Did the solar tax credit expire in 2026? Here’s what homeowners need to know
The 30% solar tax credit didn’t disappear in 2026, it just moved. What you need to know about prepaid solar leases — and why going solar in 2026 can still save you money.
If you heard that the federal solar tax credit expired and assumed that meant solar was no longer worth it, you’re not alone. A lot of homeowners think the same thing. But here’s the truth: The tax credit that used to benefit homeowners didn’t disappear, it shifted. You can still benefit from it, just in a different way, through something called a prepaid lease or power-purchase agreement (PPA).
Here’s how it works and some things to watch out for.
What happened to the solar tax credit?
For years, the Investment Tax Credit (known as the “25D federal tax credit” in solar circles) let homeowners claim 30% of the cost of a purchased solar system directly on their tax return. Thanks to the One Big Beautiful Bill Act (OBBBA) (we didn’t name it!) that credit expired at the end of 2025 for homeowners who buy their systems through cash or loans.
But here’s what most people don’t know: A separate 30% tax credit — the 48E Clean Electricity Investment Tax Credit — is still very much alive. The difference is that it applies to companies, not individual homeowners. That means solar leasing companies that own the panels on your roof can still claim the 30% tax credit.
And when competitive companies claim a tax credit? They pass the savings along to you through lower pricing.
That’s exactly what a prepaid lease can do. (Note: We also mentioned prepaid power-purchase agreements. Here we’ll focus on prepaid leases, but to learn more about the difference between the two, check out our blog “What’s the difference between a solar PPA and a solar lease”.)
So, what is a prepaid solar lease?
A prepaid lease is a type of solar arrangement where you pay for your system upfront — or finance that upfront cost through a loan — rather than making monthly lease payments over 20+ years to the company that technically owns the system.
Here’s what makes it different from a traditional lease:
- Traditional solar lease: You pay a monthly fee (sometimes with annual escalators) to use a solar system you don’t own. At the end of a 20–25 year contract, you may have the option to buy.
- Prepaid lease: You pay the cost of the system upfront. A solar company still technically owns and maintains the panels for an agreed period — typically five to six years — but at the end of that shorter window, you have the option to buy the system and own it outright.
Think of it like a fast-track lease-to-own. You get the benefits of third-party ownership (professional installation, maintenance, no immediate technical responsibility) while working toward full ownership on a much shorter timeline.
As Jess Lyons, staff product manager at Aurora Solar, put it in an interview with SPW: “You don’t have to be an expert on the thing on your roof right away. You have five to six years to figure it out.”
Why does the tax credit matter here?
Because the company offering your prepaid lease can still claim the 48E tax credit on your system, competitive providers factor that benefit into their pricing — and that benefit can compound if your system is eligible for the domestic content bonus or the energy community bonus. That’s money you’d otherwise have been leaving on the table if you assumed solar tax incentives were gone.
According to the 2026 Aurora Solar Snapshot — which surveyed more than 1,100 homeowners and 600 solar sales professionals — nearly two-thirds of solar companies expect most of their 2026 projects to involve third-party ownership (TPO) arrangements like leases. More than half said TPO has become their most-used financing option. The market is shifting, and prepaid leases are a big reason why.
Who is a prepaid lease right for?
A prepaid lease tends to be a good fit if:
- You can afford the upfront cost (or qualify for a loan to cover it) and want to eventually own your system
- You want lower long-term costs than a traditional monthly lease or PPA.
- You’re not ready to take full ownership of a solar system right away — but you plan to within a few years
- You want the tax benefit and potential bonuses reflected in your pricing without having to claim a credit on your own taxes
It’s also worth noting that prepaid leases still benefit from professional maintenance during the lease period. You’re not on your own until (and unless) ownership transfers to you.
What to watch out for
Prepaid leases are relatively new, and the details can vary significantly by provider. A few things to pay close attention to before signing:
Production guarantees. Most solar lease agreements include a guarantee that your system will produce a minimum amount of electricity. Solar United Neighbors — a nonprofit solar consumer advocate — notes that homeowners with prepaid leases may have less leverage over the solar company if the system underperforms, since payment has already been made. Make sure you understand how underperformance is handled before you sign.
Buyout terms. Understand the exact terms of your buyout option at the end of the lease period. What does ownership actually cost? What’s included?
Availability. Prepaid leases are still rolling out to new markets. They’re currently available in states including Arizona, California, Colorado, Hawaii, Idaho, New Jersey, New York, Texas, and Utah — with more coming.
Read the full contract. As with any solar agreement, the fine print matters.
The bottom line
The story that “solar tax credits are gone” is only half true. Yes, the credit homeowners could claim on their own taxes expired. But the mechanism that helps make solar affordable — a 30% federal incentive — still exists, and competitive providers are now using it to make lease pricing more attractive than ever.
A prepaid lease isn’t for everyone. But for homeowners who want to eventually own a solar system, start saving quickly, and take advantage of a market that’s adapted to work in your favor, it’s one of the most compelling options available right now.
Solar didn’t stop making sense in 2026. It just changed shape.
Ready to see what solar could look like for your home? Get a free quote from a local installer →
Frequently Asked Questions
Did the federal solar tax credit go away in 2026?
Not entirely. The 25D residential tax credit — the one homeowners claimed on their own taxes when they bought a system with cash or a loan — expired at the end of 2025 under the One Big Beautiful Bill Act (OBBBA). However, the 48E Clean Electricity Investment Tax Credit, also worth 30%, is still in effect for companies that own solar systems. That includes solar leasing companies, which pass the savings to homeowners through lower pricing.
Can homeowners still get the 30% solar tax credit?
Indirectly. If you go solar through a prepaid lease or power-purchase agreement (PPA), the leasing company claims the 48E tax credit and competitive providers factor that benefit into your price. You don’t claim anything on your own tax return, but you still benefit from the 30% incentive.
What is a prepaid solar lease?
A prepaid solar lease is a financing arrangement where you pay the cost of your solar system upfront (in cash or through a loan) instead of making monthly lease payments for 20+ years. The solar company technically owns and maintains the system for a shorter period — usually five to six years — and then you have the option to buy it outright.
How is a prepaid lease different from a traditional solar lease?
A traditional solar lease has you paying a monthly fee for 20–25 years to use a system you don’t own. A prepaid lease front-loads that cost into a single upfront payment, shortens the third-party ownership period to about five to six years, and gives you the option to take ownership much sooner. Think of it as a fast-track lease-to-own.
Who owns the solar panels in a prepaid lease?
The solar company owns the panels during the lease term (typically five to six years) and is responsible for installation and maintenance during that period. After the lease term ends, you have the option to buy the system and own it outright.
Is a prepaid solar lease right for me?
A prepaid lease is generally a good fit if you can afford the upfront cost (or qualify for a loan), want lower long-term costs than a traditional monthly lease, plan to eventually own your system, and want the 30% tax benefit reflected in your pricing without having to claim it on your own taxes.
Which states offer prepaid solar leases?
As of 2026, prepaid leases are available in Arizona, California, Colorado, Hawaii, Idaho, New Jersey, New York, Texas, and Utah, with additional states rolling out over time. Availability varies by provider.
What should I watch out for before signing a prepaid lease?
Pay close attention to the production guarantee (what happens if the system underperforms), the buyout terms (what ownership will actually cost at the end of the lease period), and the full contract language. Because you’ve paid upfront, you may have less leverage with the solar company if issues come up later — so understand exactly how disputes and underperformance are handled before signing.
Does a prepaid lease still include maintenance?
Yes. During the lease term, the solar company is still responsible for professional maintenance of the system. You’re not on the hook for repairs or upkeep until (and unless) ownership transfers to you at the end of the lease period.
