Solar incentives by state

Find tax credits, rebates and more solar panel incentives in 2024

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Do you own or rent?

house with solar panels on roof

Going solar is an increasingly attractive option for people who want to reduce their carbon footprint and electricity costs. For many, the biggest downside is the upfront expense of a solar panel installation.

There’s no way around it — going solar is expensive. A typical residential system costs $10,191 to $28,714, depending on what incentives you’re eligible for, the size of your system and other factors.

It’s definitely in your best interest to take advantage of all the solar incentives available to you. Arizona, Hawaii, Massachusetts, New Mexico, New York, South Carolina and Utah also have personal tax credits to incentivize solar adoption. About half of states don’t have any statewide financial incentives for solar panels, solar water heaters and energy storage devices.


Key insights

The federal solar investment tax credit (ITC) is the most significant financial incentive for homeowners. It is not a rebate or a refund, but it reduces what you owe on income taxes.

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Depending on where you live, you may be eligible for additional solar incentives, such as tax breaks and rebates. Overall, New York and Oregon have the most state-funded solar incentive programs.

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In some states, recent changes to net metering policies mean that people with solar panels earn less when they sell electricity to their local power grid. This often incentivizes investing in an energy storage battery along with solar panels.

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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.

Solar incentives are subject to change — check with your local authorities for the most up-to-date information.

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 2024

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

Corporate tax breaks

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.

Pros

  • Low upfront investment required
  • Potentially lower energy bills over time
  • Extended repayment terms for manageable monthly payments
  • Possible tax breaks

Cons

  • Often higher interest rates than traditional loans
  • Puts a lien on your property, so missed payments could lead to foreclosure
  • Obligation transfers to new owners if you sell the property
  • Not available in all states

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 TO GO SOLAR

  1. Hawaii
  2. Nevada
  3. Delaware
  4. Arizona
  5. California

WORST STATES TO GO SOLAR

  1. Indiana
  2. Kentucky
  3. Arkansas
  4. Tennessee
  5. Alabama

Best states for solar

1. Hawaii

High retail electricity prices are a key reason Hawaii is such a good place for people to install solar panels on their roofs. The potential savings are so clear that they more than make up for the state’s limits on net metering eligibility and relatively low compensation rates for excess power generation.

On average, solar panel costs in Hawaii range $9,772 to $25,580.

Over 25 years, homeowners with solar panels avoid an estimated $64,565 in total utility costs.

» COMPARE: Best solar companies in Hawaii

2. Nevada

Nevada is a pro-solar state in terms of both regulations and economics. As far back as 1997, the state allowed net metering for rooftop solar customers. The state is boosting rooftop solar in other ways, too.

On average, solar panel costs in Nevada range $9,046 to $25,846.

Over 25 years, homeowners with solar panels avoid an estimated $41,459 in total utility costs.

» COMPARE: Best solar companies in Nevada

3. Delaware

Delaware has relatively cheap installation costs, reasonable solar potential and solar-friendly policies. The state made it easier for people to support community solar projects in 2021, and it launched a program to give free solar panels to low-income homeowners in 2022.

On average, solar panel costs in Delaware range $9,144 to $26,125.

Over 25 years, homeowners with solar panels avoid an estimated $63,870 in total utility costs.

» COMPARE: Best solar companies in Delaware

4. Arizona

Arizona has great solar potential and relatively low rooftop solar installation costs. The state also has generally solar-friendly policies and a personal tax exemption to help defray the costs of installing rooftop solar systems.

On average, solar panel costs in Arizona range $8,204 to $23,439.

Over 25 years, homeowners with solar panels avoid an estimated $59,661 in total utility costs.

» COMPARE: Best solar companies in Arizona

5. California

California has relatively high retail electricity prices and great solar potential. It also has rules that prevent local or private restrictions on installing solar panels.

On average, solar panel costs in California range $10,310 to $29,457.

Over 25 years, homeowners with solar panels avoid an estimated $106,870 in total utility costs.

» COMPARE: Best solar companies in California

Worst states for solar

1. Indiana

Indiana has the highest rooftop solar installation prices, and its lack of statewide rebates to help offset those costs makes the economics of going solar less attractive than any other state.

On average, solar panel costs in Indiana range $11,894 to $33,983.

Over 25 years, homeowners with solar panels avoid an estimated $56,472 in total utility costs.

» COMPARE: Best solar companies in Indiana

2. Kentucky

There are no statewide programs to help residents pay the up-front costs of installing rooftop solar systems. Kentucky also bans power purchase agreements, which is another way to cover those expenses.

On average, solar panel costs in Kentucky range $10,678 to $30,508.

Over 25 years, homeowners with solar panels avoid an estimated $54,204 in total utility costs.

» COMPARE: Best solar companies in Kentucky

3. Arkansas

Arkansas’s economic circumstances aren’t doing residents any favors when they go solar: It has comparatively low residential electricity prices, a complete lack of statewide aid to help cover installation costs and a ban on power purchase agreements.

On average, solar panel costs in Arkansas range $9,818 to $28,051.

Over 25 years, homeowners with solar panels avoid an estimated $67,139 in total utility costs.

» COMPARE: Best solar companies in Arkansas

4. Tennessee

Tennessee has some of the cheapest electricity prices in the country, which is one of the reasons why solar adoption rates are relatively low. There are no statewide solar rebates or other programs to incentivize rooftop solar.

On average, solar panel costs in Tennessee range $11,812 to $33,750.

Over 25 years, homeowners with solar panels avoid an estimated $51,774 in total utility costs.

» COMPARE: Best solar companies in Tennessee

5. Alabama

Alabama also has high rooftop solar installation costs, and government policies aren’t helping. The state bans power purchase agreements, doesn’t protect properties from neighbors’ shade and lets HOAs restrict solar panels.

On average, solar panel costs in Alabama range $8,985 to $23,510.

Over 25 years, homeowners with solar panels avoid an estimated $65,922 in total utility costs.

» COMPARE: Best solar companies in Alabama

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.

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, Ampion Renewable Energy

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.

Do you own or rent?

FAQ

How can I pay for solar panels?

You can pay cash upfront, but many people finance their solar energy systems. You can also lease solar equipment with low upfront costs. In some states, you can also take advantage of power purchase agreements (PPAs) or PACE financing programs.

  • Solar loans: A solar loan works like any other type of home improvement loan — there’s an application and approval process, and you pay it back over time (with interest).
  • Solar leases: Leasing solar panels lets you go solar without the high upfront costs. A potential drawback is that you won’t be eligible for the same tax incentives.
  • Power purchase agreements: In some states, a power purchase agreement (PPA) is one way to go solar without paying for the system upfront. Instead, homeowners pay a monthly fee to the solar company for installing the system and handling maintenance and repair work. In most practical aspects, PPAs are very similar to solar leases.
  • PACE financing: In California, Florida and Missouri, Property Assessed Clean Energy programs allow property owners to finance solar panels and other energy-efficient improvements. The loan is secured by the property and repaid through an assessment of the property tax bill.

    The biggest downside with PACE is that you could lose your house if you don’t make payments. It might also make it more difficult to sell your home or refinance your mortgage.

  • Home equity: Some suggest using a home equity line of credit or loan to finance a solar installation. This can be a financially beneficial option — home equity interest rates are relatively low, and homeowners can still take advantage of the federal solar tax credit. 

» SOLAR PANELS: Lease vs. buy

What is the difference between a tax credit and a rebate?

A tax credit is a dollar-for-dollar reduction in the amount of taxes you owe. A rebate is a direct payment from the government, manufacturers or local utility companies. Unlike tax credits, rebates are typically received as a direct payment or a discount on the purchase price. For example, if there is a $1,000 rebate on a $10,000 solar panel system, you pay $9,000, or if you pay the full amount upfront, you might receive $1,000 back after the purchase.

Can I use more than one solar incentive?

Yes, in most cases, you can use multiple solar incentives to offset the cost of your solar system.

Are there incentives for residential and commercial installations?

Yes, solar incentives are available for both residential and commercial solar installations.

Do I need to inform my utility about my solar installation to get incentives?

In most cases, you will need to inform your utility about your solar installation in order to receive solar incentives.

Are there incentives for adding energy storage or battery backup to my solar system?

Yes, seven states have statewide incentives for energy storage, according to the DSIRE. An additional three have utilities offering direct incentives.

Are there any programs that help low-income households with solar adoption?

Yes, there are some programs that help low-income households with solar adoption. These programs typically offer financial assistance or other support to help make solar energy more affordable.

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.

*For 100% usage offset; **Over 25 years

Article sources

ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:

  1. DSIRE, “Community Solar Policy.” Accessed April 4, 2024.
  2. DSIRE, “Database of State Incentives for Renewables & Efficiency.” Accessed April 4, 2024.
  3. DSIRE, “Energy Storage Financial Incentives.” Accessed April 4, 2024.
  4. DSIRE, “Net Metering.” Accessed April 4, 2024.
  5. EnergySage, “Solar Rebates and Incentives.” Accessed April 4, 2024.
  6. Federal Trade Commission, “Solar Power for Your Home.” Accessed April 4, 2024.
  7. IRS, “Residential Clean Energy Credit.” Accessed March 27, 2024.
  8. U.S. Department of Energy, “Homeowner’s Guide to the Federal Tax Credit for Solar.” Accessed March 27, 2024.
  9. U.S. Department of Energy, “Property Assessed Clean Energy Programs.” Accessed March 27, 2024.
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