The Federal Solar Tax Credit: What Happened in 2026
The residential solar Investment Tax Credit (ITC), which gave homeowners a 30% dollar-for-dollar tax credit on solar installations, expired on December 31, 2025. The One Big Beautiful Budget Act did not renew it for residential systems.
If you installed solar in 2025 or earlier, you can still claim the credit on your 2025 tax return (filed in 2026). Installations completed on or after January 1, 2026 do not qualify.
The commercial ITC (Section 48) and some utility-scale credits remain in effect under different rules — but these don't apply to residential homeowners.
State Solar Tax Credits: Still Available in 2026
While the federal credit is gone, several states still offer their own income tax credits that work similarly — a direct reduction in your state tax bill. These are independent of the federal program and remain available.
Hawaii
35% state tax credit on installation cost, capped at $5,000 per system. One of the most generous state-level credits in the country. High electricity rates ($0.40+/kWh) make solar extremely compelling.
New York
25% state tax credit up to $5,000. Stacks with NY-Sun Megawatt Block incentive — a per-watt rebate paid directly to your installer and reflected in your quote price.
Massachusetts
15% state tax credit up to $1,000, plus the SMART program that pays a monthly per-kWh production incentive for 10 years. One of the best ongoing production payment programs in the US.
Arizona
25% state tax credit up to $1,000. Combined with Arizona's 299+ days of sunshine annually and high net metering value, solar ROI in Arizona remains strong despite the federal credit expiration.
South Carolina
25% state tax credit up to $35,000 — one of the highest caps of any state program. Also offers a property tax exemption on solar-added home value.
Utah
25% state tax credit up to $1,600. Utah also has strong property tax exemption policies and most major utilities offer favorable net metering terms.
For a complete list by state, the DSIRE database tracks every available incentive program by zip code and is updated regularly. See also our state-by-state solar guide for incentive summaries across all 50 states.
Property Tax Exemptions
Solar panels typically add $15,000–$25,000 to your home's market value. Without a property tax exemption, that increase would also raise your annual property tax bill. Fortunately, over 36 states currently exempt solar-added value from property tax reassessment.
This means your home can be worth significantly more — and sell faster — without any increase in your annual property tax. For a homeowner in a state with a 1.2% effective property tax rate, exempting $20,000 of added value saves $240 per year, every year.
Sales Tax Exemptions on Solar Equipment
More than 25 states exempt solar panels, inverters, and installation materials from state sales tax. On a $20,000 system in a state with a 6% sales tax, that's $1,200 back in your pocket — automatically, with no paperwork required on your end. Your installer handles this at the point of sale.
States with full solar sales tax exemptions include Arizona, Colorado, Florida, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Oregon, and Texas. States without income tax (like Texas) often compensate with stronger sales tax and property tax exemptions for solar.
Net Metering: Ongoing Credit for Excess Power
Net metering is arguably the most financially significant ongoing incentive for solar homeowners. When your panels produce more electricity than you're consuming — typically midday on sunny days — that excess flows to the grid and your meter runs backward. Your utility credits you for that power, reducing future bills.
The value of net metering varies significantly by state and utility:
- Full retail rate NEM: You receive the same per-kWh rate the utility charges customers. Most financially favorable. Still available in many states.
- Avoided cost rate: You receive the utility's wholesale generation cost — typically 3–5 cents/kWh vs. retail rates of 12–34 cents. Significantly less valuable.
- No net metering: A handful of states and utilities have no NEM requirement. Solar still makes sense, but battery storage becomes more important to capture your own production.
California moved to NEM 3.0 in 2023, which reduced export rates significantly — making battery storage nearly essential for new California solar installations. Check our state guide for your state's current net metering policy.
Utility Rebates
Some electric utilities offer direct rebates — typically $0.10–$0.75 per watt of installed capacity — independent of any state or federal program. These are paid directly to you (or your installer as a discount) and don't affect your tax liability.
Notable utility programs still active in 2026:
- Green Mountain Power (Vermont): Battery storage incentives plus favorable solar rates
- Austin Energy (Texas): Solar rebate program at $0.20/watt, up to $2,500
- Los Angeles DWP: Feed-in tariff for excess solar generation
- Xcel Energy (CO/MN): Solar*Rewards program with per-kWh production payments
Use the DSIRE database to find utility-specific programs in your area — enter your zip code for a complete list.
How to Stack Incentives for Maximum Savings
The best solar deals in 2026 come from combining multiple programs. Here are two real examples of how incentives stack in high-value states:
New York — $22,000 System Example
Property tax exemption adds ongoing savings. Net metering credits reduce future bills further.
Colorado — $20,000 System Example
Colorado property tax exemption eliminates increased property taxes from solar-added home value.
Solar Incentives FAQ
Can I still claim the 30% federal tax credit in 2026?
Only if your system was installed and operational before December 31, 2025. If you completed installation in 2025 but haven't filed your 2025 taxes yet, you can still claim it on IRS Form 5695 when you file. New installations in 2026 do not qualify for the federal residential ITC.
Do I need to own my home to claim state solar incentives?
For most state tax credits, yes — you need to own the property where the system is installed. Some utility rebate programs are available to renters if the system is owner-installed, but this varies. Renters interested in solar should look into community solar programs, which let you subscribe to a portion of a shared solar array and receive bill credits without rooftop installation.
What if my state tax credit is larger than my state tax bill?
This depends on your state's rules. Some states allow unused credits to carry forward to future tax years (similar to how the federal credit worked). Others have no carryforward provision, meaning you lose the unclaimed portion. Check your state's specific rules with a tax professional before assuming carryforward applies.
Does leasing solar panels qualify for incentives?
No. When you lease panels, the leasing company owns the equipment and claims any available tax credits. You receive none of the direct incentives — only the lower electricity rate specified in your lease. Purchasing or financing your system is almost always financially superior if you plan to stay in your home for 7+ years.
How do I find every incentive available in my area?
The DSIRE database (Database of State Incentives for Renewables and Efficiency) is the most comprehensive source. Enter your zip code to see state, utility, and local programs. Also check our state-by-state guide for a quick summary of what's available in each state.
See what solar costs and saves in your state — with current 2026 incentives.
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