Leasing solar panels does not give you a federal tax credit. The leasing company owns the equipment, so it claims any available credit on its own return, not yours. And starting with installations completed in 2026, the personal Residential Clean Energy Credit no longer exists for anyone, whether they lease or buy. The commercial credit that leasing companies rely on is still available for a limited time, which is why lease and power purchase agreement rates in 2026 can still look attractive.
Why a Lease Never Qualified You for a Personal Credit
The federal Residential Clean Energy Credit under Section 25D of the tax code was only ever available to the person who actually paid for the solar property.1Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit In a lease, a third-party developer installs equipment on your roof and charges you a monthly fee to use it. The developer holds legal title to the hardware, handles maintenance, and carries the system on its books as a business asset. You never made a “qualified solar electric property expenditure,” which is what the statute required.
As the legal owner, the developer was the one eligible for federal tax benefits on the installation. Those benefits came through the commercial investment tax credit, not the residential one, because the developer is a business. Leasing companies fold their expected tax savings into the deal by quoting you a lower monthly payment. You benefit indirectly through the rate, but nothing about the installation goes on your personal tax return.
Power Purchase Agreements Work the Same Way
A power purchase agreement (PPA) uses a similar structure but sells you electricity rather than equipment. The solar company installs and maintains the panels at no upfront cost, and you agree to buy the power the system generates at a fixed per-kilowatt-hour rate, usually below your local utility rate. You are a customer of a small power producer, not a system owner.
Because the PPA provider holds title to the array, the ownership rule applies the same way: the company claims any federal tax benefits. A PPA has never given a homeowner a direct reduction in federal tax liability. Your advantage is the lower electricity price.
The Residential Credit Has Ended for 2026 Installations
Even a homeowner buying solar outright no longer gets a personal federal credit for a new system. Section 25D was terminated by the One Big Beautiful Bill Act, signed into law on July 4, 2025. The statute now provides that no credit is allowed for expenditures made after December 31, 2025.2Internal Revenue Service. Residential Clean Energy Credit The IRS treats an expenditure as “made” when the installation is completed, not when you pay. So even if you signed a contract and put money down in 2025, you cannot claim the credit if the system was actually installed in 2026.3Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under the One Big Beautiful Bill
No replacement residential solar credit has been enacted. The termination covers all clean energy property that previously qualified under Section 25D, including solar panels, solar water heaters, small wind turbines, geothermal heat pumps, and battery storage.2Internal Revenue Service. Residential Clean Energy Credit For a homeowner comparing lease-versus-buy in 2026, this is the important shift: the option to buy no longer comes with a 30 percent tax offset.
What the Leasing Company Can Still Claim
The commercial Clean Electricity Investment Credit under Section 48E is still available to businesses, including solar leasing companies, for facilities placed in service after December 31, 2024.4Internal Revenue Service. Clean Electricity Investment Credit It generally equals 30 percent of the project cost and replaced the older Section 48 investment tax credit.
The One Big Beautiful Bill Act put this credit on a schedule of its own for solar. It will not be available for solar facilities placed in service after December 31, 2027, if construction begins after July 4, 2026. To qualify, developers generally must perform physical construction work before that deadline. The common “five percent safe harbor,” where a company can start the clock by spending 5 percent of a project’s cost, is not available for solar under this rule.5Internal Revenue Service. Notice 2025-42, Sections 45Y and 48E Beginning of Construction
How That Credit Reaches You Through the Lease
When a solar company installs panels on your roof under a lease or PPA, it builds its expected tax savings into the pricing. Because Section 48E is still available for projects that begin construction by July 4, 2026, lease and PPA rates offered in 2026 still reflect the 30 percent commercial credit. The company claims the credit on its own return and passes the benefit through to you as a lower monthly payment or electricity rate.
So while you personally cannot claim a federal tax credit, a lease or PPA signed in 2026 can still save money against your current utility bill. Timing is the variable to watch. As the July 2026 construction deadline approaches and the commercial credit phases out for new solar, pricing on new lease and PPA offers is likely to move. Terms available now are likely to be more favorable than terms available after that deadline passes.
Lease Buyouts Do Not Revive the Credit
If your lease is ending and the company offers you the option to buy the panels, that purchase will not qualify for a federal tax credit either. Two rules block it. The residential credit is terminated for 2026 installations, and the IRS separately excluded used, previously owned clean energy property from the credit even when it was active.2Internal Revenue Service. Residential Clean Energy Credit A lease buyout runs into both: the equipment was already placed in service, and the credit no longer exists for residential taxpayers.
A buyout can still make sense if the price is low enough and the panels have real productive life left. You would own all the electricity the system produces and end the monthly lease payments. Just do not put a federal tax credit in that math, because there is none to claim.
State and Local Incentives May Still Apply
The federal residential credit is gone, but many states run their own solar programs, including tax credits, rebates, property tax exemptions, and sales tax exemptions on solar equipment. These vary widely in value and eligibility. Some states extend their incentives to leased systems and PPAs; others limit them to homeowner-owned installations. Your state energy office or tax agency is the place to confirm what applies where you live, and those programs can still meaningfully reduce the cost of going solar in 2026.