Solar Tax Credit Ended? The State Incentives That Remain

What happened to the federal solar tax credit

The 30% residential clean energy credit (Section 25D) is gone for installations completed after December 31, 2025, after the One Big Beautiful Bill Act, signed July 4, 2025, ended it early. If installation finished after that date, the homeowner credit doesn’t apply, no matter when you signed or paid a deposit.

If your 2025 expenses qualified, you can still claim the credit on your 2025 federal return, but if your system was installed in 2026 or later, the federal homeowner credit is gone. This was the incentive that allowed direct owners to reclaim 30% of their system cost at tax time—on a typical $30,000 installation, about $9,000 in savings disappeared.

The credit was originally scheduled to run through 2032 under the Inflation Reduction Act before being terminated early. The Inflation Reduction Act had extended the credit through 2032, so it ended years ahead of schedule. Many homeowners are discovering this change only after requesting quotes, which is why understanding what state-level programs still exist matters now more than ever.

State solar incentives that still exist in 2026

State and utility incentives weren’t touched by the federal change. Rebates, state tax credits, net metering and property tax exemptions all still follow their own rules. These programs were always stacked on top of the federal credit rather than standing in for it, and some are more generous in 2026 than they have ever been.

The most impactful programs still available include:

• State tax credits: States with their own solar tax credits include Arizona, Hawaii, Massachusetts, New Mexico, New York and South Carolina. New York gives a 25% state income tax credit, capped at $5,000, and you can stack it with NY-Sun rebates. South Carolina credits 25% of the system cost against state income tax. You can use up to $3,500 a year and carry the rest forward for as long as 10 years.
• Upfront rebates: NY-Sun rebates depend on your utility territory and how much capacity is left in the current block. In Con Edison territory, homes under 25 kW are seeing roughly $0.20 to $0.35 per watt in 2026. Maryland’s Energy Administration offers a $1,000 residential clean energy grant on a first-come, first-served basis, with funding renewed from time to time.
• Solar Renewable Energy Credits (SRECs): Each SREC represents 1 MWh of solar output. Active markets include New Jersey (about $200 to $250 per MWh), Washington DC (about $350 to $450), Maryland (about $40 to $60), Illinois through Illinois Shines (about $75 to $90) and Massachusetts, which uses fixed SMART rates.
• Net metering: Getting full retail credit for the power you export is still the biggest single driver of solar savings. New York, New Jersey, Massachusetts, Florida, Ohio, Maryland and about 30 other states still offer it.
• Property and sales tax exemptions: More than 35 states keep solar out of property tax assessments, so the value it adds to your home doesn’t raise your tax bill. Many also waive sales tax on the equipment, which trims a few percent off the price.

If you want to see what’s available where you live, start with DSIRE, the best source for an up-to-date list of state and utility incentives. You can also find a local solar installer who tracks these programs and can walk you through what applies to your specific situation.

For how to register and sell certificates, see our guide to solar renewable energy credits (SRECs).

Which states have the strongest remaining programs

Massachusetts, New York and New Jersey stand out, with tax credits, rebates and ongoing payments for the power your system produces. Here’s what the top states offer in 2026:

New York: Add the 25% state tax credit (capped at $5,000) to NY-Sun and a typical home can see roughly $6,600 to $7,800 in state incentives, which recovers a good share of the lost federal credit. For many homeowners, New York’s programs together cover a large share of the project cost.

New Jersey: Its Successor Solar Incentive (SuSI) pays about $85 for every SREC-II, and each MWh your system produces for 15 years earns one.

Massachusetts: Its SMART 3.0 program pays a per-kWh incentive that varies by system size and project type, and you can add the state income tax credit on top.

California: The state’s SGIP program provides rebates for home batteries, which matter more than ever now that NEM 3.0 makes storage close to essential for good returns. While the state’s net metering policy changed significantly, high electricity prices still make solar pay off in California, even with smaller export credits.

For a comprehensive look at how solar costs break down in 2026 without the federal credit, read our guide on how much solar costs in 2026.

What about third-party ownership (leases and PPAs)

Leases and PPAs are a different story. The company that owns the equipment can still claim the commercial credit under Section 48E and pass some of that value to you through lower monthly payments. For solar, that commercial credit only applies if construction began by July 4, 2026, or the system is placed in service by the end of 2027. Ask the provider to confirm your project qualifies.

This is not a workaround or a loophole—it’s a different financing structure where you don’t own the equipment. The solar company owns the system, claims the commercial tax credit, and you pay them either a fixed monthly lease payment or a per-kilowatt-hour rate under a power purchase agreement. Without the homeowner credit, the cost gap between buying and leasing is much smaller than it used to be.

If you’re weighing ownership versus a lease or PPA, our guide on solar loans vs leases vs PPAs walks through the tradeoffs in detail. The short version: leases and PPAs now capture federal value that cash and loan buyers cannot access, which changes the math significantly compared to 2025.

How to find and claim state incentives in 2026

Most state incentives require different applications and have different deadlines. Here’s how to approach it:

1. Start with DSIRE: DSIRE is the most comprehensive database of state, local, and utility solar incentives. Search by your ZIP code to see what’s available.
2. Check your utility’s website: Most utilities need to know about your system before you can collect their incentives. Many utilities run their own rebate programs separate from state incentives.
3. Apply before installation when required: Many utility programs require approval before installation, and applying after the work is done is a common reason rebates get denied.
4. Register for SRECs immediately: If your state has an SREC market, register your system as soon as it’s interconnected. SREC payments depend on registering with your state’s program. Registration is free, but certificates you don’t register for are lost and can’t be claimed retroactively.
5. File state tax credits with your state return: Claim any state tax credits on your state return—these are separate from your federal return and must be claimed on the appropriate state forms.

Work with an installer who knows your state’s programs. Find a solar installer in your area who can walk you through the application process and confirm current funding availability before you sign a contract.

What this means if you already own solar

If you installed your system in 2025 or earlier, nothing changes for you—you’re grandfathered into the federal credit you already claimed. The end of the federal credit affects new installations only.

If you’re considering adding a battery to your existing system, the standalone battery credit under Section 25D also ended December 31, 2025. That credit also covered home batteries, so batteries installed after December 31, 2025 no longer qualify either. However, a growing number of states fund batteries directly, through standalone programs or add-ons to solar incentives. California’s SGIP can pay up to about $1,000 per kWh of capacity, and Maryland offers a 30% state tax credit for storage, capped at $5,000.

For more on whether adding storage makes sense for your system, see our comparison of Tesla vs SolarEdge batteries. And if you’re dealing with an older system and wondering whether your equipment is still competitive, read our guide on outdated solar technology.

Is solar still worth it without the federal credit

Is solar still worth it without the federal credit? For many homeowners, yes. The credit lowered the upfront cost, but most of the value comes from decades of lower electric bills as utility rates climb. A system typically lasts 25 years or more, and the electricity you don’t buy over that time can add up to real savings on its own.

Whether it pays off now depends much more on where you live, so the programs your state offers can make or break the numbers. States with strong incentive stacks and high electricity rates will see shorter payback periods. States with weaker programs and lower rates will see longer paybacks.

Can solar still pay for itself? In many states, state credits, SRECs, net metering and lower equipment prices together put payback somewhere around 5 to 10 years, and sometimes less in states with the strongest programs.

Run the numbers for your situation using our solar savings calculator, which reflects 2026 incentive structures and includes state-specific rebates and SREC values. The calculator will show you payback period, lifetime savings, and what incentives you qualify for based on your location and system size.