Solar incentives by state (2026)
The 30% federal residential solar tax credit (Section 25D) ended December 31, 2025 under the One Big Beautiful Bill Act. State-level incentives now drive solar economics for cash and loan purchases: state tax credits in California, Massachusetts, New York, South Carolina, and others; net metering structures ranging from full 1:1 retail (Colorado, Massachusetts, Florida) to net billing (California NEM 3.0, Arizona RCP) to deregulated REP buyback (Texas); SREC markets in New Jersey, Pennsylvania, Maryland, and Massachusetts; sales and property tax exemptions in roughly half of US states. The commercial Section 48E credit still applies to third-party-owned systems (leases and PPAs), typically passed through as lower monthly payments. Verify current rules with your installer, your utility, and a qualified tax advisor.
Federal solar tax credit (2026 status)
The federal landscape changed in 2025. Here is what applies in 2026.
What changed in 2025
The One Big Beautiful Bill Act (Public Law 119-21), signed July 4, 2025, terminated the Section 25D Residential Clean Energy Credit for systems placed in service after December 31, 2025. The IRS confirmed the change in Fact Sheet FS-2025-05 (August 2025). Customer-owned solar systems (cash or loan) installed in 2026 receive no federal tax credit.
The commercial Section 48E Clean Electricity Investment Credit remains available, with construction-start deadlines running 2027 through 2030 depending on project type. Leases and PPAs use this credit because the installer (not the homeowner) owns the system. The installer typically passes some of the credit value through as lower monthly payments.
Read the complete federal credit guide for the full detail and timeline.
This is a general overview. Federal and state tax rules change and depend on individual circumstances. Consult a qualified tax advisor before making financial decisions.
Types of state solar incentives
Six categories of state-level incentive drive most of the financial case for solar in 2026.
State Income Tax Credits
Some states offer their own income tax credit for residential solar, separate from the federal Section 25D credit that ended December 31, 2025. Examples: South Carolina (25%, up to $3,500 per year with 10-year carry forward), New York (25%, capped at $5,000), Arizona (25%, capped at $1,000), New Mexico (10%, up to $6,000), Massachusetts (15%, capped at $1,000). Caps and carry-forward rules vary; consult a qualified tax advisor.
Net Metering and Net Billing
Three structures exist in 2026. Full 1:1 retail-rate net metering (Colorado, Massachusetts, Maryland, New Jersey, Florida IOUs) credits exports at the full retail electricity rate. Net billing or net energy metering 3.0 (California NEM 3.0, Arizona RCP, Idaho post-September 2025) credits exports at an avoided-cost rate roughly 25-75% below retail. Texas has no statewide net metering mandate; in the deregulated ERCOT market, Retail Electric Providers set their own buyback rates ranging from $0.03 to $0.12 per kWh.
Solar Renewable Energy Credits (SRECs)
In states with active SREC markets, homeowners can earn one SREC per megawatt-hour of solar production and sell them to utilities. Active SREC markets in 2026: New Jersey (SREC-II), Pennsylvania, Massachusetts (legacy SREC-II and SMART 3.0 alternative compliance), Maryland, Ohio (Tier II), and the District of Columbia. SREC prices vary by state and supply/demand within each market. A 7 kW system in a strong SREC state can earn $200-$500 per year in SREC income.
Utility Production Incentives and Rebates
Some utilities and states offer per-kWh production payments or upfront rebates. Examples: Xcel Energy Solar*Rewards in Colorado ($0.02 per kWh on all production for 20 years), Massachusetts SMART 3.0 (annual-program-year structure launched October 2025), Oregon Energy Trust ($2,500 rebate for PGE and Pacific Power customers), Austin Energy ($2,500 rebate plus Value of Solar tariff). Programs frequently exhaust mid-year; verify current funding before counting on any specific rebate.
Property Tax Exemptions
Roughly 40 US states exempt the added home value from a solar installation from property tax assessment. Some are 100% exemptions (Texas Tax Code §11.27, Florida residential), some are time-limited (Massachusetts 20 years, Maryland 5 years), some require explicit application (Texas Form 50-123 by April 30). Without the exemption, going solar can raise your annual property tax bill by $300-$700 depending on system size and local tax rates.
Sales Tax Exemptions
Some states exempt solar equipment from state sales tax: Florida (100%, saves ~$1,500 on $25K system), Massachusetts (100%, saves ~$1,500), New York (100% on state portion), Colorado (state-level exemption saves ~$500-$650). Texas notably does NOT exempt solar from sales tax, so 6.25% applies to Texas installations. Verify the current exemption status in your state before counting it in project budgets.
State incentive quick reference
General 2026 overview. Verify current rules with your state's utility commission or a qualified installer before making financial decisions. Federal Section 25D credit ended December 31, 2025 for all states; the Section 48E commercial credit continues for lease/PPA systems nationwide.
| State | State Tax Credit | Net Metering Structure | SREC Market | Property Tax Exempt | Sales Tax Exempt |
|---|---|---|---|---|---|
| Arizona | Yes (25%, cap $1,000) | Net billing (RCP) | No | Yes | Yes |
| California | No | Net billing (NEM 3.0) | No | Yes | No |
| Colorado | No | Full 1:1 retail | No | Yes | Yes |
| Connecticut | No | Full 1:1 retail | Yes | Yes | Yes |
| Florida | No | Full 1:1 retail (IOU) | No | Yes | Yes |
| Georgia | No | Limited (RNR tariff) | No | No | No |
| Hawaii | Yes (35%, cap $5,000) | Modified (NEM 3.0) | No | Yes | No |
| Illinois | No | Full 1:1 retail | Yes | Yes | No |
| Maryland | No | Full 1:1 retail | Yes | Yes | No |
| Massachusetts | Yes (15%, cap $1,000) | Full 1:1 retail | Yes | Yes | Yes |
| New Jersey | No | Full 1:1 retail | Yes | Yes | Yes |
| New Mexico | Yes (10%, cap $6,000) | Full 1:1 retail | No | Yes | No |
| New York | Yes (25%, cap $5,000) | VDER (value stack) | No | Yes | Yes |
| North Carolina | No | Full 1:1 retail | No | Yes | No |
| Oregon | No | Full 1:1 retail | No | Yes | No |
| Pennsylvania | No | Full 1:1 retail | Yes | Yes | No |
| South Carolina | Yes (25%, cap $3,500/yr) | Full 1:1 retail | No | Yes | No |
| Texas | No (no state income tax) | Deregulated REP buyback | No | Yes | No |
| Virginia | No | Full 1:1 retail | No | Yes | No |
| Washington | No (no state income tax) | Full 1:1 retail | No | Yes | Yes |
Data reflects general 2026 policy status. State tax credit caps and net metering rules change frequently; confirm with your state's energy office or a qualified installer before making financial decisions. Click any state to see the full per-state breakdown including utility names, statute citations, and the latest payback estimates.
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