Solar Incentives by State

Solar energy incentives by state

Solar rebates, tax credits, sales tax exemptions and other incentives vary significantly from state to state. Not all of these incentives are available to homeowners; some are designed for corporations and other entities.

How to find solar incentives in your state

Solar program statuses change frequently with new laws or when funding runs out. Always verify details with official state or utility sources before making decisions. Follow these steps to find what's available where you live:

1. Check DSIRE (Database of State Incentives for Renewables & Efficiency) at dsireusa.org. This is the most comprehensive national database of solar incentives, updated regularly.
2. Contact your utility company. Many utilities offer rebates, net metering programs or low-interest financing that aren’t listed at the state level.
3. Ask your solar installer. Reputable installers know what programs are currently active in your area and can help you stack incentives.
4. Check your state energy office. Most states have a dedicated energy office website with current program details.
5. Verify eligibility before you sign. Income limits, system size caps and funding availability can change quickly.

What happened to the federal solar tax credit?

The 30% federal solar investment tax credit (ITC) was one of the biggest drivers of rooftop solar adoption for over a decade. It expired at the end of 2025, following the passage of the “One Big Beautiful Bill.”

What this means for homeowners

• Systems installed and operational by Dec. 31, 2025, can still claim the 30% credit on 2025 tax returns (filed by April 15, 2026).
• Systems installed in 2026 or later do not qualify for the 30% direct credit.
• A separate federal credit (Section 48E) still exists. It only applies to third-party-owned systems (leases and PPAs), not homeowner-purchased systems.
• Solar companies may still be able to use a separate federal commercial credit for third-party-owned systems, such as leases and PPAs, but homeowners cannot claim it directly.

For most homeowners, buying still maximizes long-term savings only if your state has strong local incentives. Leasing makes more sense in states with fewer local programs or for homeowners who can’t use a tax credit.

Did you know? 

Solar tax credits have historically benefited higher-income homeowners. Rebates and loan programs, on the other hand, have the potential to make solar power more accessible for everyone.

» RELATED:  Tax deductions for homeowners

Incentive stacking: How to maximize your savings

One of the best ways to save in 2026 is by stacking multiple incentives. Here’s what that can look like in a real-world scenario: Let’s say you install a $25,000 solar panel system in Massachusetts. By combining available incentives, it’s possible to reduce your first-year costs by $4,000 to $6,500.

Types of solar incentives

Solar incentives vary by state but can include tax credits, rebates, net metering and exemptions that can significantly reduce the cost of installing solar panels.

Tax breaks

• Tax credits: This is a dollar-for-dollar reduction in the income taxes you owe (not a deduction). For example, if you owe $4,000 in state taxes and qualify for a $1,000 solar credit, you only owe $3,000. Most are non-refundable, meaning you can’t receive more back than you owe.
• Sales tax exemptions: You don’t pay sales tax on solar equipment in some states, which can save hundreds or even thousands. For example, if you install a $20,000 solar system in Arizona, where the state sales tax rate is currently 5.6%, the solar sales tax exemption saves you $1,120.
• Property tax exemptions: Adding solar won’t increase your property taxes, even if it raises the value of your home.

Rebates

Rebates are direct payments from utilities, governments or manufacturers. They don’t depend on your taxes and are usually paid within weeks or months. Rebate programs tend to be funded and time-limited, so availability can change quickly.

Performance-based incentives

These pay you based on how much energy your system produces:

• Net metering: You earn credits for extra power you send to the grid. These credits lower your future electric bills. Rates vary by state.
• SRECs (Solar Renewable Energy Certificates): You earn certificates for the energy your system makes. In some states, you can sell them for extra income — sometimes enough to cover your system cost over time.
• Feed-in tariffs: You get paid a set rate for the power you send to the grid. These are less common but still offered in a few states.

Low-cost financing programs

Some states and utilities offer low-interest loans to make solar more affordable. PACE financing is available in places like California, Florida and Missouri. It’s paid back through your property taxes over 10 to 20 years.

Keep in mind: PACE is tied to your home, which can make selling or refinancing more complicated.

Income-based programs

Several states offer extra help for low- and moderate-income households:

• California: DAC-SASH offers large upfront rebates
• Illinois: Solar for All provides added incentives for eligible households and nonprofits
• New York: NY-Sun includes extra support and community solar options with bill savings
• Massachusetts: SMART pays higher rates for projects serving income-qualified households

What you need to know about net metering

Net metering lets you send extra solar power back to the grid and earn credits on your electric bill. Think of it like “banking” energy to use later, which can help lower your monthly costs. Most states offer some form of net metering, but the details vary:

• Full retail credit: You get the same rate you pay for electricity (best option)
• Net billing / avoided cost: You’re paid a lower rate for excess energy
• Time-of-use (TOU): Credit value depends on the time of day

States where net metering is changing

Net metering rules are changing in some states, often reducing how much you’re paid for extra energy. For example, North Carolina has already moved away from legacy net metering for many new Duke Energy customers, and legacy terms are scheduled to phase out for existing participants.

In places without statewide mandates, utility buyback rates can be very low. John Porter in Texas discovered this the hard way when he realized his provider would only give him “about half a penny for each kilowatt” of surplus energy, meaning he couldn’t profit even if his panels made him entirely self-sufficient.

Pro tip

If you’re in a state where net metering rates are declining, getting a system installed before new rate structures take effect can lock in better terms for years.

Solar battery incentives

As net metering becomes less generous, solar batteries are becoming more important. They let you store extra energy instead of sending it back to the grid. They are also expensive. On average, a solar battery costs $7,000 to $18,000.

Some states, including California, Massachusetts and New York, offer incentives to help offset the cost.

For many homeowners, batteries help maximize savings. Without one, extra energy often goes back to the grid for little return. As Patricia in Massachusetts put it, “During the summertime, I get the sun energy. But instead of storing it for me to use during the wintertime, it goes back to the grid and it’s not giving me any incentive.”

Are solar panels still worth it?

Solar panels can still be worth it, but the math looks different without the federal credit. Without the 30% federal tax credit, more of the upfront solar panel costs falls on the homeowner (if buying outright). Strong state incentives can help recover some of that gap, but not all of it. Payback periods are generally longer in 2026 for homeowners in states with weak incentive programs.

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Bottom line: Best states for solar incentives

Not all states offer the same solar savings. Here’s a simple look at where you’ll find the best deals in 2026.

Top states for solar incentives 

• Massachusetts, New York and New Jersey lead the way. They offer strong incentives like tax credits, rebates and payments for the energy your system makes.
• California and Illinois also have good programs, especially for lower-income households. Even with fewer perks than before, high power costs in California still make solar worth it.
• Colorado stands out, too, with tax breaks, net metering and utility rebates.

Middle-of-the-road states

• Florida, Texas, Oregon, Michigan, North Carolina and Maryland offer some savings, like tax breaks and net metering, but fewer upfront rebates. In Texas, incentives often depend on your local utility.

Weaker solar incentive states

• Wyoming, Arkansas and Oklahoma offer fewer incentives overall. In these states, solar savings depend more on your electric bill and how much sun your home gets.

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