How Homeowners Can Still Benefit from the Federal Solar Tax Credit!

The federal solar tax credit has been one of the most powerful incentives helping millions of Americans go solar. But starting in 2026, the residential solar tax credit (Section 25D)—which allowed homeowners to claim 30% of their solar installation cost—has officially expired for systems installed after December 31, 2025.

For homeowners considering solar in the coming years, this raises an important question:

Is it still possible to benefit from federal incentives for solar?

The short answer is yes—but the path is changing. New financing models, including Energy Service Agreements (ESAs) and other third-party ownership structures, allow homeowners to indirectly benefit from the federal Investment Tax Credit (ITC) even after the expiration of the residential credit.

Here’s what homeowners need to know.

What Changed with the Federal Solar Tax Credit?

For years, homeowners who purchased solar systems with cash or a loan could claim the Residential Clean Energy Credit (Section 25D). This incentive covered 30% of the cost of installing solar panels, batteries, and other clean energy equipment.

However, legislation passed in 2025 accelerated the expiration of this credit.

Key changes:

• The 30% homeowner solar tax credit (Section 25D) expired December 31, 2025.
• Systems installed after 2025 no longer qualify when the homeowner owns the system.
• The commercial Investment Tax Credit (ITC) is still available for certain projects and third-party owners through at least 2027.

This creates a shift in how residential solar projects are financed.

Instead of homeowners claiming the tax credit directly, third-party owners can still claim it and pass the savings on to homeowners through new financing structures.

The Opportunity: Energy Service Agreements (ESAs)

One of the most promising models emerging in the post-25D landscape is the Energy Service Agreement (ESA).

An ESA allows homeowners to install solar with little or no upfront cost, while a third-party provider owns and operates the system.

HOW ESAs WORK:

1. A solar provider installs and owns the solar system on your home.
2. The provider claims the commercial federal ITC available to system owners.
3. The homeowner agrees to purchase the electricity produced by the system or pay a fixed monthly service fee.
4. The savings from the tax credit and other incentives help lower the homeowner’s energy costs.

Because the system owner—not the homeowner—claims the tax credit, the incentive can still support residential solar installations.

This model is similar to solar leases or power purchase agreements (PPAs), which also allow third-party owners to claim the federal ITC.

Why ESAs Are Becoming More Popular

As the residential tax credit expires, ESAs are becoming a powerful tool for maintaining access to solar.

Key benefits include:

No Large Upfront Investment

Many homeowners can go solar with little or no upfront cost, making solar accessible even without a personal tax credit.

Lower Energy Bills

Because the system owner can claim federal incentives, those savings are often reflected in lower electricity rates or service payments.

Professional System Management

The provider typically handles:

• installation
• monitoring
• maintenance
• performance guarantees

This reduces long-term risk for homeowners.

Flexibility Over Time

Many agreements include buyout options, allowing homeowners to purchase the system later once it has produced years of savings.

Solar Still Makes Financial Sense

Even without the homeowner tax credit, solar continues to deliver strong value.

Homeowners can still benefit from:

• Lower monthly electricity bills
• Protection against rising utility rates
• State and local solar incentives
• Energy independence and resilience
• New financing models like ESAs simply shift how incentives are captured, rather than eliminating the financial benefits of solar.

The Solar Landscape Is Changing—But Opportunity Remains

The expiration of the residential 25D tax credit marks a major shift in the solar industry. But it does not mean the end of affordable solar for homeowners.

Instead, the market is evolving toward new ownership and financing structures that allow homeowners to benefit from federal incentives indirectly.

Energy Service Agreements are emerging as one of the most effective ways to bridge this gap—helping homeowners install solar with minimal upfront cost while still capturing the value of federal incentives.

✅ Interested in learning whether an Energy Service Agreement could work for your home?

The team at Cosmic Solar can help you explore your options and determine the best solar solution for your energy goals. Contact our expert solar consultants today for more info!

https://www.cosmicsolar.com/free-evaluation

office: 760-749-1111