Every claim on this page checked against primary sources on July 27, 2026

Buying vs leasing solar in 2026

What actually happened on December 31, 2025

The July 2025 budget law rewrote the energy credits. For a homeowner, the operative sentence is short:

Two details in that sentence do more work than they look like they do.

The first is "expenditures made." It does not mean when you paid. § 25D(e)(8)(A) treats an expenditure as made when the original installation is completed, and the IRS restated that in its own guidance on the new law. A homeowner who signed in October 2025, paid a deposit in November, and was switched on in February 2026 made a 2026 expenditure and gets nothing. IRS FS-2025-05, Aug. 21, 2025

The second is "under this section." Section 25D is the residential credit — the one an individual claims on a personal return for property installed at a home they live in. Congress terminated that section. It did not terminate § 48E, the clean electricity investment credit that a business claims on a commercial return. And a solar company that owns equipment on someone else's roof and sells them the electricity is, for tax purposes, a business that made a qualified investment in a generating facility.

The subsection that did not close the loophole

Congress did legislate against leasing. Section 70513(c)(1)(B) of the same law added a new subsection to § 48E, and its heading says exactly what it is for:

Everything turns on which paragraphs of § 25D(d) are named. That subsection lists six categories of residential energy property, and the restriction reaches two of them:

Rooftop photovoltaic panels — the thing almost everyone means by "solar" — are paragraph (2). They are not in the list. Solar water heaters and backyard wind turbines are. The practical result is that the least common residential technologies lost third-party financing and the most common one kept it.

The rate is unchanged too. Section 48E starts at 6%, multiplied by five to 30% for a facility with maximum net output under one megawatt — which is every rooftop in America by a factor of about a hundred. 26 U.S.C. § 48E(a)(2)

So what does that mean for the money?

Honestly: it means the two options are no longer comparable on the same terms, and anyone who tells you the lease is now "30% cheaper" is doing arithmetic that the law does not support.

The part the federal story leaves out: ownership rules cut the other way

Here is what makes this genuinely a decision rather than an obvious answer. The federal code now favors third-party ownership. State and utility programs overwhelmingly still favor you owning the system — and in 2026 those programs are a much larger share of what is actually on the table, because they are the part that survived.

Minnesota is a clean illustration, because it contains both rules at once. Minnesota Power's SolarSense rebate requires that you own the PV system and the property; a leased array is ineligible outright. Xcel Energy's Solar*Rewards pays the production incentive to whoever owns the system, so a lease is workable but the $0.03/kWh goes to the finance company unless the contract says otherwise. And the Minnesota Department of Commerce battery rebate states plainly that the payee must be the owner of the storage system. Three programs in one state, three different answers.

The 2027 cliff nobody is talking about yet

The § 48E route is not permanent either, and the deadline is closer than the one that just passed. Wind and solar facilities placed in service after December 31, 2027 get no § 48E credit:

The escape hatch is beginning construction before that date. IRS Notice 2025-42 sets the deadline precisely — construction must begin before July 5, 2026 — and, for most facilities, restricts the proof to the Physical Work Test rather than the old five-percent spending safe harbor. Residential-scale systems get an exception: section 6 of the notice preserves the Five Percent Safe Harbor for a "low output solar facility," defined as one with maximum net output of 1.5 megawatts or less. IRS Notice 2025-42

That deadline has now passed. Whether a given provider's 2026 fleet is safe-harboured under it is a question about that company's own equipment purchases before July 5, 2026 — and it is a fair question to ask any lease or PPA salesperson, because it determines whether the credit they are pricing into your contract survives a 2028 installation. Battery storage is carved out of the 2027 termination separately under § 48E(e)(4)(C), so paired storage does not share the same cliff. 26 U.S.C. § 48E(e)(4)(C)

How to decide

The honest summary is that the repeal did not make leasing good. It made buying worse, which is a different thing, and it did it by roughly the size of the credit that vanished.

• Buying still wins when your state carries the weight. If your utility pays a production incentive, your state exempts the system from sales and property tax, and net metering is at retail rate, the federal credit was never the whole case. Check what your state actually offers before you conclude the economics died with § 25D.
• A lease is worth pricing when you cannot use a credit anyway. Retirees and others with little federal tax liability were often poor candidates for § 25D even when it existed, since it was non-refundable. For them, comparatively little changed in 2026.
• Get the pass-through in writing, or assume it is zero. No provision of law obliges a § 48E claimant to share the credit with the customer. If a salesperson says the 30% is "still there," the question to ask is who receives it and which line of the contract reflects it.
• Price the escalator over the full term. A 2.9% annual escalator on a 25-year agreement roughly doubles the payment by the end. That arithmetic has nothing to do with tax law and it is where leases have always been won and lost.

What is left is mostly state and utility money, and it varies more between two neighbouring states than the federal credit ever varied between any of them. That is what the state pages are for.