Solar Tax Credit Impact
US Residential Solar Installations Stall After Federal Tax Credit Elimination, Impacting Home Batteries
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The U.S. residential solar industry is heading for its worst slump in years. After President Donald Trump signed the "One Big Beautiful Bill Act" into law on July 4, 2025, a key 30% tax credit for homeowners who buy solar panels expired on December 31. National residential solar additions are now expected to fall 15% in 2026, dropping to just 4.1 gigawatts — the lowest level in five years, according to McClatchy.
The fallout is hitting major companies hard. Sunrun expects a 25% drop in residential solar additions in 2026. Enphase Energy forecasts a 22% decline, SolarEdge 20%, and SunPower 15%. Home battery installations are also taking a hit, with total additions expected to fall 26% to just 1.4 gigawatts this year.
A Tax Credit Disappears and Costs Soar for Homeowners
For a decade, homeowners could claim 30% of the cost of a solar system back on their federal taxes. The Inflation Reduction Act of 2022 had locked that credit in through 2032. The new law killed it for homeowners who buy their own systems, effective January 1, 2026. Without the credit, the typical payback period for a home solar system has stretched from 7 years to more than 10 years, pricing out many middle-income families, according to The Miami Herald.
A key distinction survives in the new law. The credit for commercial companies that own solar systems and lease them to homeowners — known as Section 48E — is still available, but only for projects that broke ground by July 4, 2026. This has pushed the market sharply toward leases and power purchase agreements, where a company owns the panels and the homeowner pays a monthly bill instead of buying the system outright, according to The Charlotte Observer.
Industry Giants Warn of Steep Declines as One Installer Goes Bust
Sunrun CEO Mary Powell acknowledged the company's 25% drop in Q1 subscriber additions but argued its lease model offers some protection. "We are not seeing similar impacts from changes to the 25D tax credit," she said, referring to the expired homeowner credit. Still, CFO Danny Abajian blamed "uncertainty around the final shape" of the new law for the slump, according to The Sun Herald.
The damage is not limited to big players. Leading solar installer Freedom Forever filed for bankruptcy in April 2026, explicitly citing the loss of federal tax credits. Smaller installers who cannot offer lease options are being squeezed out of the market entirely. Business group E2 estimated that $34.8 billion in clean energy investments were canceled in 2025 alone — new cancellations outnumbered new investments three to one, according to The Idaho Statesman.
Florida and California Buck the National Downward Trend
Two states are defying the national slump. Florida is projected to see a 62% increase in residential solar additions in 2026, reaching 710 megawatts. A new pro-solar state law passed last year is offsetting the loss of the federal credit. California is forecast to grow 17%, driven by some of the highest utility rates in the country and strong state-level incentives for battery storage, according to The Fresno Bee.
These two states stand out sharply against the rest of the country. Most other states have no comparable programs to replace the federal credit. Analysts say states with high electricity bills and their own solar incentives are best positioned to weather the federal pullback — but few states meet both criteria, according to The Bellingham Herald.
Market Recovery Not Expected for at Least a Decade
The outlook is grim for the long term. BloombergNEF analysts do not expect the U.S. residential solar market to return to its record 2023 levels "anytime in the next decade." The Solar Energy Industries Association's CEO Abigail Ross Hopper put it bluntly in June 2026: "The Trump administration is deliberately stifling investment, which is raising energy costs for families and businesses," according to The Myrtle Beach Online.
Some analysts frame the drop differently. Roth Capital Partners argues the decline is a "market correction" that exposes inflated costs in the U.S. solar industry. American installations cost about $2.58 per watt — more than double the $1.00 per watt paid in Australia. July 4, 2026, marks the final deadline for commercial developers to lock in any remaining credits. After that window closes, the industry faces yet another potential cliff, according to The News Tribune.
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