Solar Payback Period by State 2026 (Without the Federal Tax Credit)
7 kW system at $3.00/W ($21,000) before any incentives. No federal credit applied (the residential credit ended 31 December 2025). Payback = system cost ÷ annual electricity savings at March 2026 EIA rates.
Fastest payback
4.8 yrs
Hawaii (no credit)
Federal credit
Ended
Dec 31, 2025 (OBBBA)
Avg payback
11.6 yrs
across listed states
System lifespan
25-30 yrs
Net profit window
Why This Page Shows No Federal Tax Credit
The 30% residential credit is gone. The One Big Beautiful Bill Act (July 2025) ended Section 25D for expenditures after December 31, 2025, so systems installed from 2026 onward get no federal credit if purchased outright.
Purchased systems: no credit
The Section 25D Residential Clean Energy Credit ended for expenditures after December 31, 2025 (the IRS treats an expenditure as made when installation is completed). A homeowner buying a system in 2026 pays the full pre-incentive price at federal level.
Lease and PPA can still help
Third-party-owned systems (lease or Power Purchase Agreement) remain eligible for the commercial Section 48E credit for installations before the end of 2027. The leasing company claims the credit and competitive markets pass part of it through as lower payments.
State incentives survive
State-level incentives are unaffected: Hawaii's 35% state credit (capped $5,000), Louisiana's state credit, Illinois Shines SRECs, NJ TRECs, and SREC markets in MD and PA still shorten payback. Check the per-state notes in the table below.
Modeling a pass-through discount
If you are quoted a lease or PPA where the provider passes through part of its Section 48E credit, or your state offers an upfront rebate, multiply the payback years below by (1 minus the effective discount). A 30% effective discount turns a 11.6-year baseline into roughly 8.1 years.
Solar Payback by State (No Federal Credit, March 2026 Rates)
7 kW system, $3.00/W installed cost. Payback years sorted fastest to slowest.
| State | Rate (c/kWh) | Sun hrs/day | Net Metering | Payback (no credit) |
|---|---|---|---|---|
| Hawaii 35% state tax credit (capped $5,000) | 42.23 | 5.6 | Partial NEM | 4.8 yrs |
| California | 33.35 | 5.8 | NEM 3.0 | 8.0 yrs |
| Connecticut | 30.47 | 4.1 | Full NEM | 8.2 yrs |
| Rhode Island | 29.91 | 4.1 | Full NEM | 8.4 yrs |
| Massachusetts | 30.21 | 4.0 | Full NEM | 8.5 yrs |
| New York | 28.55 | 4.2 | Full NEM | 8.6 yrs |
| New Hampshire None above federal | 26.92 | 4.0 | Full NEM | 9.5 yrs |
| New Jersey | 23.49 | 4.4 | Full NEM | 9.9 yrs |
| New Mexico | 14.81 | 6.8 | Full NEM | 10.2 yrs |
| Maryland | 22.20 | 4.5 | Full NEM | 10.3 yrs |
| Colorado | 16.74 | 5.7 | Full NEM | 10.8 yrs |
| Vermont | 24.11 | 3.8 | Full NEM | 11.2 yrs |
| Arizona | 15.59 | 6.5 | Partial NEM | 11.3 yrs |
| Pennsylvania | 20.92 | 4.3 | Full NEM | 11.4 yrs |
| Michigan | 21.20 | 4.2 | Full NEM | 11.5 yrs |
| Mississippi | 16.30 | 5.3 | Full NEM | 11.9 yrs |
| Illinois Illinois Shines SREC program | 18.86 | 4.5 | Full NEM | 12.1 yrs |
| Ohio | 18.78 | 4.4 | Full NEM | 12.4 yrs |
| Florida | 14.86 | 5.5 | Full NEM | 12.6 yrs |
| Nevada | 14.17 | 6.4 | Partial NEM | 12.6 yrs |
| North Carolina | 16.00 | 5.1 | Full NEM | 12.6 yrs |
| Alabama | 17.15 | 5.2 | Partial NEM | 12.8 yrs |
| Georgia | 15.01 | 5.2 | Full NEM | 13.2 yrs |
| Louisiana 50% state tax credit (capped $12,500) | 14.16 | 5.5 | Full NEM | 13.2 yrs |
| Oklahoma | 13.56 | 5.7 | Full NEM | 13.3 yrs |
| Minnesota | 15.08 | 4.5 | Full NEM | 15.1 yrs |
| Oregon | 14.89 | 4.2 | Full NEM | 16.4 yrs |
| Texas | 16.39 | 5.6 | No NEM | 16.6 yrs |
| Washington | 14.40 | 3.8 | Full NEM | 18.8 yrs |
Assumptions: 7 kW system, $3.00/W installed, 80% efficiency, 60% self-consumption, 40% grid export at NEM rate. Production = sun hours × 365 × 7 × 0.80. No state incentives included unless noted.
The Payback Math, Explained
Step 1: System cost
7 kW × $3.00/W = $21,000
National avg installed price, Q1 2026 (NREL)
Step 2: Annual production
5.0 hr/day × 365 days × 7 kW × 0.80
= 10,220 kWh/year
US average peak sun hours; efficiency includes inverter + wiring losses
Step 3: Annual savings
60% self-used: 6,132 kWh × $0.1856 = $1,138
40% exported: 4,088 kWh × $0.1856 = $759
Annual savings = $1,897
Full NEM at the March 2026 US avg rate; export savings drop with partial NEM
Step 4: Payback
$21,000 ÷ $1,897 =
11.1 years
US average, no federal credit (Section 25D ended 31 Dec 2025).
What changes payback the most
Net metering policy
High impactFull NEM vs. NEM 3.0 (5c/kWh export) can add 3-5 years to payback. Check your state's current policy before signing.
Electricity rate
High impactEvery 1c/kWh higher rate cuts payback by ~6 months at US avg production. Hawaii (41c) vs. Louisiana (11c) creates a 4+ year gap in baseline payback.
Peak sun hours
High impactArizona (6.5 hrs/day) produces 71% more electricity than Vermont (3.8 hrs/day) from the same panels. Sun hours dominate production math.
System cost
Medium impactInstaller quotes vary $2.50-$3.80/W. Getting 3 quotes can reduce your cost by $5,000-$8,000 on a 7 kW system. Negotiate.
Self-consumption ratio
Medium impactIf you use more electricity during daylight (EVs charging, heat pumps running), your self-consumption goes up and export goes down. In NEM 3.0 states, higher self-consumption is critical.
Rate escalation
Medium impactUS residential rates rose about 5.6% per year from 2020 to 2025 (EIA annual averages, 13.15c to 17.30c). Future rate increases are not included here (conservative), but they accelerate real payback.
Net Metering Status Matters More Than Rate
California has the highest rates in the continental US (32c/kWh) but NEM 3.0 dropped export credits to ~5c/kWh, making solar payback 10+ years in many cases. Louisiana has a third the rate but full retail NEM and more sun hours.
Full retail NEM states (fastest payback)
You get credited at the same rate you pay. Excess exports have full value. These states offer the most straightforward solar economics.
MassachusettsNew YorkNew JerseyColoradoFloridaLouisianaMississippiGeorgiaNorth CarolinaOhioMichiganMinnesotaPennsylvaniaOregonWashingtonMaryland
Reduced or no NEM (caution)
Export credits are below retail rate or don't exist. Solar still makes sense, but self-consumption strategy (EVs, batteries) matters much more.
California (NEM 3.0 ~5c)Nevada (~75% retail)Arizona (~9.4c/kWh)Texas (Utility-by-utility)Alabama (Utility-set rates)Hawaii (CGS+ 8c/kWh)
Frequently Asked Questions
How is the solar payback period calculated here?+
Payback period = system cost ÷ annual electricity savings. System cost uses $3.00/W installed for a 7 kW system ($21,000). Annual savings = state residential rate (EIA, March 2026) × estimated annual kWh production (state-adjusted for sun hours). No federal credit, no state incentives, no depreciation are applied unless noted.
Why is no federal solar tax credit included?+
Because it no longer exists for homeowner-owned systems. The One Big Beautiful Bill Act (P.L. 119-21, July 2025) terminated the Section 25D Residential Clean Energy Credit for expenditures after December 31, 2025 - and the IRS treats an expenditure as made when installation is completed. Any system installed from 2026 onward gets no federal credit if you buy it outright. Leased and PPA (third-party-owned) systems can still benefit indirectly through the commercial Section 48E credit for systems installed before the end of 2027, because the leasing company claims that credit and can pass savings through. State incentives (e.g. Hawaii's and Louisiana's state tax credits, Illinois Shines SRECs) remain available and are noted per state below.
Does net metering affect the payback period?+
Significantly. States with full retail-rate net metering (you sell excess power back at the same rate you buy it) shorten payback by 15-25%. States that have reduced net metering to avoided-cost rates (e.g., California's NEM 3.0 at ~5c/kWh export) lengthen payback substantially. California's NEM 3.0 transition is why CA payback lengthened to 10+ years despite high rates.
What system size does this assume?+
7 kW DC installed capacity at $3.00/W all-in cost = $21,000 before incentives. This covers approximately 900 kWh/month in average sun states. High-usage states (TX, FL, AZ) or low-sun states (AK, WA, VT) will need adjustment. Use the sizing guide: your monthly kWh usage ÷ state peak sun hours ÷ 30 days ÷ 0.80 efficiency = kW needed.
Which states have the fastest solar payback right now?+
With no federal credit, at March 2026 EIA rates: Hawaii (4.8 yrs), California (8.0 yrs), Connecticut (8.2 yrs), Rhode Island (8.4 yrs), Massachusetts (8.5 yrs) have the fastest payback due to high sun hours combined with moderate-to-high rates and favorable net metering. Hawaii and California show longer payback than their high rates suggest because of export-rate limits (CGS+ and NEM 3.0).
