.svg)
For twenty years, one number decided whether a family could afford solar panels on their roof. That number was 30 percent. On the first morning of 2026, it simply stopped existing. There was no countdown, no gentle taper, no warning shot. It was there, and then it wasn’t.
That 30 percent was Section 25D of the federal tax code, a credit that reached back to the mid-2000s and had been locked in place through 2032 by the 2022 Inflation Reduction Act. Congress tore that promise up less than two years later, and the story of what happened when it did is really a story about who gets to decide when a home upgrade is worth the risk.
If you bought your solar system with cash or a loan, the government simply handed you back 30 cents of every dollar you spent, straight off your tax bill. It was blunt, it was generous, and it is the single biggest reason rooftop solar stopped being a hobby for the wealthy and became something an ordinary family might actually do.
That door is closed now. The only path left runs through leasing. If a company owns the panels on your roof and simply sells you the power at a discount, it can still claim a 30 percent credit under a different part of the tax code, Section 48E. You never see that money. It just makes your monthly lease payment a little lower than it would otherwise be. SolarReviews has a fuller breakdown of what changed for homeowners specifically.
The original plan gave the industry ten years to adjust. Then, on July 4, 2025, the president signed a new tax law that scrapped the slow version entirely. Section 25D didn’t fade out. It ended on a specific date, all at once.
Heatmap News described it well: the industry didn’t get a phase-down, it got a funeral. There is one narrow exception. If a leased or third-party-owned project broke ground before July 4th, 2026, or reaches service by the end of 2027, it can still qualify for the 30 percent commercial credit. Everyone else missed the window.
Homeowners raced to sign contracts before the deadline, then the phones stopped ringing on January 2nd. It didn’t help that American solar was already among the most expensive in the developed world before the credit even disappeared.
By EnergySage’s tracking, a typical U.S. residential system cost somewhere between $2.53 and $2.58 per watt in 2025 and 2026. In Australia, the equivalent system runs closer to 60 cents to a dollar. That is not a small gap. SEIA’s own research traces most of it to what the industry calls soft costs: permitting fees, sales commissions, overhead, the paperwork of getting a system approved and connected. Those soft costs eat up roughly 65 percent of what an American homeowner pays, compared with about a quarter in Australia and closer to 15 percent in Germany. And 2026 made the soft costs worse, not better. Wood Mackenzie found that the cost of simply acquiring a new residential customer jumped about 40 percent, to 84 cents a watt, once installers could no longer coast on the panic buying of late 2025.
The industry’s own numbers, tracked jointly by the Solar Energy Industries Association and Wood Mackenzie, forecast residential installations falling somewhere between 18 and 21 percent for all of 2026. That comes on top of declines the market had already absorbed in the two years before.
The details make the shape of it clearer. Total solar installations across every segment fell 27 percent in the first quarter of 2026 compared with a year earlier. The residential segment alone still managed a small year-over-year gain, but only because so many homeowners rushed to finish their projects before the deadline hit. EnergySage logged a 205 percent jump in people simply shopping for solar quotes in the second half of 2025, a wave that had nowhere left to go once January arrived. Not everyone in Washington thinks putting the old credit back is even the right answer. Senator Martin Heinrich, who sits on the Senate Energy Committee, has pointed out that wind, solar, and batteries already make up roughly 94 percent of new power added to the grid, and argued that Democratic energy priorities might be better spent decarbonizing harder sectors like transportation than fighting to restore a subsidy the market has already learned to live without.
Line shape is stylized to show the trend, but the marked milestones are real: 2023 was a record year, 2024 declined, 2025 stayed roughly flat thanks to a late rush, Q1 2026 total solar fell 27 percent year over year, and full-year 2026 residential is forecast down 18 to 21 percent before 2027 begins recovering (SEIA / Wood Mackenzie).
This isn’t a story where two lucky states thrived while everywhere else went dark. Seven states, Texas, Florida, Ohio, Indiana, Michigan, Arizona, and Mississippi, together accounted for nearly three quarters of every new watt of solar built in the first three months of 2026.
Texas is on that list mostly because of massive utility-scale projects and data center power contracts, not because of a rooftop boom. Ohio, Indiana, and Michigan are newer names on the solar map entirely, drawing serious investment for what industry analysts at Payaca describe as the first time. New York and Illinois tell a different, quieter story. Both states are still growing their residential solar markets despite getting less sunshine than the Sun Belt, simply because their own state incentives are filling part of the gap the federal credit left behind. Michigan shows how fast the underlying financing has shifted. A year ago, almost none of its solar sales were structured as leases. Now nearly four in ten are, according to the market tracker VA Horizon. Nationally, leased and third-party-owned systems are expected to make up about 65 percent of all residential solar sold in 2026, up from 44 percent the year before. The market didn’t just shrink. It reorganized itself around the one financing model that still qualifies for a federal credit.
Hover any tile for more detail
Top 7 states by new solar capacity in Q1 2026 (Texas, Florida, Ohio, Indiana, Michigan, Arizona, and Mississippi) made up roughly 74 percent of the national total. New York and Illinois are bucking the residential slump. This map highlights the states this piece is actually about, not a complete state-by-state accounting.
More than a hundred American solar companies have shut their doors or filed for bankruptcy since 2023. The worst single collapse of 2026 belonged to Freedom Forever, the country’s second largest home solar installer, which filed for Chapter 11 protection on April 15th.
Freedom Forever had installed close to two gigawatts of solar across 35 states and held roughly 6 percent of the national residential market, second only to Sunrun. According to pv magazine USA’s coverage of the filing, the company listed between $500 million and a billion dollars in debt, and its collapse touched about 190,000 already installed systems and 3,600 employees. It followed SunPower’s bankruptcy in 2024 and Sunnova’s in 2025, a company that had carried nearly nine billion dollars in debt. Taken together, those three failures alone have left more than 1.3 million homeowners without the company that originally installed their panels, even though the panels themselves keep working and the loans usually just get handed to a new servicer.
More than 100 solar company bankruptcies or closures since 2023. Freedom Forever (April 2026) was the second-largest U.S. residential installer, with about 6 percent market share, roughly 190,000 systems and 3,600 employees affected, and $500 million to $1 billion in liabilities. Combined with SunPower (2024) and Sunnova (2025, about $9 billion in debt), more than 1.3 million homeowners have been affected in total.
The credit didn’t just disappear. It rewrote the math of who can reasonably afford to go solar in America. That damage is real and it is structural, but the market underneath it hasn’t stopped moving.
Senate Minority Leader Chuck Schumer told Heatmap News that letting the credits expire was bad for families, bad for workers, and a gift to China, and promised that bringing them back would be one of the first things Democrats do if they retake the majority. Even some people inside his own party aren’t sure that’s the right fight. Third Way policy analyst Maya Gibbs has argued that fixing permitting delays and building more transmission lines might do more good than resurrecting a tax credit the industry has already restructured itself around. In the meantime, leases and power purchase agreements are quietly absorbing the demand that ownership can no longer serve, states like New York and Illinois are proving that local policy can soften a federal retreat, and SEIA and Wood Mackenzie’s own long range forecast still expects residential solar to start growing again in 2027. The subsidy is gone. The industry it built is still standing, just leaning on something else now.
SEIA / Wood Mackenzie’s base-case forecast: roughly 43 gigawatts of total U.S. solar installed per year on average between 2026 and 2031, enough to double the size of the entire U.S. solar fleet within five years even with the residential segment’s near-term slump.