Do Solar Panels Save Money? How to Run the Numbers

Solar panels can save money over their lifetime, but only if your yearly savings on electricity add up to more than the system costs, and that depends on your installed price, sunlight, electricity rates and how your utility credits the power you export. So do solar panels save money for you? The honest answer is to run the payback math with real quotes, especially now that the federal tax credit for homeowners has ended.

This guide explains what changed, how to calculate payback the way the Department of Energy suggests, and how to compare buying, financing and leasing. It's US-focused and current as of 2026. Incentives and grid rules differ by state and by country, so check official sources where you live.

Do solar panels actually save money?

Often, yes, over many years, but not everywhere and not for every home. The Department of Energy says your savings depend on how much electricity you use, the size of the system, whether you buy or lease, how much power it produces given your roof and sunlight, your utility's rates and how much the utility pays for excess power you send to the grid.

That's why two neighbors can get very different answers. A sunny, unshaded roof in an area with high electricity prices and generous credits for exports can pay back much faster than a shaded roof with cheap power.

Solar is a big purchase, not a quick saving. If you're looking for faster wins on your bills, start with the cheaper fixes in our guide on how to save money on utilities, which also make any future solar system smaller and cheaper. For the full household picture, see our step-by-step guide to saving money.

What changed with the federal solar tax credit?

For homeowners who buy a system, the main federal incentive is gone. The IRS says the Residential Clean Energy Credit, worth 30% of the cost of qualified clean energy property such as solar panels, applied to property installed from 2022 through December 31, 2025, and isn't available for property placed in service after that date.

What that means in 2026:

• Payback takes longer for a purchased system, because the upfront cost is no longer reduced by 30% at tax time.
• State, local and utility incentives may still exist. Check your state energy office and your utility's rebate pages.
• Be skeptical of sales pitches that still lead with the federal credit. Ask the installer to show their math without it.

If you're comparing a lease or power purchase agreement, ask the company how its pricing changed. The FTC notes that when you lease, you don't own the system, so you can't claim tax credits or other incentives yourself.

How do you calculate solar payback?

Use the Department of Energy's formula: payback period equals the net cost of the system (after upfront incentives) divided by the yearly financial benefit (electricity savings plus any yearly incentives).

You need three numbers:

1. Net cost: the installed price from written quotes, minus rebates you'll actually receive.
2. Expected production: how many kilowatt-hours the system will produce a year. Installers should estimate this for your roof.
3. Value of each kilowatt-hour: what you pay for electricity you no longer buy, and what your utility credits for power you export.

For a rough sense of price, EnergySage's marketplace data, updated in September of 2026, shows an average of about $2.60 per watt before incentives, and about $31,135 for a typical 12-kilowatt system. Your quotes may be higher or lower.

Example (hypothetical): payback under four scenarios

Assume an 8-kilowatt system at $2.60 per watt, so $20,800 installed, producing 10,400 kilowatt-hours a year, with electricity at 18 cents per kilowatt-hour. These are illustrative assumptions, not predictions.

The math behind row two: 5,200 kWh used at home saves $936, and 5,200 kWh exported at 6 cents earns $312, for $1,248 a year.

Simple payback leaves out several things that can move the answer either way: electricity prices rising or falling, panel output slowly declining, maintenance and inverter replacement, and loan interest if you finance.

What makes solar save more, or less?

The same system can be a good or poor investment depending on these factors:

The Department of Energy suggests asking your utility specific questions about net metering: whether it's available, eligible system sizes, rates and how bill credits work. Those rules can change, so ask what happens to existing customers if they do.

Should you buy, finance, lease or sign a PPA?

Each option shifts who pays upfront and who gets the savings.

• Buy with cash: highest upfront cost, but you keep all the savings and any incentives. Usually the shortest payback.
• Buy with a loan: low or no upfront cost, but interest adds to the total. Compare the loan rate and fees with other ways to borrow, and check whether a "low rate" is offset by a higher system price.
• Lease: a company installs and owns the system; you pay to use it. The FTC notes leases are typically long-term, some lasting 20 years, and payments can increase over time.
• Power purchase agreement (PPA): you buy the power the system produces at a price the provider sets, also typically under a long contract.

With a lease or PPA, check what happens if you sell the house, whether payments escalate each year and who handles repairs.

How do you avoid a bad solar deal?

Get several written bids and slow down. The FTC warns about solar scams and high-pressure sales, and says to be wary of:

• Claims you'll never pay an electric bill again because government programs or rebates cover everything.
• Large upfront payments or deposits demanded before work starts.
• Pressure to sign quickly, or being asked to sign on a tablet without seeing the full agreement.

The FTC suggests comparing detailed bids that specify the equipment brand, size and expected performance in writing, along with warranties, cancellation policies, payment schedules and any fees. Problems can be reported at ReportFraud.ftc.gov or to your state attorney general.

What should you do before getting solar?

Cut waste first, then size the system to what you'll really use.

1. Lower your usage. Thermostat settings, sealing drafts and efficient appliances shrink the system you need.
2. Pull 12 months of electric bills to see your actual usage and rate.
3. Check your roof for shade, age and condition.
4. Ask your utility about net metering, export credits and any rebates.
5. Get at least three written quotes and run the payback formula on each, without the expired federal credit.
6. Decide how you'll pay and compare the total cost of each option over the contract or loan.

If you'd be paying out of savings, keep your emergency fund intact rather than draining it for the system.

Next steps

Start with your last year of electric bills and the efficiency fixes that cost little. Then collect three quotes, run the payback formula with your utility's real export credit, and compare buying with leasing on total cost, not monthly payment.

For a routine that puts the savings to work, follow our simple plan on how to save money. And if you'd like to grow your income alongside cutting costs, see our guide to making money online; results depend on effort and time.