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Definition
A solar loan is financing where you borrow money to purchase and own your solar system, then repay the principal plus interest over time. Because you own the equipment rather than renting it, you can typically no longer claim the federal residential solar tax credit (Section 25D, IRS) on a purchased system installed in 2026 and any state or local incentives tied to ownership. This stands in direct contrast to a lease or power purchase agreement (PPA), where a third party owns the panels and keeps the tax benefits. With a loan, the system becomes your asset, which can add value to your home and let you keep all the energy savings once the loan is paid off. Loan terms, interest rates, and any dealer fees vary by lender and state, so compare the total cost carefully before signing.
Also Known As
Solar Financing
Residential Solar Loan
Solar Purchase Loan
Home Solar Loan
Used in Context
- A homeowner considering a solar loan over a lease should be aware that, for systems installed after December 31, 2025, the federal residential solar tax credit (Section 25D, IRS) has expired for homeowner-purchased systems — meaning a 2026 purchase would earn no federal credit. With a lease or PPA, the third-party owner may still claim the 30% commercial credit under Section 48E (IRS), often passing savings through as a lower rate, provided construction begins before July 4, 2026 (or the system is in service by December 31, 2027).
- After comparing quotes from Dreamy Leads, a buyer picked a solar loan with a fixed rate to spread the system cost over several years.
- Because he financed with a solar loan, the installer confirmed he—not a third party—would receive the ownership-based incentives.
Can I claim the solar tax credit with a solar loan?
For systems installed in 2026 or later, the answer depends on how you go solar. Because the federal residential solar tax credit (Section 25D, IRS) expired for homeowner-purchased systems installed after December 31, 2025, buying via a solar loan no longer qualifies for a federal credit. With a lease or PPA, the third-party owner may still claim the 30% commercial credit under Section 48E (IRS) and often passes those savings through as a lower rate — provided construction begins before July 4, 2026 (or the system is in service by December 31, 2027). Eligibility rules are complex, so confirm the current rules with a tax professional before filing. This is general information, not tax advice.
How is a solar loan different from a lease or PPA?
With a solar loan you borrow money, own the system, and repay principal and interest. With a lease or PPA, a third party owns the panels and you pay to use them or buy the power. Ownership is the key difference, and it determines who can claim the tax credit and incentives.
Do I keep the energy savings with a solar loan?
Yes. Since you own the system, the energy your panels produce is yours, and once the loan is paid off you keep all the savings. During repayment, your loan payment plus any remaining utility bill replaces your old electricity cost. Actual savings vary by system size, usage, and local rates.
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