Solar Incentives by State in 2026: The Complete Guide

Short answer: The federal residential solar tax credit (Section 25D) expired December 31, 2025 under the OBBB Act, so US homeowners can no longer claim the 30% ITC on a direct residential install. Solar leases and PPAs (third-party owned systems) may still capture the commercial 48E credit passed through to lessors. State rebates, tax credits, property tax exemptions, and SREC markets are now the foundation of residential solar economics. In the strongest stacks — New Jersey, Massachusetts, Illinois, Maryland — state-only incentives can still cover 25–40% of system cost.

The federal residential ITC (Section 25D) — expired December 31, 2025

Under the OBBB Act, the federal residential solar tax credit codified at Section 25D of the Internal Revenue Code expired for systems placed in service after December 31, 2025. Homeowners who paid for and commissioned their system on or before that date can still claim the 30% credit on IRS Form 5695. Systems energized in 2026 or later do not qualify for the residential credit.

• What is gone: The 30% residential income-tax credit (Section 25D) on owner-purchased systems, including new solar, standalone batteries ≥3 kWh, and associated soft costs.
• What survives: The commercial Section 48E credit, claimed by businesses, developers, and third-party owners of residential solar (lessors of leases and PPAs). The 48E credit carries its own statutory deadline that has not yet been repealed.
• Practical effect for homeowners: Leases and PPAs (where the installer owns the system) may still capture 48E, which is typically reflected in a lower monthly payment than a comparable 25D-era lease. Direct purchases lose the federal credit entirely and must rely on state and utility programs.
• If you placed your system in service before Jan 1, 2026: File IRS Form 5695 with your 2025 return to claim the 30% credit; unused portions carry forward up to 5 years.

State-by-state incentive table (2026)

State	Primary Program	Value	Expiry / Notes
California	NEM 3.0 (net billing) + SGIP battery rebate	Export credit ~25% of retail; battery rebate up to $1,000/kWh for equity tier	Ongoing; SGIP tier-based
Texas	Utility rebates (Oncor, CenterPoint, Austin Energy)	$2,500–$8,500 depending on utility	Annual cap; first-come-first-served
Florida	Sales tax exemption + property tax abatement + full net metering <10 kW	100% of state sales and property tax on equipment	Permanent
New York	NY-Sun Megawatt Block + 25% state tax credit + property tax exemption	Block incentive declining; tax credit capped at $5,000	Block fills regionally
New Jersey	SuSI (Successor Solar Incentive) TRECs + sales/property tax exemption	~$85/MWh for 15 years; TRECs are one of the highest in the country	Ongoing through 2030+
Arizona	$1,000 state tax credit + sales/property tax exemption	Max $1,000 lifetime	Permanent
Colorado	Xcel Solar*Rewards rebate + sales/property tax exemption	$0.30/W rebate (Xcel territory only)	Annual cap
Massachusetts	SMART program + state tax credit + property tax exemption	15-cent incentive per kWh produced; $1,000 state tax credit	SMART capped by utility
Pennsylvania	SREC market (Solar Alternative Energy Credits)	~$40/SREC in 2026 (volatile market)	Market-driven; declining
Nevada	Tiered net metering (Tier 4)	~75% of retail export credit	Tier-based; declining
Georgia	Georgia Power net metering (federal 25D credit expired)	Net metering at retail rate	Capped at 5,000 new customers/year
Washington	Sales tax exemption on systems <10 kW + utility-by-utility net metering	6.5% state sales tax waived	Permanent for qualifying systems
Illinois	SREC Adjustable Block + property tax exemption	~$65–$85/MWh for 15 years	Strong; protected by Climate and Equitable Jobs Act
Ohio	Solar SREC market + property tax exemption	Solar-carve-out SRECs $4–$12 (low-value market)	Volatile; minimal net benefit
Maryland	SREC market + $1,000 state grant + property tax exemption	SRECs ~$50–$80 + $1,000 residential grant	Grant first-come; SREC market strong

SREC markets explained

A Solar Renewable Energy Credit (SREC) is a tradable certificate issued for every 1,000 kWh (1 MWh) your solar system produces. Utilities in SREC states must source a minimum percentage of their electricity from solar — they buy SRECs from homeowners to meet that quota. The price fluctuates based on supply and demand in each state's market.

• Strong SREC markets ($40–$85 per MWh in 2026): New Jersey (SuSI TRECs), Massachusetts (SMART), Maryland, Illinois (Adjustable Block).
• Moderate SREC markets ($20–$40): Pennsylvania, Washington DC.
• Weak SREC markets ($4–$20): Ohio — low solar carve-out makes these nearly worthless.

A typical 8 kW system produces ~11 SRECs per year. At $80/SREC in NJ, that's $880/year — $13,200 over the 15-year program term.

How incentives stack in 2026

With the federal residential ITC (Section 25D) expired, the stacking rules are simpler than they were:

• State tax credits + state rebates + property tax exemptions: Generally all stack. Confirm with state DOR.
• State rebate + SRECs: Stack cleanly. SREC income is reported separately as taxable income.
• Commercial 48E credit (lease/PPA only): Claimed by the system owner — typically your lessor — and reflected in your lease or PPA pricing. As a homeowner you do not claim 48E directly.
• SGIP (CA): Continues to apply to battery storage. Stacks with state and utility rebates.
• Systems energized on/before Dec 31, 2025: Still eligible for the legacy 30% Section 25D credit on the 2025 return; unused portions carry forward up to 5 years.

Example stack: New Jersey homeowner, 8 kW system, $24,000 gross cost (2026)

• Federal residential ITC (Section 25D): $0 — expired Dec 31, 2025
• NJ sales tax exemption (6.625% waived): saves $1,590 upfront
• Property tax exemption: no added assessment (preserves ~$300/year)
• SuSI TRECs (11/year × $85 × 15 years): +$14,025 lifetime
• Effective net cost after state incentives and TRECs: ~$8,385 over 15 years

Even without the federal residential credit, NJ's strong SuSI TREC market keeps it among the top US states for residential solar ROI. Homeowners considering a lease or PPA instead of a direct purchase may see further price reductions if the system owner (lessor) captures the commercial 48E credit and passes it through.

Where to look up your exact local incentives

• DSIRE (Database of State Incentives for Renewables & Efficiency): the authoritative database, updated monthly.
• Your utility's website: rebates, interconnection fees, and net metering details are utility-specific.
• Your state's Public Utility Commission (PUC) website: SREC markets and program caps.

Once you've confirmed your state's incentive stack, the next step is getting apples-to-apples quotes. Browse verified installers by state or get up to five free quotes. For net metering mechanics, see our 2026 net metering guide.

Frequently asked questions

What is the federal solar tax credit in 2026?

The federal residential solar tax credit (Section 25D) expired December 31, 2025 under the OBBB Act. Homeowners can no longer claim the 30% ITC on residential direct-purchase installations. Solar leases and PPAs (third-party owned systems) may still offer savings through the commercial 48E credit passed to lessors. Check your state for available rebates and incentives.

Which states have the best solar incentives in 2026?

With the federal residential 25D credit expired, state-only stacks matter more than ever. New Jersey, Massachusetts, Illinois, and Maryland rank highest in combined value, with SREC markets paying \$40–\$85 per MWh for 15 years. In the strongest state stacks, total state-level incentives still cover 25–40% of installed system cost.

Can I stack state and federal solar incentives?

For 2026 direct-purchase residential installs, the federal Section 25D credit is no longer available — so stacking is limited to state tax credits, state rebates, utility rebates, SREC revenue, and property tax exemptions, which generally stack cleanly with each other. Homeowners going through a lease or PPA may benefit indirectly from the commercial 48E credit claimed by the system owner.

What is an SREC and how much is it worth?

An SREC (Solar Renewable Energy Credit) is a tradable certificate issued for every 1,000 kWh a solar system produces. In 2026, NJ SuSI TRECs pay ~\$85 each, MD and IL SRECs pay \$50–\$80, PA runs ~\$40, and Ohio SRECs are nearly worthless at \$4–\$12.