Solar leasing could be a better deal, thanks to Trump’s tax changes—here’s why

While virtually no clean energy program survived this summer’s legislative process unscathed, the 30% residential solar tax credit (Section 25D of the U.S. tax code) got the shorter end of the stick compared to its commercial counterpart, the 48E tax credit—meaning leasing solar panels may now be more affordable than buying them yourself. 

Signed into law by President Trump on July 4, 2025, the One Big Beautiful Bill Act (OBBBA)  dramatically narrowed the timeline for homeowners to claim the federal solar tax credit. The Biden-era Inflation Reduction Act (IRA) of 2022 had extended the residential credit through 2034, but under current law, it now expires at the end of 2025. To qualify, homeowner-owned systems must be installed by December 31, 2025.

However, solar companies that offer third-party ownership (TPO) solar models—such as solar leases and power purchase agreements (PPAs)—can still claim the 30% commercial solar tax credit under Section 48E after 2025, albeit with new restrictions and a condensed timeline. TPO projects will remain eligible as long as construction begins before July 4, 2026, or if the system is placed in service by December 31, 2027. This effectively gives TPO projects an additional two years of eligibility compared to homeowner-owned eligibility, which is being cut short at the end of this year.

In addition to the OBBBA, persistently high interest rates have also set the stage for more growth in TPO solar models, according to the 21st edition of the EnergySage Intel: Solar & Storage Marketplace Report. 

“By cutting nearly a decade off the residential solar credit, the OBBBA abruptly reshaped the economics of going solar,” said Emily Walker, director of insights at EnergySage and author of the organization’s 21st Marketplace Report. “Homeowners interested in purchasing a solar panel system in cash will need to move quickly, while providers offering TPO products can continue to leverage federal incentives for a bit longer.”

The limited continuation of 48E for TPO projects offers a silver lining as the residential solar market adjusts to the loss of 25D and other headwinds, including steep tariffs and increasingly hostile political rhetoric. But access to these benefits isn’t universal. States that allow solar PPAs and leases are much better positioned to weather federal policy changes, while those that restrict TPO are likely to see solar adoption slow.

TPO, or leased, solar panel systems are installed on residential rooftops, but are considered commercial equipment for tax purposes because they stay under the ownership of the solar company—not the homeowner. Homeowners use the electricity generated and pay the solar company monthly, often at rates lower than those of the utility. Since the system remains under company ownership, the solar company claims the tax benefits, not the homeowner. 

With leases and PPAs, homeowners typically sign long-term agreements—usually 20 to 25 years—while the solar provider maintains ownership of the physical panels. This setup requires little to no upfront cost and removes maintenance responsibilities from homeowners, but the major downside to leasing is that it almost always provides much less long-term savings than owning a system outright that is purchased with cash or a loan.

Solar lease vs. power purchase agreement (PPA)

PPAs and solar leases are similar, but not interchangeable. The key difference is how you’re charged for your power each month. With a PPA, homeowners agree to pay a set price per kilowatt-hour (kWh) of electricity produced by the solar panel system, and you pay based on the amount of electricity you use every month. That means that your monthly bill will vary depending on how much energy you use. For example, your bill will likely be higher in the summer months when you’re using your air conditioning every day. 

If you’re looking for a predictable monthly payment that never changes, a solar lease may be a better option. A solar lease charges a flat monthly fee to use the system regardless of how much energy you use every month. In either case, the rate is usually lower than the local utility’s electricity rate, which should generate monthly bill savings right off the bat. 

Both models allow households to avoid upfront installation costs, though they sacrifice direct ownership and the financial savings that come with the ability to claim tax credits yourself.

The elimination of the residential credit makes it more expensive for homeowners to purchase solar panel systems outright—but as electricity rates continue to rise and show no signs of slowing down, the economics of going solar still remain strong, even without tax incentives. At the same time, the partial preservation of 48E strengthens the case for TPO projects: Because solar providers can still claim a 30% credit against their installation costs, customers will ideally continue to see lower prices than if the credit had been eliminated entirely.

The extra two years of commercial tax credit eligibility create a meaningful buffer for the industry. Installers and financiers will be able to continue building out residential solar projects while capturing federal credits, even as the residential credit disappears for homeowner-owned systems. Combined with high interest rates that have discouraged solar loan financing, this policy is expected to push more homeowners toward TPO offerings.

“That extra time is consequential for installers,” Walker explained. “It allows them to continue developing residential projects with the tax credit, even as the credit for purchased systems disappears. For some homeowners, that will make TPO the most accessible entry point into solar.”

Homeowners’ access to TPO financing depends heavily on where they live.

Some states explicitly allow both PPAs and leases, others ban them outright, and many fall into a gray area where policies remain unclear. For example, Florida bans PPAs but allows solar leases. If you live in a state that restricts access to PPAs, you may still be able to benefit from TPO solar through a lease model.

While the table in this section outlines PPA availability, information on solar leases is less consistently documented. Homeowners interested in lease availability should check with their state’s public utilities commission (PUC) for the most up-to-date information.

In states where TPO is permitted, solar companies can continue to claim the 30% federal credit through Section 48E, and may choose to pass those savings along to customers even as the residential credit disappears. That tax advantage helps insulate those markets from policy-driven slowdowns. With interest rates still high, households in these states also gain access to little-to-no-upfront-cost options that make solar financially viable. 

By contrast, states that prohibit or restrict TPO may see adoption stall. Homeowners in these markets will be left with cash purchases or loans as their only financing options. Although most solar loans these days require no down payment and no additional upfront investment, having a TPO option available still gives homeowners more choice overall. Without the federal solar tax credit, customers face longer solar payback periods, or the time it takes to break even on a solar investment. In states with relatively low electricity rates, like Washington, going solar may not even make financial sense once the residential solar tax credit disappears. 

“In states that allow TPO, providers can continue developing projects with the support of federal incentives,” Walker said. “But in states that restrict leases and PPAs, the loss of the residential tax credit extends payback periods significantly in areas with lower electricity rates, potentially slowing adoption.”

PPA access by state

Even as federal incentives shift under the OBBBA, rising electricity prices continue to push homeowners toward solar. Electric bills are climbing steadily across the country, which is a trend unlikely to slow down amid the surge in AI data center–driven demand, which will only continue to grow.

While the loss of the residential tax credit will raise the cost of solar ownership in the near term and uneven state policies limit access to TPO, the core economics remain compelling. For most homeowners, solar is still one of the most effective ways to stabilize your energy costs in the face of electricity rate volatility, political uncertainty, and our changing climate.