Solar incentives by state and locality, plus utility programs, are what’s left for 2026 buyers, and they vary a lot from place to place. The federal Residential Clean Energy Credit (25D) ended for expenditures after December 31, 2025, under the July 2025 tax law, so homeowners who buy and own a new system in 2026 can’t claim the 30% federal credit. The solar tax credit 2026 picture changed sharply.
Solar Tax Credit 2026: Federal Status
| Program | 2026 status for homeowners |
|---|---|
| 25D Residential Clean Energy Credit | Ended for systems after Dec 31, 2025 (IRS) |
| 48E for third-party-owned (lease/PPA) | Still available to the owner company, with new deadlines (IRS Notice 2025-42) |
The 48E credit is claimed by the leasing company, not you. Rules are still changing.
Solar Incentives by State: The Main Types
- State income tax credits: a percentage of cost, often capped
- Sales tax exemptions on solar equipment
- Property tax exemptions so added home value isn’t taxed
- Rebates from state energy offices or utilities
- Performance payments / SRECs: paid per kWh or MWh produced
- Battery incentives for storage or demand response
How to Find What Applies to You
- Search your state on DSIRE (dsireusa.org), run by NC State
- Check your utility’s website for rebates and battery programs
- Look at your state energy office
- Ask installers to list incentives and show sources
Programs open, close and run out of funds, so verify each one before you count on it.
California
California has no general state solar income tax credit. Key items are the property tax exclusion for qualifying solar, the net billing tariff (NEM 3.0) for investor-owned utilities, and storage programs such as SGIP. Check current funding before relying on any of them.
States With Notable Programs
Several states have historically offered credits or SREC markets, including New York, Massachusetts, New Jersey, Maryland, Arizona and South Carolina, among others. Amounts and eligibility change, so confirm the current rules on DSIRE.
Don’t Fall for “Federal Credit” Claims
If a salesperson in 2026 promises a 30% federal credit on a system you’ll own, ask for the IRS source.
Stacking Incentives
State and utility incentives can often be combined, for example a sales tax exemption plus a property tax exemption plus a utility battery rebate. Some rebates reduce the cost basis used for other programs, so read the rules or ask a tax professional before assuming they all add up.
Examples of State Programs (Verify Before Counting On Them)
Here are long-running state programs as described by state agencies and DSIRE. Rules, caps and funding change, so check the current version before you rely on any of them.
| State | Program type | Details as published |
|---|---|---|
| New York | State income tax credit | 25% of qualified solar costs, capped at $5,000 (NY Solar Energy System Equipment Credit) |
| Arizona | State income tax credit | 25% of cost, up to $1,000 (Residential Solar Energy Credit) |
| South Carolina | State income tax credit | 25% of cost, up to $3,500 a year, with unused credit carried forward (up to 10 years) |
| Florida | Sales tax and property tax exemptions | Solar equipment exempt from sales tax; added value excluded from property tax assessment |
| Texas | Property tax exemption | Added value from solar excluded from appraised value |
| California | Property tax exclusion, storage program | Solar new-construction exclusion; SGIP for batteries |
| Massachusetts | Performance-based incentive | SMART program payments per kWh, by utility territory and block |
| New Jersey | Performance-based incentive | SREC-II and successor programs paying per MWh |
Worked Example: Stacking a State Credit
Take a $24,500 system (7 kW at LBNL’s 2024 cash median of $3.5/W) in two states (illustrative; confirm eligibility):
| New York example | South Carolina example | |
|---|---|---|
| System price | $24,500 | $24,500 |
| State credit | 25% capped at $5,000 → $5,000 | 25% = $6,125, max $3,500/ |
| Credit timing | Applied on the state return (carryforward rules apply) | $3,500 in year 1, $2,625 carried to year 2 |
| Net cost after credit | $19,500 | $18,375 over two years |
| Sales tax | NY exempts residential solar equipment from state sales tax | Check current rules |
Compare that with 2025, when the federal 25D credit would have taken another 30% off. State credits are now the main tax help for owned systems. See is the solar tax credit gone in 2026.
Worked Example: Performance-Based Payments
SREC and per-kWh programs pay for production rather than cost. For a system producing 9,800 kWh a year (9.8 MWh) (illustrative payment rates):
| Payment basis | Example rate | Yearly payment |
|---|---|---|
| Per kWh | $0.05 | $490 |
| Per MWh (SREC) | $85 | $833 |
These payments are in addition to bill savings. Contract terms, the number of years paid and the rate depend on the program and your enrollment date.
Step-by-Step: Finding Your Incentives
- Go to DSIRE and search by ZIP code.
- Filter for residential solar and storage programs.
- Open each program’s source link (state agency or utility) to confirm it’s open and funded.
- Check your utility’s website for rebates, battery programs and export tariffs. See net metering vs net billing.
- Check your county for property tax exemptions and any filing needed.
- Ask installers to list each incentive in the quote with a source.
- Talk to a tax professional about state credits and timing.
Battery Incentives
Storage programs are among the more active incentives in 2026. They come in two main forms:
- Upfront rebates, such as California’s SGIP, which prioritizes certain customers.
- Performance payments for letting the utility call on your battery during grid peaks, sometimes called virtual power plant or demand response programs.
Read the rules on backup reserve and how often the utility can dispatch your battery. See is a solar battery worth it.
How Incentives Change the Payback
Any incentive that reduces your net cost shortens payback directly. In the New York example above, a $5,000 credit cuts net cost from $24,500 to $19,500. At $1,960 of yearly savings, simple payback falls from about 12.5 years to about 10 years. Run your own numbers with our solar payback period guide and are solar panels worth it in 2026.
FAQ
Is there a solar tax credit in 2026?
Not the federal 25D credit for homeowner-owned systems. State incentives may apply.
Does a lease still get a tax credit?
The leasing company may claim 48E, which can lower your lease price.
Where do I find state solar incentives?
DSIRE, your state energy office and your utility.
Which states have the best solar incentives in 2026?
It changes often. States with a state income tax credit, sales and property tax exemptions and strong export rules usually offer the most. Check DSIRE for your state’s current programs.
Do state solar incentives apply to leased systems?
Often the leasing company, as owner, receives them. Some programs pass value through in the lease price. Ask the provider.
Do I have to apply for a property tax exemption for solar?
In some states it’s automatic, and in others you file with your county assessor. Check your state’s rules and your county’s website.
Sources: IRS, Residential Clean Energy Credit page and FAQs on modification of clean energy credits; IRS Notice 2025-42; DSIRE (dsireusa.org); NY Department of Taxation and Finance; Arizona Department of Revenue; South Carolina Department of Revenue; Florida and Texas property tax exemption statutes; Massachusetts DOER (SMART); NJ BPU; CPUC (SGIP). Accessed Oct 2026.
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