Solar Incentives & Taxes by State in 2026: What's Left
If a guide still tells you to expect a "30% federal tax credit," it's out of date. The federal residential credit — Section 25D — expired on December 31, 2025. In 2026, what solar saves you depends almost entirely on where you live: a patchwork of state tax credits, rebates, renewable-certificate markets, and tax exemptions that varies wildly from one state line to the next.
What solar incentives are still available in 2026?
For homeowners who buy their system with cash or a loan, the federal credit is $0. The incentives that remain are state and local: a few generous state tax credits, upfront or performance-based rebates, SREC markets that pay you per megawatt-hour generated, and property- and sales-tax exemptions. The only place the federal subsidy still flows to residential rooftops is through a lease or PPA, where the installer claims the commercial credit and passes part of it back. None of these are uniform — your zip code now matters more than ever.
Federal recap: 25D is gone, 48E survives
Section 25D refunded 30% of an owned system's cost against your federal taxes. Systems placed in service in 2026 or later don't qualify; if you energized your system in 2025 you may still claim it on your 2025 return. There is no successor residential credit — budget as if it's simply gone. We cover the details and the lease loophole in solar tax credit 2026.
The commercial clean-electricity credit — Section 48E — is still in effect, but a homeowner can't claim it on a system they own. A business that owns panels on your roof can, which is the entire basis of third-party ownership. See solar lease vs. buy in 2026 for how that changes the math.
The state mechanisms
State support comes in five recurring forms, and most strong-incentive states stack several:
- State tax credits — a percentage of system cost against your state income tax (NY, AZ, and a handful of others).
- Upfront rebates — a fixed dollar grant from the state or your utility, sometimes performance-tiered.
- SRECs / performance payments — you earn certificates per MWh generated and sell them, or get paid per kWh for a set term.
- Property-tax exemptions — the home-value bump from solar isn't added to your assessment.
- Sales-tax exemptions — no sales tax on the equipment at purchase.
State incentive table
Representative examples for 2026. Programs change frequently, carry budget caps, and sometimes have waitlists — treat this as a starting point, not a quote.
| State | Notable incentive (2026) |
|---|---|
| New York (NY) | 25% state tax credit, capped at $5,000; state sales-tax exemption; NY-Sun rebates |
| New Jersey (NJ) | SuSI program pays fixed SREC-II certificates per MWh for 15 years; property- & sales-tax exemptions |
| Massachusetts (MA) | SMART performance-based payments (per-kWh, declining blocks); ~15% state credit up to $1,000 |
| Maryland (MD) | Active SREC market; $1,000 residential solar grant; property- & sales-tax exemptions |
| Illinois (IL) | Illinois Shines pays SREC-style certificates over 15 years; property-tax special assessment |
| Washington, D.C. (DC) | Highest SREC prices in the country, often $300–$400/MWh |
| Arizona (AZ) | 25% state tax credit capped at $1,000; sales- & property-tax exemptions |
| Florida (FL) | Full property- & sales-tax exemptions; retail-rate net metering at major utilities |
| Texas (TX) | No state credit; local utility rebates (e.g., Austin Energy); property-tax exemption |
| California (CA) | No state credit; value comes from net billing under NEM 3.0 (exports paid below retail) |
A few patterns are worth noticing. Income-tax credits (NY, AZ) cut your upfront cost but only help if you owe enough state tax. SREC and performance programs (NJ, MD, IL, DC, MA) pay out over years, so their lifetime value can rival a credit — but prices float with supply. And big-population states like California and Texas offer little or no direct cash; there the return comes from your electricity rate and net-metering rules, not a rebate.
How SRECs actually pay
In an SREC state, every megawatt-hour (1,000 kWh) you generate creates one certificate that utilities buy to meet a renewable mandate. A typical home system produces 8–12 MWh a year, so at $250/MWh that's roughly $2,000–$3,000 annually in a hot market like D.C. — or a tenth of that in an oversupplied one. The income is real but variable, so don't let a salesperson bake a peak SREC price into a 25-year payback.
The lease and PPA pass-through
Because 48E still exists for system owners, leasing companies and PPA providers can claim the 30% commercial credit plus depreciation, then price your monthly payment to share some of that value. So the choice in 2026 is:
- Buy it yourself: no federal credit, but you capture 100% of the savings and any state incentives directly.
- Lease or PPA: the provider keeps the federal credit; you get low- or no-money-down access and a smaller, immediate monthly saving.
State incentives interact with this too — in some programs the system owner (the leasing company) collects the SRECs or rebate, so read the contract for who keeps what.
How to stack what's available where you live
The reliable move is to layer incentives: any state credit, plus a rebate, plus ongoing SREC or performance income, plus the tax exemptions — then judge the result against your utility's export rules. Net-metering terms decide how much each exported kWh is worth and often swing the payback more than any rebate; we break those down state by state in net metering & permits by state.
To see real numbers for your state, our solar cost calculator applies the state-level incentive we track and shows payback with no phantom 30% federal credit for cash and loan buyers. Jump straight to solar cost in California, Texas, New York, or New Jersey, or browse all the solar guides.
Bottom line
- Federal: 25D is gone for owners; only lease/PPA providers still tap the credit via 48E.
- State: a genuine patchwork — strong credits (NY, AZ), SREC income (NJ, MD, IL, DC, MA), and widespread tax exemptions.
- Verify before signing: programs change, cap out, and waitlist; confirm current terms with your state energy office and utility.
These are ballpark figures to guide your decision, not tax advice. Enter your bill and state to see what solar costs you in 2026.
Estimate solar system size, price, and payback with accurate post-25D tax logic. Analyze your actual roof via satellite.
Estimate my cost →Frequently asked questions
- Is there still a federal solar tax credit in 2026?
- Not for homeowners who buy their system. Section 25D, the 30% residential credit, expired on December 31, 2025, so cash and loan buyers get $0 federal credit in 2026. The commercial 48E credit survives but can only be claimed by a business that owns the panels, such as a lease or PPA provider.
- Which states have the best solar incentives in 2026?
- New York stands out with a 25% state tax credit capped at $5,000 plus a sales-tax exemption. States with active solar renewable credit markets — New Jersey, Maryland, Illinois, Washington D.C., and Massachusetts — can also add hundreds of dollars a year in ongoing payments.
- What is an SREC and how much is it worth?
- A Solar Renewable Energy Certificate (SREC) is earned for each megawatt-hour your system generates and sold to utilities that must meet a renewable target. Prices swing by state and year — from roughly $10 in oversupplied markets to $300–$400 in Washington, D.C. — so treat them as a variable bonus, not a guarantee.
- Do solar panels raise my property taxes?
- In many states, no. Dozens of states offer a property-tax exemption so the value solar adds to your home isn't taxed, and several also waive sales tax on the equipment. Coverage varies, so confirm your state's rules before assuming the exemption applies.
- How do lease and PPA customers still get the federal credit?
- The provider owns the equipment and claims the commercial 48E credit plus depreciation, then prices your monthly payment to pass part of that value back. You claim nothing federally — the subsidy reaches you indirectly through a lower rate.
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A ballpark estimate for planning — not a final quote. Solar data last updated June 30, 2026 · Sources: NREL, EIA, DSIRE.