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.

Arizona, Hawaii, Massachusetts, New Mexico, New York, South Carolina and Utah offer personal tax credits to encourage solar installations.

Other states, like Tennessee, West Virginia and Oklahoma, don’t have any residential solar panel incentives at all.

Residential solar panel incentives by state

State vs. federal solar incentives

Solar incentives come in two main forms: federal programs, which apply nationwide, and state or local programs, which vary depending on where you live.

According to Jacquelyn Omotalade, a climate policy expert at Dream.org, changes to solar incentives at the federal level, such as alterations to tax credits or renewable energy funding, can significantly influence state-level incentives.

For example, reductions in federal tax credits may place a disproportionate burden on low-income households or communities of color, hindering their ability to invest in solar energy, she said.

Types of solar incentives

Tax credits and rebates make solar more affordable in different ways. A tax credit is claimed when you file your tax returns, while a rebate is a partial refund you get after buying solar panels.

Tax credits

These are dollar-for-dollar reductions in the income tax you owe. For instance, the federal solar investment tax credit (ITC) reduces your federal income tax liability by 30% of what you spent for a solar energy system, including the cost of installation.

The federal solar tax credit expires at the end of 2025.

For example, if you spent $10,000 installing a solar panel system, then the ITC would be worth $3,000. If you owed $15,000 in federal taxes that year, the ITC would lower that to $12,000.

Fill out Form 5695 to claim the federal tax credit before the end of 2025. You’ll include the project’s total cost (this should be in your contract). If the amount of your credit exceeds the amount you owe in taxes, the credit carries over to future years.

Tax exemptions

• Property tax exemptions: The majority of states have a solar property tax exemption. That means that your property tax bill won’t go up because solar panels increased the value of your home. Depending on where you live, you may be eligible for additional solar incentives.
• Sales tax exemptions: You don’t have to pay state sales tax on photovoltaics (PV) equipment in 15 states. 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.

Solar rebates

Rebates are a partial refund after purchasing the solar panels. They are typically received as a direct payment and not tied to your tax filings. Manufacturers, local governments or utility companies can offer solar rebates.

Solar incentives for low- and moderate-income households

Many states have special solar incentives for low- and moderate-income (LMI) families and underserved communities. These programs often offer extra rebates, grants or financing to lower upfront costs and widen access to solar. For example:

• California: The DAC-SASH (Disadvantaged Communities – Single-Family Solar Homes) program helps eligible LMI homeowners.
• Illinois: The Solar for All program gives enhanced incentives for LMI households and nonprofits in environmental justice areas.
• New York: NY-Sun delivers extra support for LMI homeowners and disadvantaged residents, including community solar with guaranteed savings.
• Massachusetts: The SMART program increases incentives for projects serving LMI customers and affordable housing.

Financial assistance for homeowners going solar

Government grants and subsidized loans are available in some states. You might also qualify for low-cost financing through a solar energy company.

Performance-based solar incentives

Performance-based incentives reward solar system owners based on the amount of energy their systems produce, rather than just upfront installation. The most common structures are net metering, feed-in tariffs, and Solar Renewable Energy Certificates (SRECs).

Net metering

Net metering lets solar energy system owners send unused electricity back to the grid and receive credits on their utility bills.

These credits offset future electricity consumption and lower monthly utility costs. In essence, you “bank” your extra power for later use.

Programs are widely adopted, though policies vary by state. Some states are reducing compensation rates, which creates uncertainty for potential adopters. For example, North Carolina rolled back its rates in 2025 and other states may follow.

Solar Renewable Energy Certificates (SRECs)

SRECs are another performance-based incentive that represent the clean energy attributes of solar power generation. In states with renewable portfolio standards, utilities purchase these certificates to meet regulatory requirements, creating an additional income stream for solar system owners.

Feed-in tariff programs

Solar feed-in tariffs compensate system owners for excess electricity generated and supplied to the utility grid. Under this model, your solar installation functions as a distributed power generator — when production exceeds consumption, surplus energy flows into the broader electrical grid at predetermined rates per kilowatt-hour.

Pro tip

If net metering rates are declining in your area, consider investing in energy storage systems alongside solar panels to maximize self-consumption and reduce dependence on grid compensation programs.

» RELATED: How much does a solar battery cost?

What about community solar?

Community solar makes clean energy accessible without the high upfront costs of rooftop panels. Instead of installing panels on your home, you subscribe to a share of a local solar project (like a solar farm). In return, you get credits on your utility bill for your portion of the power produced — typically saving 5% to 20% on electricity.

This option is especially helpful for renters, households with unsuitable roofs or anyone not ready for the long-term investment of rooftop solar.

Thanks to the Inflation Reduction Act, developers get bonus tax credits for building projects that serve low- and moderate-income (LMI) households. Many programs require at least half the benefits to go to LMI subscribers, along with guaranteed bill savings.

“These incentives help sites get built, and as more sites are built, more consumers can get those 5% to 20% savings that community solar offers," Nate Owen, CEO of Ampion Renewable Energy, told us.

Bottom line: How much will it cost me to go solar?

Solar panel installation costs vary significantly, but a typical residential system starts between 18,000 to $43,000. On the high end, some solar company reviewers tell us they paid up to $100,000 for a complete system.

Keep in mind, cost estimates don’t always include the solar batteries, which sometimes cost almost as much as the panels. Solar batteries are also a must if you want real energy independence, and they sometimes cost as much as the panels. Permitting, utility fees and maintenance also add to the cost of going solar.