Is Prepaid Solar Better than the Original Tax Credit?
The solar.com team exists to provide choice, transparency, and trust to our homeowners and partners. This means we’re constantly evaluating the market for new technologies, products, and services.
With the passage of Trump’s One Big Beautiful Bill, the residential solar industry has been knocked sideways by the changes to tax credits and new rules. One of the byproducts of the market adjustment is the emergence of Prepaid leases and power purchase agreements (PPAs) — known collectively as Prepaid Solar Products — to the financial arsenal used to help homeowners go solar.
While we all miss the homeowner-claimed federal solar tax credit, the advantages of Prepaid Solar Products have our team debating whether this is actually a better overall solar experience than the “Original Tax Credit” route (i.e., homeowners directly purchasing solar and filing for a federal tax credit themselves).
Here’s why.
Brush up on new rules and solar products in our 2026 Solar Resource Center:
- Trump’s One Big Beautiful Bill is Now Law: How it Impacts Solar
- Prepaid Solar Leases & PPAs: A New Path to Going Solar in 2026
- What in the FEOC is Going On? Solar and & Foreign Entity of Concern Rules in the OBBB
Prepaid Solar vs Purchasing Solar with the “Original” Tax Credit
Recently, our team mapped out the pros and cons of Prepaid Solar Products, and someone declared, “These seem to be better than the original consumer tax credit.” A spirited debate ensued, with the team agreeing that for some homeowners the original tax credit was better, and for others, these new Prepaid Products are ideal.
To be clear, this is a hypothetical debate. The consumer tax credit was terminated on December 31, 2025—claiming it is no longer an option if your system is installed in 2026 and beyond. But it’s an interesting thought experiment: How do these new Prepaid Solar Products stack up against the “Original Tax Credit” path?
Our two cents: Prepaid Products—where they’re available—deserve a close look, especially before the federal tax credits that underpin them go away, too. As such, we humbly present this comparison of Prepaid Solar versus the original consumer tax credit to help you to evaluate whether this option is right for your home.
This article is intended to be a helpful guide and not tax advice. There are certainly individual scenarios where the information presented is not applicable. Please consult your tax professional for your unique circumstances.
Side-by-side: Prepaid Solar vs Ownership with the Original Tax Credit
| Criteria | Prepaid Solar Products | Original Consumer Tax Credit |
| Who claims the tax credit? | Prepaid Solar Provider | Homeowner |
| Base tax credit value | Variable by provider, but typically 30% or less. | 30% of the eligible cost basis |
| Tax credit adders allowed? (e.g., domestic content bonus, energy community bonus, etc.) | Yes, at a discounted rate | No |
| Depreciation eligible? | Yes, by the tax credit claimant | No |
| Must have sufficient tax liabilities? | No | Yes, to efficiently monetize the tax credit |
| Wait to claim the tax credit until tax filing? | No, provided as net to project value | Yes |
| Includes a multi-year performance guarantee and support in case of issues? | Yes, the exact terms are variable by provider | No |
| Allowance to use any product? | No, due to FEOC limitations | Yes |
| Requirement to enroll in VPP programs? | Variable by provider; some require this | No |
| End of term buy-out? | Variable by provider; some require this at a nominal amount | No |
| If leveraged with a loan, are there predictable monthly payments? | Yes | In most solar loans, a balloon payment was required around month 18 to pay down the loan with the tax credit value |
| Universal eligibility? | No, restricted to certain markets | Yes |
Curious how a prepaid product might work for your specific project? Connect with a solar.com Energy Advisor who can prepare a no-obligation proposal and advocate for you with qualified local installers to help achieve the greatest value for your solar project.
