Solar Lease vs. Buy in 2026: The Tax Credit Changed the Math

The Comparison Just Flipped

For a decade, the standard advice was simple: buy your solar system if you possibly can. Buying captured the 30% federal tax credit, leasing handed it to a company, and the lifetime math almost always favored ownership by a wide margin.

In 2026 the picture is messier. The One Big Beautiful Bill Act ended the federal Residential Clean Energy Credit (§25D) for purchased systems completed after December 31, 2025 — but third-party owners can still claim the commercial §48E investment tax credit on systems they own and lease to you (subject to construction-start and placed-in-service deadlines around 2027). For the first time, the leasing company has a federal subsidy the buyer doesn't.

That doesn't mean leasing suddenly wins. It means the gap narrowed, the answer became situational, and the contract details matter more than ever. Here's how to think it through — and our Solar Payback Calculator can put hard numbers on the buy side of the comparison.

How Third-Party Ownership Works

Three structures, one common thread: someone else owns the hardware on your roof.

• Solar lease. You pay a fixed monthly amount for the system, regardless of how much it produces. The provider owns, monitors, and maintains it.
• Power purchase agreement (PPA). You pay per kilowatt-hour the system actually produces, at a contracted rate below your utility's — your payment varies with the seasons.
• Prepaid lease. You pay the full lease term upfront in one discounted lump sum. It feels like buying, but the provider still owns the system and still claims the federal credit. This structure is worth a close look in 2026, because it can recapture some federal value while behaving almost like a purchase.

In all three, the provider claims the §48E credit, plus depreciation, and in some states the SRECs your system generates.

The Credit Pass-Through: Verify, Don't Assume

The pitch you'll hear is that the provider's tax credit gets passed through to you as lower payments. Sometimes it genuinely does — competition forces it in mature solar markets. But the pass-through is not automatic and not required by law. A leasing company is perfectly free to claim the credit and price your lease as if it didn't exist.

The only way to know is to compare numbers:

1. Get the total of all lease payments over the full term (including escalators — see below).
2. Get purchase quotes for an equivalent system and compute lifetime cost.
3. If the lease isn't meaningfully cheaper per kWh than your utility and competitive against buying, the credit isn't reaching you.

Ask the provider directly how the federal credit is reflected in your rate. A good one will answer specifically; evasiveness is data.

The Classic Downsides of Leasing Still Apply

The tax-credit flip changed the federal math. It did not change any of the reasons leasing earned its mixed reputation:

• Escalator clauses. Many leases raise your payment 1–3% every year for 20–25 years. A payment that beats your utility bill today can overtake it by year 12 if your local rates rise slower than the escalator.
• Home-sale complications. The buyer of your home must qualify for and agree to assume the lease, or you pay it off at sale. Deals do fall through over this. A purchased system, by contrast, is generally a selling point.
• You may not own the SRECs. In states with SREC markets, those credits can be worth hundreds of dollars a year — and in many lease contracts they belong to the provider.
• Higher lifetime cost. Over 25 years, the total of lease or PPA payments usually exceeds the cost of buying the same system outright. You're paying for financing, the provider's margin, and their shareholders' return. The federal credit shift narrowed this gap; it rarely closes it.

Buy vs. Lease vs. PPA at a Glance

Who Should Lease (or PPA) Now

• Homeowners with little or no tax appetite — which is now everyone, for federal purposes. The old "lease if you can't use the credit" advice has inverted: no buyer can use a federal credit, so the provider's §48E claim is the only federal money on the table. If it's genuinely passed through, that's value a purchase can't access.
• No upfront capital and no appetite for a loan. $0-down with immediate (if modest) bill savings beats not going solar at all in a high-rate area.
• Long-payback states. Where a purchased system takes 14+ years to pay back, a well-priced lease's day-one savings can be the more defensible choice. See which states those are.
• Want zero maintenance involvement. The provider monitors production and fixes problems — that's their asset on your roof.

Who Should Still Buy

• Long-horizon homeowners in decent solar states. Even at full price, buying still usually wins on 25-year total cost — payback of 8–14 years, then a decade-plus of essentially free power, with no escalator and nothing to assume at sale. Our companion article on buying without the credit runs that math in full.
• Anyone in a strong SREC or state-incentive market. Owning means those payments are yours, not the provider's.
• Anyone who may sell within the lease term. Transferring a 20-year contract is friction you can simply avoid by owning.
• Disciplined shoppers. Competitive quotes at $2.50–$3.00/watt narrow the cost gap that the lost credit created — negotiation is the buyer's remaining subsidy.

Questions to Ask Any Leasing Company

Bring this list to every quote. The answers belong in the contract, not in the sales pitch:

1. What is the annual escalator percentage? Anything above ~2% deserves skepticism — model it against realistic utility rate growth, not the inflated projections in the brochure.
2. What is the buyout schedule? Can you purchase the system at fair market value or a stated price at year 5, 10, 15? Get the actual numbers.
3. What are the transfer terms if I sell my home? Credit requirements for the new owner, transfer fees, and what happens if the buyer refuses.
4. Who gets the SRECs and any state incentives? If the answer is "we do," that value should show up as a lower payment — is it?
5. How is the federal §48E credit reflected in my rate? The honest answer includes a number.
6. What's the production guarantee, and what happens if the system underperforms?
7. What does end-of-term look like — removal, renewal, or purchase, and who pays for roof restoration?

The Bottom Line

The end of the residential federal credit turned a settled question into a real one. Leasing is no longer automatically the worse deal — the provider's §48E credit is the only federal solar money left, and in well-priced contracts some of it reaches you. But the structural downsides of third-party ownership — escalators, sale friction, surrendered SRECs, higher lifetime cost — didn't go anywhere, and a leasing company's tax benefit only helps you if the contract says so.

So treat it as a numbers problem. Price the purchase with our Solar Payback Calculator, get a lease or PPA quote for the same roof, lay both against your current utility trajectory over 25 years — and make whichever choice the spreadsheet defends.