Solar Lease vs PPA in 2026: Which Makes Sense After the 25D Credit Died?

By Nacho Iniguez ✦ Updated June 8, 2026

I bought my panels outright, so I will be honest up front: third-party solar is not how I went. But after the rules changed on January 1, 2026, a lease or a PPA is the only way most homeowners can still touch a federal tax credit at all. That alone makes them worth understanding before you sign anything.

This guide walks through what actually changed, how a lease differs from a PPA, where the savings hide, and the traps that the salesperson tends to mention quietly or not at all.

Why the Tax Credit Rules Flipped in 2026

For years, the Section 25D Residential Clean Energy Credit gave homeowners 30 percent back on a solar system they bought with cash or a loan. The One Big Beautiful Bill, signed July 4, 2025, killed that credit for any system installed after December 31, 2025. If you buy panels in 2026, your federal credit is zero. Full stop.

What survived is a different credit aimed at businesses: Section 48E, the commercial Investment Tax Credit. It runs through the end of 2027, with a construction-start deadline around July 4, 2026 for projects relying on safe harbor. Here is the catch that matters to you: a homeowner cannot claim 48E. A company can.

That single fact is why leases and PPAs suddenly look more interesting in 2026 than they did when 25D was alive.

How a Lease and a PPA Pass the Credit to You

In both a lease and a PPA, a financing company installs and owns the system on your roof. Because the company owns it, the company qualifies for the 48E credit, roughly 30 percent of the system cost. They keep that credit, but competition pushes them to fold part of it into a lower monthly rate for you.

EnergySage describes the pass-through as the provider claiming the commercial credit and passing along much of that value to homeowners through lower costs. Industry estimates I have seen put the homeowner’s share of that benefit somewhere in the high single digits to high teens as a percentage of system cost. Treat that as a market estimate, not a guarantee, because the company decides how much to share.

So in 2026 the comparison is no longer “buy and get 30 percent” versus “lease and get nothing.” It is “buy and get nothing federal” versus “lease or PPA and get a slice of someone else’s 30 percent.” That changes the math. To see whether the slice is big enough for your roof and rates, run your own numbers in the solar and battery ROI calculator.

Lease vs PPA: The Actual Difference

People use these terms interchangeably. They are not the same.

A solar lease is a fixed monthly payment. You pay the same amount whether the panels have a sunny month or a cloudy one. It is predictable, which some people value, but you carry the production risk: a weak month still costs full price.

A PPA, or power purchase agreement, charges you per kilowatt-hour your system actually produces, usually at a rate below your utility’s. A slow solar month means a smaller bill. The company carries more of the production risk, but your payment moves around.

Neither one means you own anything. In both cases the panels belong to the financing company for the length of the contract, often 20 to 25 years.

The Escalator Trap

Here is the clause that turns a good deal into a mediocre one. Most leases and PPAs include an annual escalator, a built-in yearly increase to your payment, typically between 0 and 3 percent. The number 2.9 percent shows up constantly in real contracts.

It sounds small. It is not. At a 2.9 percent escalator, a payment that starts around $150 a month grows to roughly $199 by year 10 and past $300 by year 25. The pitch is that your escalator stays below utility rate inflation, so you still come out ahead. Sometimes that is true. Sometimes utility rates rise slower than your escalator and you spend the back half of the contract paying more than you would have without solar at all.

When you read the contract, find the escalator first. A 0 percent escalator with a slightly higher starting payment often beats a low teaser rate that climbs every January. If you are also weighing a battery for outage protection or rate arbitrage, the TOU arbitrage calculator helps you see whether the escalating payment still leaves room for savings.

What Happens When You Sell the House

This is where third-party solar gets sticky, and it is the part I would not have tolerated personally. Because you do not own the system, you cannot simply leave it behind. When you sell, you generally have two paths.

The buyer assumes your contract, often for a one-time transfer fee, and inherits the remaining payments and escalator. The good news is the system is usually filed as a UCC-1 lien on the equipment itself, not on your home, so it does not cloud the title the way some people fear. The bad news is that a buyer who did not choose your panels may treat the contract as a liability and negotiate your price down, or walk.

The other path is an early buyout, where you pay the company to take ownership so you can sell clean. Buyout figures can be steep in the early years. Either way, a 20-year contract on a house you might sell in seven deserves real thought.

So Which One, and When Should You Just Buy?

If your federal tax appetite is low, you have little cash, and you want solar this year, a lease or a PPA with a 0 percent or very low escalator and a clear transfer clause is a defensible choice in 2026. The 48E pass-through is real money you cannot get any other way as a homeowner right now.

If you have the cash or can get a cheap loan, buying still wins on lifetime cost in most cases, even with no federal credit, because you keep 100 percent of the savings and own an asset instead of renting one. You skip the escalator, the transfer headache, and the buyout. The credit is gone either way, so the buy decision now rests on your electricity rates and how long you will stay, which is exactly what I walk through in is solar worth it in 2026.

My honest read: third-party solar in 2026 is a financing tool, not a windfall. Used carefully, with the escalator pinned low and the exit terms understood, it can pencil out. Signed in a rush off a door-knock pitch, it is the kind of contract people spend a decade regretting. Read every line, and run your own numbers before anyone runs them for you.