A 2026 Purchase, Start to Finish
A Pennsylvania homeowner buys a 7 kW system for $20,000 in 2026. These are the default inputs above, so the numbers below match what the calculator shows when the page loads.
- Net cost: no federal credit for a 2026 purchase, and a $2,000 utility rebate. $20,000 − $2,000 = $18,000.
- Year-1 savings: a $150 monthly bill with 90% of usage covered. $150 × 12 × 0.90 = $1,620.
- Later years: electricity rates rise 3% a year, so each year's savings are 3% bigger than the last. Over 25 years that adds up to $59,064.
- Result: $59,064 − $18,000 = a $41,064 net gain, a 228% ROI, and payback in 9.7 years.
The same system bought in 2025, with the 30% federal credit, would have cost $12,000 net and paid back in 6.8 years.
What Moves the Result Most
Change one input at a time from the example above and the payback shifts like this:
| Change | 25-year savings | ROI | Payback |
|---|---|---|---|
| Example as above | $59,064 | 228% | 9.7 yrs |
| Monthly bill $250 instead of $150 | $98,440 | 447% | 6.2 yrs |
| Monthly bill $100 | $39,376 | 119% | 13.7 yrs |
| Offset 70% instead of 90% | $45,939 | 155% | 12.1 yrs |
| Rates rise 5% a year | $77,318 | 330% | 9.1 yrs |
| Rates flat (0%) | $40,500 | 125% | 11.1 yrs |
The size of your bill matters most, because it sets how much solar can save in the first place. Rate escalation changes the 25-year total a lot but payback much less, since most of its effect comes after the system has already paid for itself. That's why a bigger up-front incentive doesn't automatically beat a market with fast-rising rates.
Filling In the Inputs
- System cost: the total installed price before any credits or rebates. Get quotes from at least two installers.
- Federal tax credit: leave it at 0 for a home system bought in 2026. Enter a percentage only for a business-owned system or to check an older installation.
- State or utility rebate: a one-time cash reduction. Leave it at zero if none applies.
- Monthly electric bill: your average before solar. Average twelve months of bills rather than guessing from one.
- Solar offset: the share of your yearly usage the system covers. Most home systems land between 80% and 100%.
- Annual rate increase: utility rates have historically risen about 2% to 5% a year.
- System life: defaults to 25 years, the usual panel warranty.
Results update as you type. One limit to keep in mind: the calculator assumes the panels' output stays flat. Real panels lose a little output each year, commonly around half a percent, so treat late-year savings as slightly optimistic.
The Formulas
| Output | Formula |
|---|---|
| Net cost | System cost × (1 − credit % ÷ 100) − rebate |
| Year-1 savings | Monthly bill × 12 × offset % ÷ 100 |
| Year N savings | Year-1 savings × (1 + rate increase % ÷ 100)N−1 |
| Total savings | Sum of every year's savings over the system life |
| ROI | (Total savings − net cost) ÷ net cost × 100 |
Payback is the point where cumulative savings first reach net cost. It is reported as a decimal year, found by working out how far into the crossover year the balance tips, rather than rounded up to a whole year.
The Federal Credit Ended: What's Left
Until the end of 2025, homeowners could claim the Residential Clean Energy Credit (Section 25D): 30% of installed cost off their federal tax bill. The One Big Beautiful Bill Act, signed July 4, 2025, ended it for any system paid for after December 31, 2025, years ahead of the old 2032 schedule. If you installed in 2025 or earlier and couldn't use the whole credit, the unused part still carries forward to later tax years.
Leases and power purchase agreements (PPAs) work differently. The installer owns the panels and claims a separate business credit (Section 48E), which is still available for projects that meet its 2027 deadlines. Some installers pass part of that value on through a lower monthly rate, so ask for a lease or PPA quote alongside a purchase quote and compare the 25-year cost of each.
For homeowners who buy, state and utility programs are now the main way to cut net cost, and they vary widely. SRECs in New Jersey, Pennsylvania, Maryland, and Massachusetts pay ongoing income per megawatt-hour generated. Some utilities offer a per-watt cash rebate. Most states exempt solar equipment from property tax, and roughly 25 also waive sales tax on it. Net metering, which credits excess power you send to the grid, isn't a rebate but effectively raises your offset percentage. DSIRE lists current programs by zip code.
Homes vs. Businesses
The two no longer get the same federal treatment. A homeowner buying outright gets no federal credit from 2026. A business-owned system can still claim the Section 48E credit within its deadlines, plus accelerated depreciation under MACRS, so commercial payback usually comes in well ahead of residential. For homeowners, the fastest paybacks are still in states with expensive electricity and strong sun, such as California, Hawaii, and Massachusetts.
Frequently Asked Questions
How is solar ROI calculated?
ROI equals total lifetime savings minus net cost, divided by net cost, times 100. Net cost is installed price minus any tax credit you qualify for and any state or utility rebates. For a home system bought in 2026 the federal credit is zero, so net cost is price minus rebates. Total savings is every year's bill reduction added up, escalated annually by whatever rate-increase assumption you plug in.
What's a typical payback period and ROI for US residential solar?
Using the default inputs on this page ($20,000 system, $2,000 rebate, $150 monthly bill, 90% offset, 3% yearly rate rises and no federal credit), payback comes to about 9.7 years and 25-year ROI to 228%. Your own result depends mostly on local electricity rates and sun exposure: states with high rates and strong sun, such as California, Hawaii and Massachusetts, pay back fastest.
Does a bigger federal credit or rebate always mean better ROI?
Not necessarily. It lowers net cost, which is the denominator, so yes, ROI goes up. But over 25 years the bigger driver is usually electricity rate escalation, and a market with fast rate growth can beat one with a larger up-front incentive.
References
- Expiration and Carryforward Rules for the Residential Clean Energy Credit, Congressional Research Service: the December 31, 2025 end date for the homeowner credit and how unused credit carries forward.
- Homeowner's Guide to the Federal Tax Credit for Solar Photovoltaics, U.S. Department of Energy: what the residential credit covered for systems installed through 2025.
- Tracking the Sun, Lawrence Berkeley National Laboratory: median installed cost data by state and system size, updated annually.
- Annual Technology Baseline, National Renewable Energy Laboratory (NREL): levelized cost of energy data, capacity factor estimates by region, and 25-year performance degradation assumptions.