Solar Panels and Heat Pumps to Be More Expensive in 2026

The elimination of US tax credits for residential heat pumps, solar panels and batteries will make electrifying your home more expensive in 2026, and tariffs and made-in-America mandates could add additional costs.

Just how pricey remains to be seen. New financing models could help keep some solar and battery costs in check, according to Emily Walker, director of insights at online solar marketplace EnergySage.

Here’s what you need to know.

The Tax Credit Repeal’s Impact on Prices

The expiration of the 30% federal tax credit for solar and battery installations at the end of 2025 doesn’t necessarily make the equipment more costly to buy but for homeowners with a tax liability, it does end the ability to reduce or erase their tax bill. A typical solar and battery system generated tax credits worth about $10,000.

You Can Still Save by Leasing

Tax credits remain for leased solar systems through the end of 2027, though the installer receives the incentive and passes on the savings to homeowners through lower monthly payments or other cost reductions.

A New Model of Solar Ownership Is Emerging

Walker said installers who sold systems are now switching to a new model that lets residents ultimately own their solar and battery arrays while securing the savings from leasing. Called lease-to-own or a prepaid lease, a homeowner pays for the cost of the system upfront and the installer passes on the tax credit benefits as a discount. The solar company must retain ownership for a certain number of years under the tax code but then transfers title to the homeowner.

Southern California installer SolarShoppers sells its systems but company president Shawn Heckerman said he estimates that prepaid leases will account for nearly all of his business in 2026. Like other solar installers, he anticipates that demand will initially soften but recover later in the year. “I expect us to have a better year in 2026 than the last one, even with the tax credit expiring,” he said.

That’s due to soaring electricity rates and temperatures that force residents to run their air conditioners. “When we get into the summer, customer calls spike when they get their first high utility bill,” said Heckerman.

Walker also expects homeowners to continue adding panels as they install electric vehicle chargers and replace fossil fuel appliances with induction stoves and heat pumps. That can make going solar still financially attractive in the long run, even if the absence of federal incentives means adding a couple of years to the time it takes for the energy savings to equal the cost of the system, she said.

“When you’re talking about something that’s producing electricity for 25 years, it’s really just a blip,” said Walker.

New Rules Could Raise the Cost of Solar Panels and Batteries

To receive the tax credit, leased systems must comply with new domestic manufacturing requirements that took effect Jan. 1, 2026. The federal government, though, has yet to issue final guidance on what percentage of components from China and other countries are prohibited under the Trump tax bill enacted in July.

Tariffs Will Also Add Costs
The US imports most of its solar panels from China, Vietnam and other countries subject to tariffs. Nearly all batteries for residential energy storage are made in China.

Tariffs and manufacturing mandates will likely push up prices, according to analysts, but Walker said that will encourage the industry to focus on cutting “soft costs” like permitting and paperwork that result in US residents paying significantly more for solar energy than those in Australia and Europe.

How Heat Pumps Are Affected

Homeowners have also lost the $2,000 federal tax credit for heat pumps that can warm and cool dwellings and provide hot water. But Francis Dietz, a spokesperson for industry group AHRI, noted that most heat pumps didn’t qualify for the incentive, which was only for the most efficient and expensive models.

“You can still get your basic or basic-plus heat pump and don’t have to worry about the tax credit going away, so it won’t make a big difference for the average consumer,” he said.

The US imported 382,000 heat pumps, mainly from China and Mexico, out of 4.1 million of the devices that shipped in 2024, according to AHRI and the United Nations. But prices may rise modestly as domestically assembled heat pumps use Chinese components subject to tariffs.