State Solar Incentives in 2026: What's Left Now That the Federal Tax Credit Is Gone
The 30% federal residential solar credit expired for installations after December 31, 2025. Here's exactly which state incentives are still standing — and which states now offer the strongest packages.
5 min read
Energy Markets Writer
For nearly two decades, "30% off with the federal tax credit" was the first line of almost every solar pitch. That line is no longer accurate for most homeowners. The One Big Beautiful Bill Act, signed July 4, 2025, repealed the Residential Clean Energy Credit (Section 25D) for any system where installation is completed after December 31, 2025 — with no phase-down period. If you install solar in 2026 and pay for it yourself, there is no federal tax credit waiting for you at filing time.
That doesn't mean solar incentives disappeared. It means state programs, which used to be a bonus layered on top of a 30% federal credit, are now the main financial lever most homeowners have left.
What actually changed, in plain terms
| | Before 2026 | 2026 and later | |---|---|---| | Federal credit for owned systems (cash or loan) | 30% of system cost, no cap | $0 — expired | | Federal credit for leased/PPA systems | 30% claimed by the leasing company | Still available to the company through the commercial credit (Section 48E), through 2027 for projects that qualify | | Battery storage (owned, standalone or paired) | 30% federal credit | $0 — expired, same repeal date | | State tax credits, rebates, exemptions, SRECs | Stacked on top of the federal credit | Unaffected — these are separate state laws |
The practical upshot: if you're buying a system outright or financing it with a loan, your 2026 savings come from your state, your utility, and your electricity bill — not Washington. If you go through a solar lease or power purchase agreement (PPA), the leasing company can still access a federal credit and may pass some of that value through in a lower monthly payment, but you as the homeowner don't claim anything on your own return.
The five kinds of state-level help still on the table
| Incentive type | How it reduces your cost | Who still offers it | |---|---|---| | State income tax credit | Percentage of system cost, credited against state tax owed | New York, South Carolina, Massachusetts, Hawaii, Arizona, Iowa, Oregon, and a handful of others | | Rebate | Upfront cash or per-watt payment, often utility-administered | Varies widely by utility — check your specific provider | | Property tax exemption | Added home value from solar isn't taxed | Roughly three dozen states, in full or local-option form | | Sales tax exemption | No state sales tax charged on equipment | Roughly 20+ states, full or partial | | SREC / performance-based incentive | Ongoing payment per MWh produced | Active markets in NJ, MA, MD, IL, PA, OH, DE, and DC |
We cover property tax exemptions, sales tax exemptions, and SREC markets in their own dedicated guides linked at the end of this article, since each has enough nuance to deserve full treatment.
Which states have the strongest state tax credits right now
| State | Credit rate | Cap | Notes | |---|---|---|---| | Hawaii | 35% | $5,000 | Highest percentage of any state credit | | South Carolina | 25% | No cap | Nonrefundable, spreads over multiple years if it exceeds your liability | | New York | 25% | $5,000 | Stacks with NY-Sun rebates and property/sales tax exemptions | | Arizona | 25% | $1,000 | Modest cap, but Arizona's high solar output improves payback independently | | Iowa | 15% | $5,000 | Available through 2027 per current state law | | Massachusetts | 15% | $1,000 | Stacks with the SMART production incentive and SREC-style payments | | Oregon | Flat credit | $2,500 solar + $2,500 storage | Two separate credits if you install both |
State tax credits like these are unaffected by federal law changes — they're written into state statutes and administered by state departments of revenue, not the IRS. States with no personal income tax (Texas, Florida, Washington, and others) have no mechanism to offer this specific incentive type, which is why those states lean more heavily on property tax exemptions and net metering instead.
A worked comparison: same system, two states
Assume an $24,000, 8 kW system, financed or paid in cash, installed in 2026.
| | New York (25% credit, $5,000 cap) | A state with no income tax credit | |---|---|---| | System cost | $24,000 | $24,000 | | Federal credit | $0 (expired) | $0 (expired) | | State tax credit | $5,000 (capped) | $0 | | Net cost before other exemptions | $19,000 | $24,000 |
That $5,000 gap is before property tax exemptions, sales tax exemptions, or utility rebates are even factored in — which is why "check your state" is no longer a nice-to-have footnote. In 2026, it's the difference between a system that pays for itself in 7 years and one that takes 12.
FAQ
Is there any way for a homeowner to still get a federal solar credit in 2026? Only indirectly — by entering a solar lease or PPA, where the third-party owner (not you) claims the commercial credit and may pass some savings through in your monthly rate. If you own the system, there's no federal credit available for 2026 installations.
Did battery storage lose its federal credit too? Yes. Standalone and solar-paired battery storage fell under the same Section 25D repeal and lost its federal credit for installations completed after December 31, 2025.
If I signed a solar contract in 2025 but installation finishes in 2026, do I still qualify? Based on IRS guidance, the credit is tied to when installation is completed, not when you signed or made a deposit — so a system finished in 2026 generally doesn't qualify even if you contracted in 2025. Confirm your specific timeline with a tax professional.
Are state incentives guaranteed to stay in place? No — state programs can be modified, capped, or sunset by state legislatures at any time, the same way the federal credit was. Check your state's current program status before finalizing a purchase decision.
What's the single best resource for checking my state's current programs? The DSIRE database (linked in our sources), maintained by the N.C. Clean Energy Technology Center, is the standard reference for tracking state-by-state incentive status as programs change.
Continue reading: how state incentives differ from the old federal credit, property tax exemptions by state, sales tax exemptions by state, and SREC markets by state.
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