Solar incentives by state

Solar energy incentives by state

Rebates, personal tax breaks, sales tax exemptions and other incentives vary significantly from state to state. We’re here to help you navigate the solar landscape and explore key programs and policies where you live.

Tax credits and rebates both effectively reduce the net price you pay to install a solar energy system at your home. A tax credit is claimed through your tax returns, while a rebate is a partial refund you get after the solar panels are purchased.

Types of solar incentives

Tax credits for solar installations have historically benefited higher-income homeowners. Rebates and feed-in tariffs, on the other hand, have the potential to make solar power more accessible for everyone. Like feed-in tariffs, Solar Renewable Energy Certificates (SRECs) are another type of performance-based incentive (PBI) that reward people with solar panels.

• Tax credits: These are dollar-for-dollar reductions in the income tax you owe. The federal solar investment tax credit currently lets you claim 30% of your total solar system costs as a credit when you file taxes. Some places also offer tax credits that can reduce what you owe on state taxes.
• Property tax exemptions: Many states exclude the added home value from solar panel installations when calculating your property taxes. This means you won't pay higher taxes for the increased worth your solar system brings to your home.
• Sales tax exemptions: Solar equipment like panels, inverters and batteries are often exempt from state sales taxes. This upfront tax relief can save you thousands when going solar.
• 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.
• Low-interest loans: Some states and utilities offer low-interest loan options specifically to make residential solar installations more affordable. These special financing programs have good rates and terms that make it easy to borrow the upfront costs.
• Feed-in tariffs: A solar feed-in tariff allows you to get paid for the excess electricity your solar panels generate and send back to the utility grid. Essentially, your home's solar system acts like a mini power plant: when it produces more electricity than you're using, that surplus energy gets fed into the larger grid. The utility company then credits you at a set rate per kilowatt-hour for that contributed electricity.
• Solar Renewable Energy Certificates (SRECs): A performance-based incentive, SRECs represent the clean energy produced by a solar power system. In some states, utilities buy these certificates to meet renewable energy requirements, providing an additional income stream for solar owners.

» MUST KNOW: Tax deductions for homeowners

What to know about the federal solar tax credit in 2025

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. For example, if you spend $10,000 installing a solar panel system, then the ITC is worth $3,000. If you owe $15,000 in federal taxes the year that you go solar, then the ITC reduces what you owe to $12,000.

The ITC drops to 26% in 2033 and 22% in 2034.

It’s nonrefundable, meaning you can only claim a credit up to the amount of tax you owe for the year. In other words, if the credit is larger than your tax bill, you won't get the excess amount refunded. However, any unused portion of the credit can carry over to reduce the taxes you'll owe in future years.

• What qualifies? The credit is for 30% of the cost of your solar panels and other equipment, as well as labor and additional features for system monitoring. Battery storage technology (as well as solar water heaters, wind turbines, geothermal heat pumps and fuel cells) also qualifies. The ITC applies to both residential and commercial installations.
• Who is eligible? You have to own the system. If you lease solar panels or enter a power purchase agreement, you’re not eligible. It also doesn’t apply to rent houses unless you have it under an LLC or corporation.
• How much can I save? For a 6-kW system, the average ITC value is $6,117. How much it’s worth for you is directly related to how much your system costs. When calculating the credit amount, you should not include any interest paid on loans or loan origination fees. Only the actual costs of the solar system installation count.
• How do I claim it? Complete Form 5695. 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.

A typical 7-kilowatt residential solar panel system is $20,197. On the bright side, that cost drops to $14,138 after using the full ITC. One of the biggest benefits is that the tax credits can accelerate your break-even point.

More federal solar incentives

Basically, the government wants more people to invest in renewable energy. Compared to fossil fuels, it’s better for the environment and usually cheaper for the consumer.

The Inflation Reduction Act and the Investing in America agenda led by President Joe Biden are big deals for solar adoption. They're all about boosting the economy and creating jobs while tackling inflation. The IRA offers tax credits to solar investors and developers to prioritize the development of sites in underserved communities. These plans are expected to give a significant push to the solar industry by investing in American-made solar gear and making solar energy more affordable.

Loan programs

• Energy-efficient mortgages
• USDA - High Energy Cost Grant Program
• Fannie Mae Green Financing

Corporate tax breaks

• Business Energy Investment Tax Credit (ITC)
• Renewable Electricity Production Tax Credit (PTC
• Residential Energy Conservation Subsidy Exclusion (Corporate tax exemption)

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.

Net metering policies

Net metering lets solar energy system owners send unused electricity back to the grid and receive credits on their utility bills. Some states mandate utilities to offer net metering, while others leave it optional.

Several states are rolling back or reducing net metering compensation rates. North Carolina cut its rates earlier this year, and others are considering similar changes. These rate changes make it more difficult for a system to pay for itself over time. Autumn Johnson, executive director of the Arizona Solar Energy Industries Association, said this creates uncertainty for potential solar energy adopters.

Omotalade of Dream.org believes states should prioritize the adoption of net metering policies to facilitate solar adoption. While net metering can benefit many consumers, it also presents challenges for historically marginalized communities.

For instance, low-income households or renters who may not have the means to invest in solar installations are often unable to take advantage of net metering benefits, according to Omotalade. Furthermore, disparities in access to rooftop space or property ownership can exacerbate inequities in net metering benefits.

Net metering vs. feed-in tariffs

Both are effective tools for encouraging the adoption of renewable energy, but they cater to different economic and policy environments.

Net metering lets you earn credits for the extra electricity your panels produce and send to the local power grid. These credits offset your future electricity consumption and costs.

Feed-in tariffs, on the other hand, guarantee payments to renewable energy producers for all the electricity they generate and feed into the grid, regardless of their own consumption. You are paid a fixed rate per unit of electricity generated, often for a long period of 15 to 20 years.

Basically, net metering incentivizes self-consumption by crediting excess production, while feed-in tariffs directly pay producers for all their renewable generation sent to the grid. Net metering reduces customer costs; feed-in tariffs aim to more broadly promote renewable energy development.

PACE financing

In some states, PACE (Property Assessed Clean Energy) financing offers a unique way to finance energy-efficient home improvements with no upfront costs. Repayments are spread over 10 to 20 years. It sounds like an appealing option for funding eco-friendly upgrades, but be sure to understand the long-term financial obligations and potential risks before enrolling.

Best states for going solar

We considered multiple factors — not just incentives — to determine whether a state is a good place to install rooftop solar. Read our full methodology to see how we ranked each state on solar panel installation costs, potential solar energy, solar policies and other factors.

Best states for solar

Worst states for solar

What about community solar?

Some people think rooftop solar is the only option and that they must be rich enough to afford an installation. However, thanks to federal and state incentives, community solar is more accessible to low- and moderate-income consumers than ever before.

Here’s how it works: Imagine a big solar panel installation set up in a field somewhere away from where you live. You and others in your community can “join” this project without having to put panels on your own roofs. You get a bit of the energy it produces, which knocks down your own electricity bill. It's great if you rent, don’t have a roof that receives much sunlight or just don’t want to deal with installing panels.

Under the IRA, federal tax credits are available to developers if a certain percentage of their site’s subscribers are folks with low and moderate incomes.

“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.

According to Owen, community solar is especially beneficial to renters and homeowners who don’t know if they will be in their homes for the next 25 years. However, if you are financially capable, have the right kind of roof, and expect to live in your home long enough to get a return on your investment, rooftop solar could be a great option for you.

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

Solar panel installation costs vary significantly, but a typical residential system is between $10,000 to $30,000. On the high end, some solar company reviewers tell us they paid up to $100,000 for a complete system.

If you buy a solar panel system, you may be eligible for tax credits or other financial incentives that offset the initial cost. Leasing solar panels or entering a power purchase agreement (PPA) is usually cheaper upfront, but you won’t be eligible for most solar incentives.

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.