Is there still a tax credit through 2027?

When the tax code changed this summer and the 30% residential solar tax credit was eliminated, homeowners looking to lower their electric bills rushed to get solar installed. It felt a lot like the toilet paper scramble during COVID.

The unspoken truth was that the commercial tax credit remained in place through 2027. That reality has shifted how many residential solar projects are financed, with more systems structured as leases that are treated as commercial property.

Solar has long used third-party ownership options like leases and power purchase agreements, or PPAs. In these arrangements, a third party owns the system, claims the tax benefits, and passes that value on to the homeowner. One version of this is a prepaid lease, where the full lease payment is made up front. Hot Purple Energy has historically advised most clients away from the first options for a litany of reasons. However, the last option, the prepaid lease, has always been in our tool chest and has worked well for many clients over the years.

With the new tax codes, investors have offered better prepaid opportunities than ever before. We are also seeing new players enter the space, prompting us to reevaluate our position on monthly leases and PPAs.

In practice, a prepaid lease works much like a purchase. Instead of buying a $100,000 system and later receiving a $30,000 tax credit, a homeowner prepays 25 years of rent for $70,000, effectively capturing the same value upfront.

For most homeowners, there is little difference between owning a solar and battery system outright and having one through a prepaid lease. The equipment, power production, warranty and day-to-day benefits are the same. The difference is simply how the system is owned on paper.

A common question is what happens at the end of the lease. For tax reasons, any buyout must be based on fair market value. By that point, the equipment is out of warranty, there is no real resale market, and removal would cost more than the system is worth, making the fair market value effectively zero.

The tax credit may be gone, but the opportunity is not. Utility costs are still climbing. With the right approach, solar can still deliver strong long-term value for homeowners.