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The solar incentive landscape shifted dramatically in 2025. The residential federal tax credit—long the centerpiece of solar savings—has expired. But that doesn't mean government solar incentives are gone. Generous state programs, commercial tax credits, and performance-based payments remain on the table. The challenge now is knowing exactly what's still available—and acting before the remaining deadlines close.
Key takeaways
- The 30% residential federal solar tax credit has expired under current legislation and is no longer available for homeowner-owned systems
- Commercial solar buyers still have a path to the 30% federal ITC, but construction start deadlines apply — verify current IRS safe harbor provisions before committing
- State and local incentives can still reduce total system costs by 40–60% in the best locations, independent of federal credits
- Several state programs operate on limited annual budgets and fill quickly — confirming that first-mover advantage is real
- Solar power government incentives vary dramatically by location; research before you sign anything
The Federal Solar Tax Credit: What Changed and What Remains
For years, the Investment Tax Credit (ITC) was the crown jewel of government incentives for solar panels — a dollar-for-dollar 30% reduction in federal tax liability. That changed in July 2025, when the One Big Beautiful Bill Act was signed into law, terminating the residential 25D solar tax credit as of December 31, 2025, with no phase-out period.
For homeowners in 2026, the residential federal ITC is gone. If you installed solar before the end of 2025 and haven't yet filed, you can still claim the credit on your taxes. But for new residential installations, there is no federal tax credit to claim.
One pathway that remains open: third-party-owned systems. Solar leases and power purchase agreements (PPAs) still qualify under the 48E commercial ITC, with the credit going to the leasing company — which typically passes some of the savings to you through lower lease rates. It's not as clean as owning the credit yourself, but it's the only federal incentive left for homeowners in 2026.
What qualifies under the remaining residential lease/PPA pathway:
- Solar panels and mounting equipment (leased systems)
- Inverters and electrical components
- Battery storage systems paired with solar
- Installation labor and permits
Own vs. Lease vs. PPA — The 2026 Decision Framework
For most of the past decade, the answer to should I buy or lease solar? was simple: buy, because you claim the 30% federal credit and the leasing company doesn't share it. That logic no longer applies.
With the residential ITC expired, leasing has become more competitive — but ownership still wins in most states with meaningful incentives. Here's why.
The Hidden SREC Cost of Leasing
When you lease, the leasing company owns the SRECs — not you. In high-value SREC markets, this is a significant ongoing transfer of income:
SREC prices fluctuate. Use current broker rates to calculate the actual forfeiture for your situation
In Massachusetts or New Jersey, leasing costs more in forfeited SREC income alone than any savings from reduced monthly payments.
Who Should Own vs. Lease
Own if you're in a state with strong SRECs or a claimable state tax credit (MA, NJ, NY, OR), plan to stay 10+ years, and want the full home equity gain.
Lease or PPA if your state has weak incentives (TX, AL, WY), you have low tax liability, or you want $0 down and immediate savings without incentive paperwork.
Prepaid lease is worth considering if you want lower total cost than a standard lease with the option to own eventually — without committing to the full purchase price upfront.
Commercial Solar: The Last Federal Deadline
Federal government solar incentives haven't disappeared entirely for businesses. The commercial 30% ITC is still available — but construction start and completion deadlines apply under current legislation.
Under the One Big Beautiful Bill Act, commercial and business solar projects must begin construction on or before July 4, 2026, and be placed in service by December 31, 2027. Projects that meet the construction start deadline remain eligible for the full 30% credit even if completion extends beyond 2027, provided continuity requirements are satisfied.
For commercial property owners, developers, and businesses considering solar, this is not a theoretical future deadline — it requires action now.
Accelerated Depreciation: Still Available, but Reduced
The Modified Accelerated Cost Recovery System (MACRS) continues to allow businesses to depreciate solar investments over five years. Bonus depreciation is also available, though the applicable rate changes annually under current tax law — consult a tax professional for the rate that applies to your filing year.
Сommercial solar tax benefits example:
The full stack of government incentives for commercial solar — ITC plus MACRS depreciation — still creates a compelling financial case for business investment. The exact first-year benefit depends on the bonus depreciation rate in effect when your system is placed in service.
Commercial projects that use USA-made solar panels may also qualify for a domestic content bonus credit on top of the base 30% ITC — verify current eligibility requirements with a tax professional.
State and Local Incentives: The New Frontline
With the residential federal credit gone, state government solar incentives have moved from "bonus" to "primary." These programs vary dramatically by location, and in 2026, some of the most generous are either waitlisted or have closed their standard-income blocks.
California
California's Self-Generation Incentive Program (SGIP) provides rebates for battery storage at tiered rates based on income. Standard residential applicants typically receive lower per-kWh rates, while income-qualified households under the Equity and Equity Resilience tiers can receive substantially higher rebates — in some funding cycles enough to cover the majority of battery cost.
SGIP budgets are frequently exhausted and program rates change as funding steps open and close. Contact your utility or an approved SGIP contractor to check current rates, funding availability, and waitlist status before including SGIP in your budget calculations.
Top 10 states with strong solar programs & incentivesCalifornia also offers a property tax exemption on the added home value from solar — since solar typically adds $15,000–$25,000 to home values, this saves homeowners $150–$500 annually in perpetuity. Sales tax exemptions apply as well.
New York
New York's 25% state income tax credit (capped at $5,000) remains intact and is one of the most valuable state-level solar panel government incentives in the country. Unlike the expired federal credit, this one still applies to new installations in 2026 and can be carried forward if you don't have enough tax liability in a single year.
The NY-Sun rebate program, however, has changed. Standard-income MW Block incentives are currently closed in most utility territories. Low-income households (≤80% AMI) continue to qualify for enhanced per-watt rebates that vary by utility region and current block availability.
Check NYSERDA's NY-Sun dashboard for the current status of blocks in your utility territory — funding opens periodically and low-income blocks remain the primary active pathway for most applicants.
Oregon
Oregon continues to lead on direct cash rebates rather than tax credits, which matters for households with limited tax liability. The state offers stacking rebates through two main channels:
- Oregon Solar + Storage Rebate Program (ODOE): Provides cash rebates for solar installations, with enhanced amounts for income-qualified households that can cover up to 60% of system cost
- Solar Within Reach (Energy Trust of Oregon): An income-qualified program offering per-kilowatt rebates that vary by utility provider
Combined, qualifying Oregon homeowners can access several thousand to over ten thousand dollars in stacked state rebates for a solar and battery system. Oregon does not have a state sales tax, but the property tax exemption remains in effect.
Rebate amounts and program availability change annually — verify current figures before budgeting.
Property and Sales Tax Exemptions
These often-overlooked government incentives solar energy programs deliver long-term, compounding value. Property tax exemptions prevent the added home value from solar from increasing your annual tax bill. With rooftop solar panels typically adding $15,000–$25,000 to home values, the exemption is worth $150–$500 per year depending on local rates.
Approximately 36 states offer property tax exemptions for solar. Sales tax exemptions, available in roughly 25 states, trim upfront costs by 4–10%.
Performance-Based Incentives: Getting Paid to Generate
Beyond upfront rebates, several solar government incentives pay you for the clean energy your system produces. These programs can generate hundreds or thousands in additional annual income.
Solar Renewable Energy Certificates (SRECs)
For every 1,000 kWh your system generates, you earn one SREC that can be sold to utilities required to meet state renewable energy standards. SREC prices have shifted significantly since 2024:
Always verify current rates through an SREC broker or aggregator before making purchasing decisions
Massachusetts remains the strongest SREC market overall. A typical 6 kW residential system generates 6–8 SRECs annually. Since SREC income scales directly with how much your system generates, choosing the best solar panels for your roof's orientation and local climate can meaningfully increase your annual certificate count — and your long-term returns.
Net Metering and Buyback Programs
Net metering allows solar owners to sell excess electricity back to the grid, significantly improving solar economics. Policy has continued to evolve in 2026.
States with some form of net metering or net billing now number approximately 38 states plus D.C.. However, the landscape is more complex than it was even two years ago:
- Full retail rate 1:1 credit: New Jersey, Massachusetts, New York, Maine, Maryland, Connecticut, Vermont, Florida, Oregon, and Minnesota, among others
- Reduced-rate export (net billing): California (NEM 3.0), Nevada, Arkansas, and others — these states have moved away from full retail compensation for exported power
- No statewide program: A handful of states
California's NEM 3.0 policy, which took effect for new applicants in 2023, significantly reduced export compensation compared to the prior full-retail structure. New California solar buyers should factor this into their payback calculations
In deregulated markets like Texas, competitive buyback programs from providers such as Direct Energy Solar Buyback, Green Mountain Energy Buyback, and Chariot Energy Solar Buyback continue to offer alternatives to traditional utility net metering.
What's Actually Worth Your Time in 2026
10 programs & incentives to ease your switch to solarWith the residential federal ITC gone, incentive stacking looks different — but still powerful in the right states. Here's an example from a California homeowner using 2026 programs:
The key variable is SGIP waitlist status. Standard-income California homeowners who can't access SGIP may see a total discount closer to 10–15% without the federal credit. This underscores why geographic location and income qualification have become decisive factors in solar economics in 2026.
Geographic Sweet Spots in 2026
Locations Where Solar Economics Are Challenging
- Alabama — minimal state support, no major incentive programs
- South Dakota — no major state programs
In states where the incentive stack is thin, reducing upfront equipment cost becomes the primary lever for a viable payback period — making affordable solar panels worth researching before committing to a full system quote.
Acting Before Deadlines Close
For residential buyers, the most time-sensitive decisions are about locking in state programs before their funding runs out — many operate on annual budgets that exhaust early in the year.
For commercial buyers and businesses, construction start deadlines govern ITC eligibility. Verify current IRS safe harbor deadlines immediately — missing the applicable construction start date means losing the 30% federal credit entirely.
Action Steps by Buyer Type
Homeowners:
- Research local programsResearch state and utility programs in your area — many operate on first-come, first-served fundin
- Get quotes earlyGet quotes now — solar installation typically takes 2–6 months from contract to completion
- Join the SGIP waitlistIf in California, join the SGIP waitlist immediately — the waitlist itself is first-come, first-served
- Check NY-Sun eligibilityIn New York, verify whether low-income NY-Sun blocks apply to your household before assuming the rebate is unavailable
- Verify via DSIREUse DSIRE (Database of State Incentives for Renewables & Efficiency) to verify current federal government incentives for solar energy and state programs in your zip code
Commercial buyers:
- Confirm the construction deadlineJuly 4 construction deadline is not a soft target
- Engage a tax professionalEngage a tax professional familiar with ITC safe harbor rules
- Know the Physical Work Test Understand the Physical Work Test requirements for projects over 1.5 MW
- Check interconnection timelines Verify interconnection timelines — some utilities have months-long backlogs
Many solar installers aren't experts on local incentive programs. Don't rely solely on their guidance to maximize savings — do your own verification through DSIRE and your state energy office.
The solar incentive landscape in 2026 requires a fundamentally different approach than in prior years. The federal residential credit is gone, but meaningful solar panel government incentives remain — particularly in states with strong SREC markets, direct rebate programs, and stacked tax exemptions. The homeowners and businesses who navigate this landscape successfully will be the ones who understand exactly which programs are still open, which are waitlisted, and which deadlines are genuinely urgent.
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Alina has always been drawn to the intersection of technology and everyday life. Joining A1 SolarStore as a contributing writer, she brings fresh curiosity and a researcher's eye to the topics of clean energy and sustainability.
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