Solar Incentives and Tax Credits: Getting the Most From Your Investment
Incentives can make a big difference to the economics of a solar installation, and the landscape changed significantly at the start of 2026, when the federal residential solar tax credit ended for homeowners. Understanding which incentives remain — at the state, local and utility level — and how to combine them is now more important than ever. Here's a guide to how solar incentives work and where to look for current programs.
The Federal Solar Tax Credit: Ended for Homeowners After 2025
For years, the cornerstone of residential solar incentives was the federal residential clean energy credit (Section 25D, commonly called the solar ITC), a 30% tax credit on the installed cost of a homeowner-owned system, including equipment, labor and qualifying battery storage. The Inflation Reduction Act had extended it into the 2030s, but the July 2025 federal budget law (the “One Big Beautiful Bill Act”) ended it early: the credit is not available for expenditures made after December 31, 2025. Homeowners who paid for systems in 2025 or earlier should check with a tax professional about claiming it or carrying forward any unused amount. Credits for businesses that own solar systems, including some leased or third-party-owned systems, follow separate rules and deadlines, so ask any lease or PPA provider how changes affect their pricing.
State Tax Credits and Rebates
With the federal residential credit gone, state programs matter more. Examples have included Massachusetts' state income tax credit for residential solar, New York's NY-Sun incentive program, and California's SGIP incentives for battery storage, though program terms and funding change over time. Texas and Florida, while lacking strong net metering policies, offer no state income tax, which affects the overall calculation differently. Researching your specific state's current incentive programs through the Database of State Incentives for Renewables & Efficiency (DSIRE) is essential before making any purchase decision.
Utility Rebates and Programs
Many utilities offer additional incentives for solar adoption, including direct installation rebates, performance-based incentives that pay per kilowatt-hour produced, and special rate programs for solar customers. These utility programs vary enormously and change frequently as utilities adjust their policies. Your utility's website or a local solar installer who knows your utility's current programs is the best source for this information.
Net Metering Policy: Know Your State
Net metering policy is technically a regulatory obligation rather than a financial incentive, but its effect on solar financial returns is comparable to direct incentives. States with full retail-rate net metering effectively give solar owners 100% credit for each kilowatt-hour exported, while states that have reduced net metering compensation offer less. Knowing your state's specific policy is essential for accurate financial modeling.
How to Stack Incentives
Many of the incentives that remain can be combined — for example, a utility rebate, a state tax credit, and a property or sales tax exemption. Utility rebates usually reduce the installed cost directly, while state credits reduce your state tax bill, and some programs calculate their value on the cost after other rebates. Older “stacking” examples that layer the 30% federal credit on top no longer apply to systems paid for after December 31, 2025, so they overstate the savings for a new installation. Check each program's eligibility rules and calculation order, ideally with a tax professional, before you sign a contract.
Learn about the full installation process in our installation guide, and understand what you're saving with our solar savings analysis.