Calculate Your State Solar Incentives
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Net Cost After State Incentives: $0
What Happened to the Federal Solar Tax Credit?
The federal residential solar Investment Tax Credit (ITC), also known as the Section 25D credit, provided homeowners with a percentage-based tax credit on the cost of a solar installation. For systems installed from 2022 through 2032, the credit was 30% of the total system cost. It was one of the most powerful incentives driving residential solar adoption in the United States.
As of January 1, 2026, the residential ITC is no longer available. The credit was repealed as part of broader tax reform legislation, and no extension or replacement has been enacted. Homeowners who installed solar on or before December 31, 2025 can still claim the credit on their 2025 tax returns (or carry forward unused credit from prior years), but new installations in 2026 receive zero federal tax benefit.
It is worth noting that the commercial ITC under Section 48E still exists. This means solar lease and power purchase agreement (PPA) providers -- which are businesses, not homeowners -- may still access commercial tax benefits. This could keep lease and PPA rates somewhat competitive, even though the direct homeowner credit is gone.
State Solar Incentives Overview
With the federal credit gone, state-level incentives are now the primary financial drivers for residential solar. These come in several forms:
- State Tax Credits: A percentage of system cost that reduces your state income tax bill. Available in states like New York, South Carolina, Arizona, and others.
- Cash Rebates: Upfront payments or grants from state programs or utilities that directly reduce your out-of-pocket cost.
- SRECs (Solar Renewable Energy Certificates): Tradeable certificates earned for solar electricity production. SREC markets in states like New Jersey, Massachusetts, and Illinois can provide hundreds to thousands of dollars per year in ongoing income.
- Property Tax Exemptions: Many states exempt the added home value from solar panels from property tax assessments, saving you hundreds per year.
- Sales Tax Exemptions: Some states exempt solar equipment from state sales tax, saving 4-8% of your system cost upfront.
- Net Metering: While not a direct incentive, net metering policies let you earn credit for excess solar electricity sent to the grid, dramatically improving your payback period.
Best States for Solar Incentives in 2026
After the loss of the federal credit, these states stand out for their strong remaining incentive packages:
| State | State Tax Credit | Rebates / Grants | SRECs | Property Tax Exempt | Sales Tax Exempt |
|---|---|---|---|---|---|
| New York | 25% (up to $5,000) | NY-Sun rebates | -- | Yes (15 yrs) | Yes |
| South Carolina | 25% (no cap) | -- | -- | -- | -- |
| Arizona | 25% (up to $1,000) | Varies by utility | -- | Yes | -- |
| Massachusetts | 15% (up to $1,000) | SMART program | Yes ($200-350/MWh) | Yes (20 yrs) | Yes |
| New Jersey | -- | -- | Yes ($150-200/MWh) | Yes | Yes |
| Maryland | -- | $1,000 grant | Yes ($50-80/MWh) | Yes | Yes |
| Illinois | -- | IL Shines rebates | Yes (via IL Shines) | -- | -- |
| Colorado | -- | Varies by utility | -- | Yes (20 yrs) | Yes |
| Connecticut | -- | RSIP rebates | -- | Yes | Yes |
| Minnesota | -- | Solar*Rewards | -- | Yes | -- |
Other Ways to Save on Solar Without the Federal Credit
Even without the federal ITC, there are multiple paths to make solar affordable:
1. Declining Equipment Costs
Solar panel prices have dropped over 70% in the past decade. The average residential system cost in 2026 is $2.50-3.00 per watt before incentives, compared to $7+ per watt a decade ago. Even without tax credits, the raw economics have improved dramatically.
2. Net Metering
If your state offers full retail net metering, every kilowatt-hour your panels produce offsets a kilowatt-hour you would have bought from the utility. At $0.15-0.30/kWh in most states, this can mean $1,500-3,600+ per year in avoided electricity costs. Use our Net Metering Calculator to estimate your savings.
3. Solar Loans
Low-interest solar loans allow you to finance your system with monthly payments that are often lower than your current electric bill. Be aware of dealer fees that can inflate loan balances.
4. Solar Leases and PPAs
Since the commercial ITC (Section 48E) still exists, solar leasing companies and PPA providers may still offer competitive rates. You will not own the panels, but you can lock in electricity rates below retail with $0 down.
5. Utility Rebate Programs
Many individual utilities offer their own rebate programs independent of state policy. Check with your local utility for current offerings.
Frequently Asked Questions
Is the federal solar tax credit still available in 2026?
Which states still offer solar tax credits or incentives in 2026?
How much can I save with state solar incentives alone?
What are SRECs and how do they work?
Can I still go solar without the federal tax credit?
Are solar leases or PPAs affected by the loss of the federal credit?
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