Solar Payback Calculator
Work out how long a rooftop solar system takes to pay for itself — with the federal residential tax credit shown as what it now is, expired, rather than baked in at 30%.
Results
Simple payback: 13.5 years
Net cost after incentives: $21,000.00
Estimated annual production: 8,623 kWh
Annual bill offset at today's rate: $1,552.16
Bill offset over 25 years: $38,804.06
Net gain over 25 years: $17,804.06
Yield per kW installed: 1,232 kWh/kW/year
Today's rate held flat for 25 years, with no panel degradation and no maintenance cost. Rising rates shorten payback; degradation and maintenance stretch it.
How it works
Annual production from the same sun-hours-and-derate model as the panel-count tool, turned into money at your rate, then divided into what you paid after incentives. Simple payback: no discount rate, no escalation, no degradation.
annual_kwh = system_kw × peak_sun_hours × 365 × derate
annual_saving = annual_kwh × rate
payback_years = (system_cost − incentive) / annual_saving
system_cost- Installed cost from your quote, before incentives.
incentive- Incentives you confirmed you qualify for. Defaults to $0.
system_kw- Nameplate DC system size in kilowatts.
peak_sun_hours- Daily peak sun hours for the location.
derate- Share of DC nameplate power that reaches the meter.
rate- Retail electricity price you avoid paying, $/kWh.
annual_kwh- system_kw × sun_hours × 365 × derate.
payback_years- (cost − incentive) ÷ annual bill offset, in years.
Assumptions
- The federal residential credit is gone, and this tool does not pretend otherwise. The One Big Beautiful Bill Act (Public Law 119-21, July 2025) terminated IRC §25D: the IRS states the credit "will not be allowed for any expenditures made after December 31, 2025", and the 2026 Form 5695 exists only to carry forward an unused 2025 credit. Paying a deposit in 2025 does not help — §25D(e)(8)(A) treats the expenditure as made when installation is completed.
- So the incentive field starts at $0 and is yours to fill in. State, local, and utility programs still exist and vary enormously; DSIRE is the usual place to look them up, and your installer should be able to name every credit they are claiming on your behalf. Confirm before you count it.
- Simple payback at today's electricity rate, held flat. No rate escalation, no discount rate, no financing interest. If you are borrowing to pay for the system, the interest is real and this figure does not include it.
- Panel output degradation is not modelled. Modules typically lose about 0.5% of output per year, so late-life production runs below the figure above. Degradation and rising rates push payback in opposite directions, which is why this tool states the simple case rather than pretending to model both.
- This assumes every kilowatt-hour you generate offsets one you would have bought at full retail price. That is full net metering, and it is no longer the rule in much of the country — California's NEM 3.0 pays well below retail for exports, and other states have followed. Where exports are paid less, payback is longer unless you self-consume or add a battery.
- 4.5 peak sun hours is a mid-range U.S. annual average, the same default the panel-count tool uses. Real values run from about 3 in the Pacific Northwest to 6 in the Southwest, so this is the input most worth replacing with a real lookup.
- 0.75 is the NREL PVWatts default: roughly 14% system losses plus inverter and other real-world losses. It does not describe a shaded or poorly oriented roof.
- Roof pitch, azimuth, and shading are not modelled — a single derate figure cannot represent them. For a site-specific estimate, run your address through NREL PVWatts and put its annual kWh next to the figure here.
- The 25-year horizon is the production warranty length most residential modules carry. It is the longest period a payback claim can lean on, not a prediction that the system stops working.
FAQ
Is there still a 30% federal tax credit for solar in 2026?
No. The One Big Beautiful Bill Act terminated the residential clean energy credit (IRC §25D) for expenditures made after 31 December 2025. The IRS FAQ and the 2026 Form 5695 instructions both say so plainly, and the 2026 form only carries forward credit earned in 2025. Signing a contract or paying a deposit in 2025 does not qualify you: the expenditure counts when installation is finished. Any calculator still defaulting to 30% is quietly overstating your savings — on a $21,000 system that is $6,300, about four years of payback.
What is a good solar payback period?
Under 10 years is generally considered strong, and 10–15 years is common. A 7 kW system at $21,000 with 4.5 peak sun hours and an 18¢ rate produces about 8,623 kWh a year, offsets roughly $1,552 of bill, and pays back in about 13.5 years. The two levers that move it most are your electricity rate and your quoted price per watt — not the brand of panel.
Can I still get a tax credit through a solar lease or PPA?
Not on your own return. With a lease or power purchase agreement the system is owned by the company, and a business-side credit (§48E) may still be available to them on a different timeline. That can show up as a lower monthly payment, but you are not claiming a credit and you do not own the asset. Ask the provider to show how the incentive is reflected in the price, then compare the lifetime payments against buying outright.
Does this include battery storage?
No. This sizes payback for a grid-tied system that offsets consumption. A battery adds cost and mostly buys backup power and time-of-use arbitrage rather than extra production, so it pays back through a different mechanism. Use the time-of-use arbitrage tool for that side, and the home battery backup tool to size the pack.
Sources
- IRS Fact Sheet 2025-05 — FAQs on the modification of §§25C, 25D and others under Public Law 119-21 (OBBB): §25D not allowed for expenditures made after 31 December 2025; a 2025 payment does not qualify if installation finishes later
- IRS Form 5695 (2026) and instructions — "You can't claim residential clean energy credits for expenditures made after December 31, 2025"; the 2026 form covers carryforward only
- NREL PVWatts Calculator — default system losses (~14%) behind the 0.75 derate, and the tool to use for a site-specific production estimate
- NREL Solar Resource Maps — peak sun hours by location, for replacing the 4.5 default
- U.S. EIA Electric Power Monthly Table 5.3 — U.S. residential average retail electricity price behind the $0.18 default
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