Solar Incentives: How to save money on solar panels in 2026

Last Updated March 2026

While the One Big Beautiful Bill (OBBB) Act¹ has recently changed the federal landscape for solar, there are still many specific state-level programs designed to help you save money. The page below is a state-by-state guide to the solar incentives available in 2026.

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Introduction to solar incentives

The need for more solar power is greater than ever as electricity prices skyrocket and climate change continues to worsen. That's why lawmakers across the country have stepped up to support solar power. One of the most effective ways they do this is through government solar incentive programs.

Solar incentives come in one of three major types:

• Tax breaks - Income tax credits are the most popular kinds of tax breaks, but state and local governments also commonly offer sales and property tax exemptions.

• Rebates - Usually offered directly to solar installers by utility companies using a pool of ratepayer funds specifically set aside to encourage solar development, rebates generally reduce the up-front cost of going solar.

• Performance payments - Performance payment programs offer a way for solar panel owners to make additional income based on the amount of energy their solar systems generate.

Many state legislatures have passed laws called renewable portfolio standards (RPS) that require utility companies in the state to get a certain amount of the energy they sell from renewable sources. These laws often include funding for incentive programs to help home and business owners adopt solar. State public utilities commissions are often charged with designing these programs to meet the requirements outlined in the RPS law.

Here’s a bit more on each of the three main types of solar incentives.

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Solar tax credits

The incentives for going solar have shifted significantly following the passage of the "One Big Beautiful Bill" in 2025. The 30% Residential Clean Energy Credit (Section 25D) officially expired on December 31, 2025. While federal options for homeowners have changed, some state-level incentives remain active.

The federal solar tax credit

Systems purchased and installed in 2026 do not currently qualify for a federal tax credit. If you installed your solar system before the Residential Clean Energy Credit expiration date, you can claim 30% of the cost of your solar system installation by April 15, 2026.

Say your solar installation cost $18,000 in total. You are eligible for a federal tax credit of $5,400. Remember, the solar tax credit is non-refundable, so you can only claim the full $5,400 if you owe at least that much in taxes. If you owe less than that, you can claim the remaining tax credit value the following year.

However, a tax credit remains available through the Section 48E (Clean Electricity Investment Tax Credit) for projects that are third-party owned, such as a Solar Lease or PPA. While it has a base rate of 6%, it is increased to 30% for projects that meet specific prevailing wage and apprenticeship requirements. Under the new law, solar projects must generally be operational by December 31, 2027, to qualify. However, a major exception exists: if a solar provider begins construction on a project by July 4, 2026, it qualifies for a four-year "Safe Harbor" window.

Read more: Federal Solar Tax Credit Guide

Solar tax credits by state

Many states also offer solar income tax credits, sometimes adding up to over half the cost of the system when combined with the federal credit.

Here’s a breakdown of the states that offer solar tax breaks, with links to each state’s incentive page on our site:

State	Tax credit details
Arizona	25% of costs, up to $1,000; Plus utility rebates
Hawaii	35% of costs, up to $5,000
Massachusetts	15% of costs, up to $1,000; Plus SMART program
New Mexico	30% of costs, up to $15,000
New York	25% of costs, up to $5,000; Plus NY-Sun rebates
South Carolina	25% of costs, up to $3,500/year; 10-year carryforward

All federal and state income tax credits can be claimed when filing taxes in the year after installation. We’ve developed a helpful guide to claiming the federal solar tax credit using Form 5695². State tax credits are usually fairly simple, and your tax software or preparer should be able to guide you through claiming them.

How much money can solar incentives save near you?

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Tax exemptions

States and municipalities also offer sales and property tax exemptions for solar power. Sales tax exemptions reduce the upfront cost of going solar, and property tax exemptions prevent solar owners from paying more based on the value a solar installation adds to a property.

Solar tax exemptions differ from tax credits in that your eligibility is pretty much automatic if your state offers these incentives.

Your installer will take care of any necessary paperwork for sales tax exemptions, and property tax exemptions just mean the county assessor won’t be knocking on your door after you get solar installed.

2026 solar tax exemptions by state

State	Sales tax exemption	Property tax exemption	2026 status
Alabama		x	For those older than 65; Max $12,000 (Combined Taxable Income-Federal Tax Return)
Arizona	X	X	100% exemption
California		X	100% exemption; Must finish install by Dec 31, 2026
Colorado	X	X	100% exemption
Connecticut	X	X	100% exemption
Florida	X	X	100% exemption; covers batteries too
Hawaii		X	Honolulu only; 20-year exemption
Illinois		X	Special assessment prevents property tax hikes
Indiana	X		100% exemption
Iowa	X	X	100% sales tax exemption; 5-year property tax exemption.
Kansas		X	100% exemption for 10 years
Louisiana		X	100% exemption
Maine	X	X	100% Exempt; Must apply with the local assessor by April 1, 2026 for property tax relief
Maryland	X	X	100% exemption
Massachusetts	X	X	20-year exemption
Michigan		X	Must file for an exemption certificate
Minnesota	X	X	100% exemption; includes labor and storage
Montana		X	10-year property tax exemption
New Jersey	X	X	100% exemption
New Mexico	X	X	100% GRT deduction (sales tax equivalent).
New York	X	X	15-year exemption
North Carolina		X	80% of system value
North Dakota		X	100% exemption for the first 5 years
Ohio	X	X	Property tax is a local option
Oregon		X	100% exemption
Rhode Island	X	X	100% exemption
South Dakota		X	Up to $50k or 70% of value
Tennessee		X	87.5% exemption
Texas		X	100% exemption (Must file Form 50-123)
Vermont	X	X	100% exemption up to 50 kW systems
Virginia		X	80% exemption is now state-mandated
Washington	X		Upfront exemption for systems < 100 kW
Wisconsin	X	X	100% exemption

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Solar rebates

Rebates are a great way to save money on solar panels. Solar rebates are often tied to a specific utility and paid directly to the solar installer to reduce the customer’s up-front cost of going solar.

This reduction in cost affects the amount of solar tax credits you can receive. For example, if you get a $1,000 rebate off the cost of a $20,000 solar installation, your tax credit is based on the reduced $19,000 amount. At 30%, the tax credit would be $5,700.

Solar panel rebate amounts are usually quite small these days—often under $500 or $1,000. There are exceptions, however, including Illinois, Oregon, Mississippi, and New York, which still offer many utility customers rebates worth several thousand dollars.

Current rebate programs 2026

Here are the states with current solar rebate programs:

State	Primary Rebate Type	Typical Value
Delaware	Green Energy Grant	$0.70/W (up to $6,000)
Florida	Municipal Rebates	Select cities (e.g., Dunedin) offer $2,500 grants
Illinois	Illinois Shines (ABP)	Upfront payments based on REC value (varies by block)
New York	NY-Sun Rebate	~$0.20 - $0.40 per watt ($2,000–$4,000 for 10kW)
Oregon	ODOE Rebate	Up to $5,000
Rhode Island	Renewable Energy Fund	Up to $7,000 ($5,000 Solar + $2,000 Battery)
Texas	Austin Energy Rebate	$2,500 per residential install
Wisconsin	Focus on Energy	$600/kW (up to $2,400)

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Performance-based incentives

The final way states and utilities have chosen to incentivize solar adoption is performance-based incentives, also known as “performance payments.” As the name suggests, these incentives are paid to solar system owners based on how much energy their systems generate.

Some performance-based incentives are paid directly to system owners as a separate line item on their monthly bills. Others rely on a concept called Solar Renewable Energy Credits (SRECs), which represent 1,000 kilowatt-hours of electric generation, and are awarded to solar system owners at specific intervals (usually quarterly or annually).

How SRECs Work in 2026

SRECs have value because they serve as proof of renewable generation. Utility companies buy these credits to comply with state laws (Renewable Portfolio Standards⁴). If a utility fails to meet these standards, they must pay a fine; therefore, SRECs typically hold a value slightly below that non-compliance penalty.

• Market-Based SRECs: In states like Maryland, Pennsylvania, and Ohio, prices fluctuate based on supply and demand. You typically sell these through an aggregator. Washington D.C. remains the most lucrative market, with credits often worth over $300–$400 each.

• Fixed-Rate Successor Programs: Many states have replaced old SREC markets with fixed-price programs for better predictability. In New Jersey, the ADI program (Successor Solar Incentive) pays a fixed rate—currently $85 per MWh⁵—locked in for 15 years.

• Production Rebates (Illinois Shines): In the Illinois Shines program⁶, the payment for 15 years of SREC production is often made in a lump sum (or over a short period) shortly after the system goes live. This functions similarly to a large upfront rebate, which is why Illinois is often categorized with rebate states.

• Smart Tariffs (Massachusetts): Massachusetts utilizes the SMART program, which provides a fixed "adder" on top of your standard electricity savings for 20 years. For 2026, the base residential rate is $0.03/kWh⁷, but this can increase if you include a battery storage system.

States with Performance-Based Incentives

As of 2026, states with active SREC or performance-payment programs include:

• SREC Markets: DC, DE, MD, OH, PA, and VA.

• Mixed PBI Programs: IL (Illinois Shines), MA (SMART), MN (Solar*Rewards), and NJ (ADI).

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Solar battery incentives

In the past few years, solar batteries have become much more affordable⁸, and homeowners are taking notice. However, the incentive landscape has shifted in 2026.

The 30% federal residential tax credit for home batteries (Section 25D) expired on December 31, 2025. While this credit is no longer available for new systems purchased in 2026, homeowners are instead turning to utility-based performance incentives and Virtual Power Plants (VPPs)⁹ to offset costs.

How solar battery incentives work in 2026

Virtual Power Plants (VPPs): Most programs require you to allow the utility to "tap into" your battery during specific peak periods (usually a few dozen times per year). In exchange, you receive ongoing monetary credits on your bill or an annual participation check.

Upfront Rebates: Some states still offer "Point of Sale" rebates. For example, California's SGIP program¹⁰ and various equity-based rebates in the Northeast can still provide thousands of dollars in upfront savings for qualifying households.

Performance Payments: Programs like ConnectedSolutions¹¹ pay homeowners based on the average amount of power their battery contributes during high-demand events.

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Final word on solar incentives

More than ever before, the U.S. is doing its part to fight climate change. A lot of that work is being done by offering solar incentives to individuals and businesses to help them adopt carbon-free sources of energy generation.

If you are one of those individuals or business owners, you owe it to yourself to use the information we’ve presented here and take advantage of the solar incentives available to you. But don't be fooled by advertisements for free solar panels! These are often sneaky marketing tactics, and very few people qualify for low-income free solar installations.

Other steps in the process of going solar include figuring out how many solar panels you need and getting quotes from solar installation companies in your area. Have a good solar journey!

How much money can solar incentives save near you?