between walking away from one of the best financial decisions available to homeowners, and taking full advantage of it.
Section 48E: The Credit That Now Works for You
Section 48E is a technology-neutral clean energy investment credit that applies to solar, battery storage, and other qualifying clean energy systems. Unlike 25D, it’s a commercial credit — claimed by businesses and investors who own qualifying equipment.
Here’s where it gets interesting for homeowners: when a solar company installs a system on your roof and retains ownership through a lease or power purchase agreement, they can claim the 48E credit. And because markets are competitive, they pass much of that value along to you in the form of lower rates.
If your home is in an energy community— an area historically dependent on fossil fuel industries, or a census tract with elevated unemployment tied to coal or oil — your installer may qualify for the 10% energy community adder. Similarly, systems using domestically manufactured components can earn a 10% bonus on top of the base rate.
These aren’t obscure edge cases. Millions of homes across the country qualify for one or both adders, which is why 2026 pricing for solar leases has surprised many homeowners to the upside.
Two Paths to Solar in 2026
Today’s market offers homeowners two primary structures to access solar through third-party ownership. Your choice depends on whether you prioritize simplicity and zero upfront cost, or maximizing long-term value with a one-time payment.
The most accessible option for most families. You pay nothing upfront, and instead make a fixed monthly payment — typically sized so that your combined solar payment plus any remaining utility bill is20–50% less than your current electric bill alone.
The installer owns the system, claims the 48E credit, and absorbs any energy community or domestic content bonuses — passing the savings to you as a lower rate. In exchange, you benefit from a full-service arrangement:maintenance, insurance, and a production guarantee. If the system underperforms, you get money back.
This structure is ideal for homeowners who want immediate savings with no complexity, no maintenance responsibility, and no capital tied up in equipment.
Sometimes called a prepaid PPA, prepaid lease, or Energy Service Agreement — these structures allow a homeowner to make a single one-time payment for the solar system at a price meaningfully below the cash purchase price, with the provider retaining ownership and claiming the 48E credit on the backend.
Think of it as the best of both worlds: you get the economics close to ownership, without the tax complexity. The installer credits the value of the 48E incentive into your one-time price, so you’re effectively capturing much of the federal credit without needing to have the personal tax liability to use it.
Critically, the prepaid amount can often be combined with state and local incentives— including state income tax credits, renewable energy certificates (RECs), battery storage rebates, and performance-based incentives — to bring your net cost down further still. In some states, a homeowner using a prepaid ESA structure plus stacked local incentives ends up at a lower effective cost than they would have with 25D ownership in 2025.
Don’t have the cash on hand? A prepaid ESA doesn’t require liquid capital. Many homeowners finance the one-time prepaid amount using a personal loan or home improvement loan, then structure the monthly loan payment to be less than what they’d otherwise pay in electric bills. You get the superior long-term economics of the prepaid structure — the deeply discounted one-time price, the stacked local incentives, the full-service coverage — while spreading the cost over time. Because the prepaid price is already meaningfully below the cash system cost, even with interest factored in, the math often works in the homeowner’s favor compared to a conventional solar loan on a purchased system.
Important: The terms “prepaid lease,” “prepaid PPA,” and “Energy Service Agreement” are sometimes used interchangeably — but the details matter. Always review the contract length, escalator clauses, and what happens at end-of-term before signing. A good installer will walk you through each element clearly.
Lease vs. Prepaid ESA: Which Is Right for You?
Option 1: Monthly Lease
- $0 upfront cost
- Fixed monthly payment
- 20–50%+ savings vs. retail electricity
- Maintenance & insurance included
- Production guarantee (you get paid if it underperforms)
- Best for: Accessibility and immediate savings
Option 2: Prepaid ESA / Lease
- One-time payment (below cash purchase price)
- No ongoing solar payment
- 48E incentive baked into pricing
- Stackable with state & local incentives
- Can be financed (loan instead of cash)
- Greater long-term savings potential
- Best for: Maximizing long-term value
Going Solar in 2026 Is Often Cheaper Than 2025
Here’s the counterintuitive truth: because the 25D credit required homeowners to personally absorb a 30% tax benefit — which many couldn’t fully use due to limited tax liability — a meaningful portion of that value was often left on the table. The 48E credit, claimed by the commercial owner and passed through to you via pricing, doesn’t have that problem.
When you layer in the energy community adder, domestic content bonus, and statewide incentives that exist across most of the country — RECs in Massachusetts, SRECs in Maryland and DC, battery rebates in New York, performance incentives in Connecticut and New Jersey — the economics in 2026 are genuinely compelling. In many markets, the effective cost to go solar today is lower than it was when 25D was in full effect.
The homeowners who will miss out in 2026are those who heard “the tax credit expired” and stopped reading. The incentive landscape changed — it didn’t disappear. Understanding the new structures is now the deciding factor between a great deal and no deal at all.
The best first step is a conversation with a qualified solar advisor who understands both the federal credit landscape and the local incentives in your state. The right structure depends on your utility, your tax situation, your usage profile, and what’s available where you live.
Find Out What’s Available in Your State
Incentives vary significantly by location. Enter your zip code to see what’s available in your area — from 48E lease pricing to state tax credits, RECs, and battery rebates.