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The ITC is dead for homeowners — but lease/PPA can still get 30%. The federal residential solar tax credit (Section 25D) expired December 31, 2025. For the first time, lease and PPA arrangements may be a better deal than cash for many Texas buyers.
2026 Alert: The federal residential solar tax credit (Section 25D) expired December 31, 2025. Cash and loan buyers receive $0 in federal tax credits. Lease and PPA arrangements can still access the 30% commercial ITC (Section 48/48E) through the third-party system owner for projects beginning construction before July 4, 2026.
The federal residential solar Investment Tax Credit fundamentally shifted the economics of solar financing. Here is what changed.
The third-party system owner (the financing company) claims the 30% commercial ITC — not the installer, not the homeowner. The financing company passes the ITC savings through as lower lease payments or lower PPA rates. This is why lease/PPA rates are lower than they would be otherwise, even though the homeowner never sees the tax credit directly.
Full ownership from day one. Maximum long-term savings, but no federal credit to reduce the upfront cost.
You own the system, but finance the purchase. $0 down with monthly payments. No federal credit to apply against the principal.
Before 2026, homeowners applied the 30% tax credit ($7,200–$9,000) to pay down the loan principal in year 1. Without that lump-sum paydown, total interest charges are significantly higher. A $25,000 loan at 7.99% over 20 years costs roughly $22,000 in interest — nearly doubling the system cost. If your rate is above 7%, compare carefully against a lease.
A third-party company owns the panels on your roof and you pay a fixed monthly fee. The third-party claims the 30% ITC — resulting in lower payments than you might expect.
A 2.9% annual escalator on a $100/month lease means you pay $175/month in year 20. Over 20 years, total payments could reach $32,000–$42,000 on a system worth $22,000–$28,500. Always calculate the total cost of the lease over its full term and compare against the total cost of a cash purchase. If the lease total exceeds the cash price by more than 30%, the escalator may be too aggressive.
Buy the power, not the system. You pay a fixed rate per kWh for the electricity the panels produce — typically lower than your utility rate. The third-party system owner claims the 30% ITC.
A hybrid model that combines third-party ITC capture with eventual ownership. $0 down, fixed monthly payments, and you own the system by year 5. Uses FEOC-compliant Silfab 440W panels. Available in Texas and Maine only.
Unlike a traditional lease, Propel has no escalator clause and transfers full ownership to you by year 5. A 20-year lease might cost $32,000–$42,000 total with the escalator, while Propel costs roughly $8,100 over 5 years and then $0/month. After year 5 you are in the same position as a cash buyer — full ownership, property tax exemption, and all ERCOT buyback credits.
All five solar financing options for a 10 kW system in Texas, compared across every dimension that matters. Based on March 2026 market data at $2.70/W average.
| Category | Cash | Loan | Lease | PPA | Propel |
|---|---|---|---|---|---|
| Upfront Cost | $24,300-$29,700 | $0 down | $0 down | $0 down | $0 down |
| Monthly Payment | $0 | $150-$250/mo | $80-$150/mo | Per kWh used | ~$135/mo fixed |
| Federal Credit | $0 (25D expired) | $0 (25D expired) | 30% via third-party | 30% via third-party | 30% via third-party |
| System Ownership | You own it | You own it | Third-party owns | Third-party owns | You own by year 5 |
| Panel Tier | Your choice | Your choice | Provider choice | Provider choice | Silfab 440W (FEOC) |
| Maintenance | Your responsibility | Your responsibility | Included | Included | Included (yr 1-5) |
| Property Tax Exemption | Yes (100%) | Yes (100%) | May not apply | May not apply | Yes (after transfer) |
| Austin Energy Rebate | $2,500 | $2,500 | Not eligible | Not eligible | Not eligible (yr 1-5) |
| ERCOT Buyback Credits | You keep 100% | You keep 100% | Third-party keeps | Third-party keeps | You keep (after yr 5) |
| 10-Year Savings | $12,000-$18,000 | $2,000-$8,000 | $4,000-$8,000 | $3,000-$7,000 | $6,000-$12,000 |
| 25-Year Savings | $40,000-$65,000 | $30,000-$50,000 | $15,000-$30,000 | $12,000-$25,000 | $35,000-$55,000 |
| Home Sale Impact | Adds value | Adds value (pay off loan) | Transfer or buyout | Transfer or buyout | Adds value (after yr 5) |
| Best For | Max long-term savings | Ownership, no upfront cost | Lowest monthly cost | Simplest, predictable | Ownership + ITC benefit |
* Savings estimates assume a 10 kW system in a deregulated Texas utility territory (Houston, Dallas, Fort Worth), 5.3–5.5 peak sun hours/day, 3% annual utility rate escalation, and no local rebates. Austin Energy customers with $2,500 rebate will see higher savings for cash/loan options.
The expiration of Section 25D fundamentally changed the relative economics of buying versus leasing solar in Texas.
Cash advantage: ~$13,100
Cash was clearly better for anyone who could afford it
Cash advantage: ~$3,000
Gap narrowed from $13,100 to $3,000 — lease is now extremely competitive
Texas has unique market factors that affect every solar financing decision. These apply differently to each option.
Texas has no state income tax, so there are no state solar tax credits available in any form. This makes the loss of the federal 25D credit even more impactful for Texas homeowners compared to states with state-level solar credits.
About 85% of Texas is in the deregulated ERCOT market where you choose your Retail Electric Provider (REP). Your REP buyback rate for excess solar production affects all ownership types. Some REPs offer solar buyback plans at 1:1 or near-retail rates — shop carefully regardless of how you finance.
Texas offers a 100% property tax exemption for solar energy devices. This applies clearly to owned systems (cash or loan) — your property taxes do not increase despite the added home value. For leased systems where a third party owns the panels, the exemption may not apply in the same way. This is a meaningful advantage for cash and loan buyers.
The Austin Energy $2,500 residential solar rebate is available only for customer-owned systems. If you are in the Austin Energy service territory, cash or loan purchases gain a significant advantage over lease/PPA. This rebate alone can reduce cash payback by 1–2 years and makes the cash vs. lease comparison even more favorable toward buying.
In the deregulated ERCOT market (~85% of Texas), your Retail Electric Provider (REP) buyback rate determines the value of excess solar production. This varies dramatically by REP and directly impacts your solar ROI.
1:1 retail rate (best available). Bill credit for surplus kWh at the same rate you pay
~8–10¢/kWh buyback on solar plans. Competitive but below retail
~6–8¢/kWh buyback. Standard variable plans may offer less
3–5¢/kWh (wholesale or avoided cost). Significantly less than retail
You keep 100% of buyback credits from day one. A 1:1 buyback plan (like TXU) can add $200–$400/year in credits, accelerating payback by 1–2 years. This is a major advantage for owned systems.
The third-party owner typically retains excess production credits. Your savings come only from reduced grid consumption. Buyback plan choice matters less for lease/PPA since you may not receive the credits.
Third-party retains buyback credits during years 1-5. After ownership transfers, you keep 100% of ERCOT buyback credits just like a cash buyer. Choose a strong buyback plan before year 5 to maximize post-transfer value.
Before finalizing any financing option, check which REPs serve your area and compare solar buyback rates. For cash/loan buyers, switching to TXU Solar Buyback (1:1) can add $5,000–$10,000 in additional value over 25 years.
Use these guidelines based on your financial situation, priorities, and location within Texas.
If you are an Austin Energy customer, the $2,500 solar rebate is only available for customer-owned systems. Combined with the 100% property tax exemption, cash or loan purchase remains significantly better than a lease in the Austin Energy service territory. The $2,500 rebate effectively replaces a portion of the lost federal credit.
Common questions about solar financing options in Texas after the ITC expiration.
No. The federal residential solar tax credit (Section 25D) expired December 31, 2025 under the One Big Beautiful Bill Act signed July 4, 2025. Homeowners who purchase solar panels with cash or a loan receive $0 in federal tax credits. This applies in every state, including Texas.
With a lease or PPA, a third-party financing company owns the solar system on your roof. As a business entity, the third-party system owner can claim the 30% commercial Investment Tax Credit under Section 48/48E for projects that begin construction before July 4, 2026. The savings are passed through as lower monthly lease payments or lower PPA rates. The installer does not claim the credit — the system owner (financing company) does.
It depends on your priorities. Cash purchase provides maximum 25-year savings ($40,000-$65,000+) and full ownership, but requires $24,300-$29,700 upfront with no federal credit. A lease costs $0 down with lower monthly payments ($80-$150/mo) because the third-party owner claims the 30% ITC, but total savings are lower ($15,000-$30,000 over 25 years) and you don't own the system. The gap between buying and leasing has narrowed significantly now that cash buyers can no longer claim the 25D credit.
Solar loan rates in Texas range from 5.99% to 8.99% APR as of February 2026, with terms of 15-25 years. For a 10 kW system costing $24,300-$29,700, monthly payments are typically $150-$250. At higher interest rates (8%+), total interest can add $15,000-$25,000 to the system cost over the loan term. Since there is no 25D federal credit to reduce the principal, the effective cost of financing is higher than it was before 2026.
If you sell your home with a solar lease, you have three options: (1) Transfer the lease to the buyer, which requires the buyer to qualify and agree to the terms; (2) Buy out the remaining lease from the financing company; or (3) In some cases, the leasing company may agree to remove the system. Most Texas home sales with solar leases involve transferring the agreement to the new buyer. Note that some buyers may view a lease as a complication.
The 100% Texas property tax exemption for solar energy devices generally applies to systems that increase the property value for the homeowner. For owned systems (cash or loan), the exemption clearly applies — your property taxes do not increase despite the added value of the solar system. For leased systems where a third party owns the panels, the exemption may not apply in the same way since the homeowner does not technically own the equipment. Consult your local appraisal district for specifics.
A Power Purchase Agreement (PPA) means you pay for the electricity the solar system produces at a fixed per-kWh rate (typically 10-14 cents/kWh in Texas), rather than paying a fixed monthly lease payment. With a lease, you pay a flat monthly amount regardless of production. Both are $0 down, and in both cases a third-party company owns the system and can claim the 30% ITC. PPAs are often slightly simpler because you only pay for what you actually use.
July 4, 2026 is the deadline for the commercial/third-party Investment Tax Credit (Section 48/48E). Solar projects must begin construction before this date for the third-party system owner to claim the 30% ITC. This affects lease and PPA arrangements — after this deadline, the third-party cannot claim the credit, which means lease and PPA rates will likely increase. For homeowners considering a lease or PPA, signing before this deadline is important to lock in ITC-subsidized rates.
No. The Austin Energy $2,500 residential solar rebate is only available for customer-owned systems. If you go through a cash purchase or solar loan and are an Austin Energy customer, you can receive the $2,500 rebate. Leased systems and PPAs where a third party owns the panels are not eligible. This makes cash or loan purchases particularly attractive in the Austin Energy service territory.
Without the federal tax credit (Section 25D expired December 31, 2025), a 10 kW residential solar system in Texas costs $24,300-$29,700 installed, or about $2.70/W on average. Before 2026, the 30% credit would have reduced a $27,000 system by $8,100. The only local rebate available is the Austin Energy $2,500 rebate for customers in the Austin Energy service territory. Texas has no state solar tax credit and no state income tax.
Propel Solar is a hybrid financing model available in Texas (and Maine). A third-party financing company owns your solar system initially and claims the 30% Section 48 ITC. You pay a fixed monthly amount of approximately $135/month with $0 down. By year 5, full ownership transfers to you. Because Propel uses FEOC-compliant Silfab 440W panels, the financing company may qualify for additional domestic content bonuses. Propel combines the ITC advantage of a lease with the long-term ownership benefits of buying.
Your ERCOT Retail Electric Provider (REP) buyback rate directly affects the value of excess solar production. With cash or loan ownership, you keep 100% of buyback credits. Some REPs offer 1:1 retail buyback (like TXU Energy Solar Buyback), while others pay wholesale rates (3-5 cents/kWh). With a lease or PPA, the third-party owner may retain excess production credits. With Propel, you receive credits after the ownership transfer in year 5. Choosing a REP with a strong buyback plan is critical regardless of financing, but it especially benefits cash and loan buyers who keep all the credits from day one.
Section 48E is the commercial/third-party clean energy Investment Tax Credit. Under the One Big Beautiful Bill Act (OBBBA), solar projects must begin construction before July 4, 2026 for the third-party system owner to claim the 30% ITC. This deadline affects every financing option that depends on a third party: leases, PPAs, and Propel. After this date, the third-party owner cannot claim the 30% credit, which will likely increase lease/PPA rates and Propel monthly payments. The financing company claims the ITC, not the installer and not the homeowner.
$0 down, own by year 5 with FEOC Silfab panels
Read guideHow third-party ownership captures the 30% ITC for you
Read guideHow the commercial ITC works for residential solar
Read guideCity-by-city pricing at $2.70/W average
Read guideHow REPs buy back your excess solar production
Read guideEverything you need to know about going solar in TX
Read guideLast updated: March 2026. Pricing, rebate amounts, and program availability are subject to change. Consult a licensed solar installer for a site-specific quote.
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