Solar After the Tax Credit: What the End of the Federal ITC Means for Humboldt County

What Changed on January 1, 2026

For most of the past 15 years, the federal government offered homeowners a direct reduction in their tax bill for installing solar. Under Section 25D of the Internal Revenue Code, the residential clean energy credit, you could claim 30% of your total system costs against what you owed in federal taxes. On a $25,000 system, that was a $7,500 reduction. On a $35,000 system with battery storage included, it was $10,500. The credit was stackable, straightforward, and available to any homeowner with federal tax liability. For the solar industry, it was foundational.

That credit no longer exists for new residential installations.

The One Big Beautiful Bill Act, signed into law on July 4, 2025, reversed the Inflation Reduction Act's long-term extension of Section 25D. The IRA had extended the 30% credit through 2032 with a planned stepdown. That timeline is now void. The credit expired December 31, 2025. Homeowners who completed installation in 2025 can still claim the credit when they file their taxes — the IRS is explicit that the credit applies when installation is physically completed, not when a system receives permission to operate. But for systems where installation is completed in 2026 or later, there is no federal residential solar tax credit.

That is the blunt version. The more useful question is what the landscape looks like from here, and whether solar still makes financial sense in Humboldt County without it. The answers are more nuanced than either the industry's optimists or its skeptics tend to suggest.

What Still Exists

The picture is not as stark as a single expired line item makes it sound. Three meaningful federal and state pathways remain, and they are not equally accessible to every homeowner.

The first is third-party ownership. Solar leases and power purchase agreements, where a company owns the panels and you pay for the electricity they produce, remain eligible under Section 48E, the Clean Electricity Investment Tax Credit. Section 48E applies to business entities, which includes the solar companies that own and operate panels on residential rooftops. The credit flows through to customers in the form of lower lease payments or reduced PPA rates. For solar projects that either begin construction before July 4, 2026, or are placed in service before December 31, 2027, Section 48E remains fully available at 30%. After that window closes, the credit phases out.

The second pathway is direct commercial or business-use ownership. If your solar installation qualifies as a business expense — for a home office, a rental property, or a business operating out of your property — Section 48E applies to you directly as the system owner. Combined with MACRS accelerated depreciation, which allows businesses to deduct the full installed cost of a solar system against taxable income in the year it is placed in service, commercial and business installations can still carry substantial federal tax advantages. The effective after-tax cost of a commercial system installed before July 4, 2026 can be reduced by 50% or more when these mechanisms are combined.

The third pathway is California-specific. The Self-Generation Incentive Program (SGIP) continues to provide rebates for battery storage systems, with enhanced incentives for households in high fire-threat districts and those with qualifying medical needs. SGIP does not require a simultaneous new solar installation — existing solar customers can add storage and apply independently. For Humboldt County households that already have solar but want backup power capability, SGIP is the most direct remaining incentive program and it has received continued state funding through the 2025 legislative session.

The Math After the Credit

Here is the part that consistently surprises people when they actually run the numbers.

The federal residential credit made solar cheaper, but the primary driver of solar economics has always been the retail electricity rate being offset. In Humboldt County, that rate has not stood still. PG&E's residential rates on standard time-of-use plans now sit between 40 and 42 cents per kilowatt-hour for combined generation and delivery. That figure represents an increase of more than 60% over rates from five years ago. Agricultural and small commercial customers are paying above 50 cents. The rate trajectory, based on CPUC-approved PG&E filings, shows no sign of reversing through 2028.

When the credit was in place, it front-loaded the savings. A homeowner who paid $25,000 for a solar system in 2024, claimed $7,500 back, and offset power at 35 cents per kilowatt-hour had a specific payback profile. Remove the credit but raise the offsetting rate to 41 cents, and the arithmetic does not simply get worse, it just changes shape. The payback period extends on the front end, but it compresses over the long term because every additional year of rate increases makes the accumulated avoided cost larger than any projection made in calmer rate environments.

A cash payback for a system sized to Humboldt County loads and rates, without any federal credit, typically falls between seven and nine years today. That is longer than the four-to-five-year payback that agricultural operations with full REAP grant coverage can achieve. But against a 25 to 30-year panel lifespan, a seven-year payback implies two decades of effectively free electricity at whatever PG&E charges during those years. The credit made solar easier to say yes to. The rates make solar hard to say no to.

There is also a financing dimension worth considering. Home equity financing at current rates (typically between 6 and 8% depending on creditworthiness) can convert the upfront cost of a solar installation into a monthly payment that sits below the electricity bill it replaces from day one, at current rates. The credit was never the only tool that made solar accessible; it was one of several.

The Window That Is Still Open

The Section 48E beginning-of-construction deadline deserves specific attention for homeowners who have not yet installed.

For TPO arrangements, the provider must either begin construction before July 4, 2026, or ensure the system is placed in service before December 31, 2027. In other words, a lease or PPA agreement signed in the next several months can still preserve meaningful financial benefit via lower rates passed through by the provider.

For direct commercial or business-use installations, the same July 4, 2026 beginning-of-construction deadline applies. Humboldt County business owners who have been considering solar should understand that the commercial ITC is still available for projects that start this spring and summer. The engineering, permitting, and interconnection approval process for a commercial system in Humboldt County typically takes three to six months. A business owner who decides to move forward today is working within a reasonable timeline to qualify. One who waits until fall may not be.

This is a specific and verifiable deadline, not a sales tactic. The legislative text is clear. July 4, 2026 is the hard cutoff for commercial beginning-of-construction eligibility under Section 48E for solar projects.

What This Means for Humboldt County Specifically

Humboldt County has always been a somewhat counterintuitive solar market. Coastal fog keeps annual production meaningfully below Central Valley benchmarks. Grid infrastructure along the North Coast makes interconnection more complex than in suburban service territories. And the customer base, historically, has been more deliberate and research-driven than average, which means decisions take longer but tend to stick.

The expiration of Section 25D removes one of the mechanisms that made solar accessible to lower- and middle-income households who could not absorb the full upfront cost and did not have sufficient tax liability to benefit fully from the credit anyway. For those households, the TPO pathway through leases and PPAs was always more practical. That pathway still exists and may actually improve as solar companies, facing a tightening 48E window, price aggressively to lock in volume before the deadline.

For homeowners who can finance a direct purchase, the underlying economics have not fundamentally changed. The credit made the upfront math easier. It did not make the electricity cheaper or the panels less durable. A 30-year roof system with a seven-year cash payback at today's rates produces the same kilowatt-hours in year 20 whether or not the federal government offered an incentive in year zero.

The Question Worth Asking

Fifteen years of federal incentives accelerated solar adoption significantly. The residential credit helped millions of homeowners make a decision they might otherwise have deferred. Now it is gone, and the honest assessment is that its absence changes the calculus without fundamentally breaking it.

The more durable question has always been whether the economics of solar stand on their own in a given market, at given rates, over a realistic holding period. In Humboldt County, at current and projected PG&E rates, they do. The payback period is longer than it was in 2023. The path to that payback runs through higher monthly rate savings rather than a day-one federal check. But the destination is the same.

Six Rivers Solar has been helping North Coast homeowners and businesses evaluate solar since 1980, well before the residential credit existed and now on the other side of it. If you want to understand what a system looks like for your property at current rates and without Section 25D, a site evaluation is where that conversation starts.