If you’ve been sitting on a solar quote for the last year or two, waiting to see what happened with policy, you’re probably feeling a little blindsided right now. The 30% federal residential tax credit, formally the Section 25D credit, expired on December 31, 2025 under the One Big Beautiful Bill Act. Gone. No phase-down, no grandfathering for systems installed in early 2026. Just zero. That changes the math in ways that are significant enough that I’d be doing you a disservice if I just handed you a sizing calculator and sent you on your way.

Here’s the honest situation: BloombergNEF projects U.S. residential solar additions will fall to just 4.1 GW in 2026, down 15% from 2025 and the lowest level in five years. Roth Capital Partners put an even sharper number on it, projecting a 33% year-over-year drop in residential volume. When installers are hurting for business, the pressure to sell you a bigger system than you need gets worse, not better. This is exactly the moment to understand how to size a system for the financial reality you’re actually in, not the one that existed in 2024.

Key takeaways
  • The 30% federal solar tax credit expired December 31, 2025, leaving cash and loan buyers with $0 in federal incentives.
  • Without the credit, average payback periods stretch from ~7 years to ~9 years, per Infinity Solar's June 2026 analysis.
  • Losing the credit means paying ~43% more out-of-pocket for the same system size.
  • BloombergNEF projects residential solar additions will hit a 5-year low of 4.1 GW in 2026.
  • Right-sizing down from the recent 7.4 kW median can restore payback timelines closer to pre-credit-loss levels.

The Out-of-Pocket Shock Is Real, and the Numbers Explain Why

Let me put the credit loss in concrete terms. On a $20,000 system, the old 30% credit handed you $6,000 back at tax time. Now that $6,000 stays in your pocket before the install, not after. To net the same effective cost, you’d need to either negotiate a 30% price cut (not happening in this market) or shrink the system. Infinity Solar’s June 2026 analysis puts it this way: losing the credit effectively means homeowners must spend about 43% more out-of-pocket for the same system. Payback stretches from roughly 7 years to 9 years on a system sized the way most people sized them in 2023 and 2024.

Nine years is still well inside a 25-year panel lifespan. The long-term value proposition hasn’t collapsed. But 9 years is a harder sell when you’re writing a bigger check on day one, especially if you’re financing and interest charges are stacking on top.

The practical response isn’t to walk away from solar. It’s to walk into the sizing conversation with a different goal: optimize for payback period, not for maximum offset. Those are different targets, and they produce different system sizes.

Why the 7.4 kW “Median” Is the Wrong Starting Point Now

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The recent median residential system size of 7.4 kW was partly shaped by the tax credit. When 30% of your system cost comes back as a federal credit, there’s a strong incentive to size up. Cover 100% or even 110% of your usage. Add a little buffer for an EV you might buy someday. The credit softened the upfront pain of going bigger.

That logic no longer applies. Here’s a simple way to think about the tradeoff in 2026:

System SizeApprox. Cost (pre-incentives)Annual Production (avg. U.S. sun)Typical Payback (2026, no federal credit)
5 kW~$13,500~6,500 kWh~7–8 years
7.4 kW (old median)~$20,000~9,600 kWh~9–10 years
10 kW~$27,000~13,000 kWh~10–11 years

Those payback estimates assume average U.S. electricity rates and typical net metering, and they’ll shift considerably based on where you live and your utility’s buy-back rate. But the pattern holds: shrinking from the old median toward 5 kW can pull payback back down closer to what the larger system achieved when the credit was alive.

The right size for you is the one that covers your baseline load, not your aspirational load. Pull 12 months of utility bills. Find your actual average monthly usage. Size to cover 80% to 90% of that number, not 100% or more. If you add an EV or a heat pump later, you can revisit. A second, smaller system addition is almost always easier to justify financially than oversizing now.

State Incentives Are Doing More Work Than They Used To

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With the federal credit gone, state and utility programs have become the primary lever for improving your payback. And this is genuinely uneven across the country.

Florida is the standout story right now. BloombergNEF projects Florida’s residential solar additions will hit 710 MW in 2026, a 62% increase over last year, driven by a sweeping permitting reform law that took effect in summer 2025. That law cut permitting timelines dramatically, which lowers soft costs for installers and, eventually, prices for homeowners. If you’re in Florida, you’re in an unusually good position heading into the second half of 2026.

Projected 2026 Residential Solar Additions
U.S. Total4.1 GW
Florida0.7 GW
Source: BloombergNEF, June 2026

Outside of Florida, look hard at your state’s net metering policy before you size anything. Net metering rules determine what your utility pays you for excess power you push back to the grid. Several states have weakened these rules in the last two years. If your utility offers a low buy-back rate, oversizing your system just means producing cheap power you’re giving away at a discount. That makes the case for a smaller, tighter system even stronger.

Some states still have meaningful incentives layered on top. New York’s NY-Sun program, Massachusetts’ SMART program, and others can meaningfully change your numbers. Get a quote that breaks out every available incentive by line item, not just a net system price.

How to Have a Better Sizing Conversation With Your Installer

Most installers are going to quote you a system that covers 100% of your usage. That’s not necessarily bad advice, but you should push on it. Ask them to show you the payback on 80% coverage versus 100% versus 110%. Make them run those numbers side by side. A good installer will do this without hesitation. One who resists the question is probably prioritizing their margin.

Also ask specifically about equipment tier. Premium panels from manufacturers like Maxeon or high-efficiency lines from LG alternatives can mean fewer panels for the same output, which matters if you have limited roof space. But in a tighter budget environment, mid-tier panels from Tier 1 manufacturers often hit a better cost-per-watt number, and the efficiency gap shrinks to something that rarely justifies the price premium for most residential applications.

Finally, if you’re considering a loan, get the total cost of the loan in writing, including all interest. A 12-year solar loan at 6.99% on a $20,000 system adds roughly $8,000 in interest over the life of the loan. That changes your effective payback significantly. Some homeowners are better served by a smaller cash purchase than a larger financed one.

The solar market in mid-2026 is harder than it was two years ago. That’s just true. But harder doesn’t mean bad. It means you need to be smarter about the size of what you buy, which incentives you’re actually capturing, and what payback timeline you can genuinely live with. The panels still work. The sun still shows up. The question is just making sure the deal does too.

Sources

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