This solar panel payback calculator estimates how many years it takes for home solar panels to pay for themselves, and how much they could save over 25 years. It accounts for rising electricity prices and the slow drop in panel output over time.
How solar payback is calculated
- Net cost = system size × cost per watt − rebates and incentives.
- Yearly output = system size (kW) × output per kW, reduced each year by panel degradation.
- Yearly savings = output × electricity price, with the price rising each year.
- Payback is the point where total savings equal the net cost.
Output per kW depends on where you live, roof direction and shading. NREL’s free PVWatts tool gives an estimate for any US address.
Federal solar tax credit in 2026
The 30% federal Residential Clean Energy Credit (section 25D) ended under the 2025 tax law. According to the IRS, it is not allowed for expenditures made after December 31, 2025, and a solar installation counts as “made” when installation is completed. Homeowners whose systems were completed in 2026 cannot claim it, so leave it out of the incentives field. State, utility and local rebates may still apply.
Worked example
A 7 kW system at $3.00 per watt costs $21,000. At 1,300 kWh per kW, it produces about 9,100 kWh in the first year, saving about $1,547 at $0.17 per kWh. With prices rising 3% a year and 0.5% yearly panel degradation, it pays for itself in about 11.8 years and saves about $52,700 over 25 years.
Frequently asked questions
How long do solar panels take to pay for themselves?
Often 6 to 12 years, but it depends heavily on system cost, local sunshine, electricity prices and how your utility credits exported power.
Can I still get the 30% federal solar tax credit?
Not for a home system completed after December 31, 2025, according to the IRS. Check state and utility incentives instead.
What is net metering?
A billing arrangement where electricity you export to the grid earns credits. If your utility pays less for exports than it charges for imports, lower the “share of output” field.
How long do solar panels last?
Panels commonly carry 25-year performance warranties and often keep working longer at slightly reduced output. Inverters usually need replacing sooner.
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Sources
Last reviewed: October 2026. For information only; not financial, tax or legal advice.