Solar Tax Credit Gone — What It Means for Your CA Lease

If a solar salesperson came to your door in Riverside, Bakersfield, San Bernardino, or anywhere else in California between 2022 and 2025, there's a good chance they handed you a savings projection built on two assumptions: the 30% federal solar tax credit would offset your upfront costs, and California's favorable net metering rules would keep your utility bill low for the next 20 years.

Both of those assumptions are now gone.

The federal residential solar tax credit — officially Section 25D of the Internal Revenue Code — expired for homeowners on December 31, 2025. The One Big Beautiful Bill Act, signed into law on July 4, 2025, eliminated it nearly a decade ahead of its original schedule, with no phase-down and no transition period. If you signed a solar purchase contract before that date hoping to claim the credit, you still can. But if you signed a solar lease or power purchase agreement in 2023, 2024, or 2025, believing the credit was already baked into your economics? The numbers your sales rep showed you were based on a tax policy that has since been gutted — and a net metering regime that California already replaced in April 2023.

That's not a technicality. That's potentially thousands of dollars in missing savings the company promised you, locked behind a 20-to-25-year contract you cannot simply walk away from.

Here's what actually happened, and what California homeowners need to know right now.

What Was the 30% Federal Solar Tax Credit, and Who Actually Got It?

The federal solar Investment Tax Credit — Section 25D — allowed homeowners who purchased a solar system outright (cash or loan) to deduct 30% of the total installation cost from their federal income tax bill. On a $30,000 system, that was $9,000 back in your pocket, dollar for dollar.

The credit existed for owners. Not leaseholders.

This matters enormously, because the majority of California solar contracts signed through door-to-door sales are not purchase agreements. They're leases or power purchase agreements — arrangements where a company like Sunrun, SunPower, Sunnova, Freedom Forever, or GoodLeap's financing arm retains ownership of the panels installed on your roof. You pay a monthly fee to use the electricity they generate. The company claims the tax credit. You don't.

So when a sales rep in Chula Vista or Stockton or the Inland Empire showed you a presentation in 2024 that included "federal tax incentives" as part of your household savings, they were being — at minimum — imprecise. The credit went to them, not to you. What you got was a monthly lease payment structured to reflect their benefit, not yours.

And as of January 1, 2026, even that arrangement is changing. The One Big Beautiful Bill Act accelerated the phase-out of the commercial solar tax credit (Section 48E) as well, which is what third-party solar companies use to claim the credit on leased systems. Those credits now have strict construction start deadlines and placed-in-service cutoffs that will further squeeze the lease economics many companies used to build their pitch to you.

What Happened to NEM 2.0, and Why Does It Matter for Your Lease?

Before the tax credit question comes the net metering question — because NEM 3.0 may be the bigger problem for California leaseholders.

Net Energy Metering is the California policy that governs how much credit homeowners receive when their solar system sends excess electricity back to the grid. Under NEM 2.0, the old system, those credits were calculated at close to the full retail rate — roughly what you'd pay PG&E, SCE, or SDG&E per kilowatt-hour if you were buying electricity from them. For homeowners in Los Angeles, Fresno, and Sacramento, that credit made the math on solar look compelling.

The California Public Utilities Commission replaced NEM 2.0 with NEM 3.0, called the Net Billing Tariff, effective April 14, 2023. Under NEM 3.0, export credits dropped by roughly 75%. Solar energy sent to the grid now earns credits tied to the avoided cost calculator — wholesale rates, not retail rates — often between $0.04 and $0.10 per kilowatt-hour, compared to the $0.30 or more per kilowatt-hour California homeowners now pay for grid electricity.

Here's the problem for anyone who signed a solar lease or PPA in 2023, 2024, or 2025: many sales reps either didn't understand NEM 3.0, didn't disclose it, or deliberately continued using NEM 2.0 export math to close deals after the policy had already changed.

The result: homeowners across the Coachella Valley, the Central Valley, Orange County, and San Diego are paying monthly solar fees plus a utility bill that didn't shrink the way they were told it would. The system is producing electricity. The grid is paying very little for what it doesn't use. And the homeowner is on the hook for both.

Under California's Consumer Legal Remedies Act (CLRA) and the California Home Solicitation Sales Act, a contract sold using materially misleading projections can be challenged. NEM 3.0 misrepresentation is one of the strongest cancellation grounds we see — the math is provable, the timeline is documented, and the legal standard is clear. For more on how this works, see our guide on how to cancel a solar lease in California.

What Did the One Big Beautiful Bill Act Actually Change for Solar Leases?

If you have a solar lease or PPA rather than an owned system, here's how the One Big Beautiful Bill Act affects your situation specifically.

The residential credit (Section 25D) is gone entirely for new owned systems. The commercial credit (Section 48E) — which solar lease companies use — was not eliminated but was given a hard construction-start deadline: projects must begin construction before July 4, 2026 to qualify for the full credit, with a placed-in-service deadline of December 31, 2030. After July 2026, commercial solar projects can only claim the credit if placed in service by the end of 2027.

What this means for existing California leaseholders: it doesn't directly cancel your contract. But it changes the financial pressure on the companies holding those contracts. Sunrun, which is publicly traded and has faced mounting legal pressure in multiple states, now operates in a tightening capital environment. Freedom Forever declared bankruptcy in April 2026. SunPower filed for bankruptcy in 2024. Sunnova filed Chapter 11 in 2025.

When a solar company goes bankrupt, the contract doesn't disappear — it transfers to whoever acquires the company's assets, which is often a private equity firm with no customer service obligation beyond minimum legal compliance. California homeowners in San Jose, Sacramento, and the Inland Empire who signed SunPower agreements found this out the hard way in 2024. For a detailed breakdown, see our guide on SunPower cancellation options after bankruptcy.

If you're in a lease with a company that's financially stressed — and several are — now is the time to understand your exit options, not after the company changes hands.

What Grounds Exist to Cancel a California Solar Lease in 2026?

You don't need the tax credit to have expired to have grounds for cancellation. The legal grounds for exiting a California solar lease generally fall into one of several categories. For a comprehensive walkthrough, see our full guide on how to get out of a solar contract in California.

NEM 3.0 misrepresentation. If your contract was signed after April 14, 2023 and your savings projections used NEM 2.0 export rates, that's a documented discrepancy between what you were told and what California policy actually provided. The CLRA covers exactly this kind of misleading sales projection.

Cooling-off violations. Under California Civil Code Section 1689.5 and the FTC Cooling-Off Rule (16 CFR 429), you have the right to cancel a contract signed in your home within three business days. Senate Bill 784, which took effect January 1, 2026, extended that window to five business days generally and seven days for customers 65 and older. If the solar company failed to provide a proper, separate Notice of Cancellation document at signing, your cancellation window may still be open — regardless of how long ago you signed.

Unlicensed contracting. Every solar installer in California must hold a valid C-46 (Solar) or C-10 (Electrical) license from the Contractors State License Board (CSLB). If your installer or their subcontractors were unlicensed, California Business and Professions Code Section 7031 may render the contract unenforceable — and in some cases, allow you to recover payments already made.

Lender liability under SB 784. For contracts signed on or after January 1, 2026, SB 784 now allows consumers to assert claims against loan holders that they could have asserted against the contractor or salesperson. If Mosaic, GoodLeap, or another lender financed a system sold using misrepresentations, the lender can no longer hide behind the fact that they didn't make the promises.

Elder financial abuse. Solar companies have aggressively targeted seniors in communities across Palm Desert, Laguna Woods, and the retirement-heavy pockets of the Central Valley. Fixed-income seniors locked into 25-year contracts frequently qualify for remedies under California Welfare and Institutions Code Sections 15610.30 and 15657.5, which can include treble damages and attorney's fees.

What Should California Homeowners Do Right Now?

If you're paying a monthly solar lease and your electric bill hasn't dropped the way you were told it would, do not stop making payments. Stopping payments without legal guidance triggers credit damage, lien enforcement actions on your home, and potential lawsuits for the full remaining contract balance. Solar company contracts are drafted by their attorneys to protect them. Your next move needs to be based on your specific contract, not general advice from a forum.

Pull your original contract and look for the Notice of Cancellation document — it should be a separate page with its own signature line. If it's missing, or if cancellation language only appears inside the body of the main agreement, that is a documented violation of California and federal consumer protection law. Our guide on what to do if you were scammed by a solar company walks through exactly how to document this.

Compare the savings projections you were shown to your actual utility bills for the past 12 months. Calculate the gap. If the discrepancy is significant and your contract was signed after April 14, 2023, document it in writing with dates.

File regulatory complaints. Submit to the California Department of Financial Protection and Innovation (DFPI) if your system was financed. File with the CSLB if there were installation problems or licensing issues. File with the California Attorney General's consumer complaint portal. For a full breakdown of which agency handles what, see our guide on how to file a solar complaint in California.

Request a free contract review. California Solar Exit reviews solar contracts across all contract types — leases, PPAs, and loans — at no cost before you commit to anything. We serve homeowners in Los Angeles, San Diego, San Francisco, Orange County, the Inland Empire, the Central Valley, and every California market in between. Call (213) 579-5156 or book a free consultation at californiasolarexit.com.

Frequently Asked Questions

Does the end of the federal solar tax credit give me grounds to cancel my solar lease?
Not by itself — the federal tax credit applied to purchased systems, not leases. But if a sales rep told you in 2023–2025 that your lease economics included federal incentive benefits, or used NEM 2.0 export rates after April 2023, that misrepresentation may be grounds for cancellation under California's Consumer Legal Remedies Act.

What is the One Big Beautiful Bill Act, and does it affect my existing solar contract?
The One Big Beautiful Bill Act (Public Law 119-21), signed July 4, 2025, eliminated the 30% residential solar tax credit (Section 25D) for systems placed in service after December 31, 2025. It does not directly void existing solar contracts, but adds financial pressure to solar companies — several of which (Freedom Forever, SunPower, Sunnova) have already filed for bankruptcy.

What is NEM 3.0, and why does it matter for my solar lease?
NEM 3.0 is California's current net metering policy, effective April 14, 2023, which reduced export credits by approximately 75% compared to NEM 2.0. If a solar rep showed you savings projections after April 2023 using NEM 2.0 export rates, that is a documented misrepresentation and one of the strongest grounds for cancellation under California consumer protection law.

Can I cancel a solar lease if my company went bankrupt?
Your contract transfers to whoever acquires the bankrupt company's assets — typically a private equity firm. The new holder has the same legal obligations as the original company. If you were considering cancellation before the bankruptcy, you may have stronger leverage now. See our guide on SunPower cancellation after bankruptcy for a detailed walkthrough, then request a free contract review.

What is SB 784, and did it change my California solar cancellation rights?
SB 784, effective January 1, 2026, extends the door-to-door cancellation window to five business days (seven for customers 65+), requires lenders to confirm contract terms before funding, and allows consumers to assert claims against loan holders for the contractor's misrepresentations. Contracts signed before SB 784 are governed by the prior three-day window, but cooling-off violations from the original signing may still leave your cancellation right open.

Does canceling my solar lease affect my credit score?
Filing complaints or pursuing a legal cancellation does not affect your credit. Stopping payments does — continue making payments while you evaluate your options. A successful cancellation typically clears the UCC-1 lien from your property title, which can improve your position if you plan to sell or refinance.

California Solar Exit is a consumer advocacy firm that works with general counsel and a specialized team focused on solar contract cancellation through consumer protection law. This article is for informational purposes only and does not constitute legal advice. Call (213) 579-5156 for a free contract review.

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