While the federal solar tax credit is set to expire at the end of 2025, it is still important to understand how the credit works and how you may be able to benefit from it. Additionally, many other solutions exist to lower your overall cost if you are still interested in solar power for your home.

Solar panels are a smart investment for any homeowner who wants to save money and increase home value. According to Stanford University, solar panels not only help put money back into homeowners' pockets, but they can also help with local and regional power outages. 

In this guide, we will explore the federal solar tax credit, when it expires, and how you can benefit from solar panels in 2026 and beyond.

How Does the Federal Solar Tax Credit Work? 

When you install a solar panel system or similar energy-efficient upgrades for your home, the federal government will give you a credit of up to 30% of the installation cost of the system. The tax credit can add up to thousands of dollars, reducing your overall solar panel installation bill significantly.

The credit is nonrefundable, which means that you need to have a tax liability to use it. However, you can carry the credit forward to future tax returns and apply it to tax liabilities down the road.

What Happens to the Solar Tax Credit in 2026? 

The existing solar tax credit will expire on December 31, 2025. Taxpayers who installed a solar panel or similar energy-saving system during the tax year of 2025 can still take advantage of the credit on their 2025 tax returns. However, the credit will not return for the 2026 tax year. 

Solar Panel Cost Alternatives 

Once the solar energy tax credit expires, will you still be able to save money on your solar panel system? The answer is yes. There are many different methods to explore when you are determining whether you can fit solar panels into your budget.

Local Renewable Energy Incentives

Although the federal tax incentive is being phased out, numerous state and local programs continue to incentivize homeowners to invest in solar energy. Solar is extremely popular in states such as California, and the state has many different options for those who want to benefit from solar energy, such as:

  • California Self-Generation Incentive Program: Residents can receive rebates based on the amount of solar energy they generate from their home systems.
  • Disadvantaged Communities Single-Family Solar Homes Program: Offers millions of dollars every year in grants for families to install solar at low or no cost.
  • PACE Financing: Residents can finance solar panels through PACE (Property-Assessed Clean Energy) programs, and use property taxes to pay back the loan over a defined period.

Payment Plans

Some solar companies offer private financing for customers who cannot afford the entire cost up-front. Ask your solar contractor and see if there is a way to make the installation more affordable.

You can also ask your banking institution for financing assistance through a home equity line of credit (HELOC), which can draw from your home equity and typically has a lower interest rate than credit cards or other financing options.

Leasing Options 

If you want something less complex than ownership, consider leasing your solar panels. You will often have a $0 down payment and free installation, while paying the company every month, often using the savings from the solar energy.

Lease terms are typically long, spanning anywhere from 20 to 25 years. Additionally, a benefit that leasing customers love is that you will not have to be responsible for maintenance and repairs. 

Excess Energy Storage 

You do not have to let extra solar energy go to waste. There are plenty of options for saving and storing your excess energy for a rainy day or a power outage. Work with a vendor such as California Solar & Battery Storage Company to determine your battery storage needs.

Partnering With Utility Companies

Explore offers from your utility company to see if you can save even more on your solar panel system through partnerships. Often, communities have exclusive incentive programs that can:

  • Distribute electricity in case of a blackout
  • Give rebates to solar customers
  • Fund job opportunities for solar installers
  • Contribute to sustainable community energy solutions

Frequently Asked Questions

Will the Solar Tax Credit Ever Come Back? 

It depends on many factors, such as the goals of the next presidential administration and the priorities of lawmakers. With mounting evidence of climate change, there may be more demand for incentives such as solar tax credits. Consumers can directly contribute to curbing the effects of rising temperatures and natural disasters. 

The federal solar tax credit may come back in a different form. It could be presented as a deduction rather than a credit, or have some other benefit when you file your tax return in the future.

Are Solar Panels Still Worth It Without the Solar Tax Credit? 

Absolutely. The savings alone from solar panels can have a positive impact on your electric bill and your conscience. With solutions such as excess storage, it will be easier than ever to retain energy and rely less on your electricity provider to power your home.

What Other Eco-Conscious Changes Can I Make in My Home? 

While solar panels are one of the primary ways that you can invest in your property, there are plenty of other options if you want to design a more eco-friendly living space, including:

  • Energy-efficient appliances that use less electricity, gas, and water
  • Electric vehicles with home charging ports
  • Solar-powered elements, such as outdoor lights
  • Natural cleaning products and reusable cloths
  • Ethically-sourced materials for furniture and flooring

Find Affordable Solar Solutions 

Even though the federal solar tax credit will no longer exist after 2025, solar panels offer valuable benefits for many homeowners. Using this guide, you can determine whether upgrading your home energy system with solar is the right choice for your lifestyle.

Would you like to learn more about how you can be more eco-friendly in every area of your life? Take a look around our website for more tips and tricks.

This article was prepared by an independent contributor and helps us continue to deliver quality news and information.

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