The residential solar tax credit expired. Here's what actually replaces it.

If you've been pricing solar in 2026, you've probably hit the same confusing wall: half the calculators and sales pages still promise a "30% federal tax credit," and the other half say it's gone. Here's the straight version.

The federal residential solar tax credit — Section 25D — expired at the end of 2025. Under the law passed in July 2025, any home solar system you buy with cash or a loan and place in service on or after January 1, 2026 gets zero federal tax credit. There's no phase-down, no grace period. If you owned a system installed by December 31, 2025, you can still claim it on your 2025 return and carry forward any unused amount — but that door is closed for new purchases.

That sounds like bad news. In practice, for most homeowners in our markets, the math still works — you just get there a different way.

What actually replaces it

1. Lease and PPA financing (the credit didn't disappear — it moved)

The commercial version of the credit, Section 48E, is still alive. When you go solar through a lease or power-purchase agreement (PPA), a third party owns the system on your roof — so they claim the 48E credit and pass the value back to you as a lower monthly rate. You don't own the panels or the incentives, but you can still get much of the benefit with little or no money down. For a lot of homeowners who can't use a tax credit anyway, this is now the simplest path to "solar that pays."

2. Your state programs, which never depended on the feds

State incentives are completely independent of the federal change, and in New Jersey and South Carolina they're strong:

• New Jersey — SREC-II. Your system earns a tradeable certificate for every 1,000 kWh it produces, at a fixed rate locked for 15 years, paid quarterly. That's recurring income on top of the bill savings, and it has nothing to do with the federal credit. (We break this down in detail in our SREC-II note.)
• South Carolina — 25% state tax credit. South Carolina still offers a 25% state income-tax credit on system cost, with no expiration date and a 10-year carryforward, plus a 100% property-tax exemption on the value solar adds to your home.

3. Rising utility rates — the quiet incentive

The least flashy reason solar still pencils out: electricity keeps getting more expensive. Every year the utility raises rates, the kilowatt-hours you produce yourself get more valuable. A system sized to your actual usage is a hedge against the next decade of rate hikes — credit or no credit.

So should you still go solar in 2026?

For most NJ and Lowcountry homeowners with a decent roof and a real power bill: yes — but the analysis has to be done property-by-property now that there's no blanket 30% to lean on. That's exactly the kind of honest, no-pressure assessment we do.