State incentives
The federal residential solar credit ended after 2025, so a handful of state income-tax credits are the only incentive layer left for homeowner buyers in 2026 — here is the primary-sourced list, plus the "credits" that are really deductions, rebates, or net metering.
Updated June 30, 2026 · 10 min read
Short answer: As of 2026, only a handful of states still offer a true residential solar income-tax credit — New York, Hawaii, Arizona, Massachusetts, New Mexico, and South Carolina. Several states people assume have one (Oregon, Montana) have expired or repealed theirs, and many "incentives" you'll read about are actually rebates, deductions, net metering, or tax exemptions — not credits.
That list matters this year more than it ever has, because the federal backstop is gone. The federal Residential Clean Energy Credit (Section 25D) — the 30% credit that defined home-solar economics for years — is not available for any property placed in service after December 31, 2025, per the IRS. A homeowner who buys a system with cash or a loan in 2026 gets $0 federal residential credit.
A note if you read that IRS page yourself: it still carries stale boilerplate that you can "claim the annual credit every year that you install eligible property until the credit begins to phase out in 2033." That language is outdated; the operative rule on the same page is the December 31, 2025 cutoff. (More on that contradiction in Is there a solar tax credit in 2026?.)
With the federal layer removed, state programs are the only incentive layer left for homeowner buyers — and they are scattered, capped, and easy to overstate. Here is what each one actually is.
These are the states where you can point to a statute and a state revenue or energy office and find an actual credit against income tax owed. All but one are non-refundable — meaning they only help if you owe enough state income tax to absorb them — though most carry unused amounts forward. New Mexico is the exception, and it's worth knowing why.
| State | % of cost | Dollar cap | Carryforward | Refundable? | Notes | Source |
|---|---|---|---|---|---|---|
| New York | 25% | $5,000 | 5 years | No | Also applies to written leases and PPAs of 10+ years | NY Dept. of Taxation & Finance |
| Hawaii | Up to 35% | $5,000 per system | Yes | No* | RETITC (HRS §235-12.5); no repeal date under current law | Hawaii Dept. of Taxation |
| Arizona | 25% | $1,000 | 5 years | No | A.R.S. §43-1083; $1,000 is a lifetime cap per residence | AZ Governor's Office of Resiliency |
| Massachusetts | 15% | $1,000 | 3 years | No | Owner-occupied principal residence; claimed on Schedule EC | Mass.gov 830 CMR 62.6.1 |
| New Mexico | 10% | $6,000/yr | n/a | Yes | Excess is refunded; certify with EMNRD within 1 year; available for tax years before Jan 1, 2032 | NM EMNRD |
| South Carolina | 25% | Lesser of $3,500/yr or 50% of tax | 10 years | No | S.C. Code §12-6-3587; ownership only (no leases) | SC Revenue Ruling RR24-2 |
* Hawaii's RETITC can be refundable in narrow circumstances (for example, certain low-income taxpayers or specific elections), but most homeowners take it as a non-refundable credit with carryforward. Confirm your situation with the Hawaii Department of Taxation.
A percentage with a cap is not the same as a percentage. Here is the plain-English version:
Notice what is not on this list. With the lone exception of New Mexico, none of these credits is refundable, and none comes close to replacing the lost federal 25D credit in size. They are smaller, capped, and — for most of them — contingent on your having state tax liability.
This is where most of the confusion — and most of the inflated savings estimates — comes from. The following are real benefits in some states, but none of them is an income-tax credit, and treating them like one will overstate your savings.
Two commonly cited programs no longer exist:
Oregon's Residential Energy Tax Credit (RETC) sunset on December 31, 2017 and was not replaced by an equivalent statewide residential solar credit. — Oregon Department of Energy
Montana's residential Alternative Energy Systems income-tax credit was repealed (S.B. 399, 2021) and could last be claimed on a 2021 return — it is not available for tax year 2022 or later. (Montana still has a renewable-energy property-tax exemption.) — Montana Dept. of Revenue
If a calculator or salesperson quotes you an Oregon or Montana income-tax credit in 2026, it no longer applies — neither state offers one.
A separate group of states pays homeowners for the electricity their system generates, through Solar Renewable Energy Certificate (SREC) markets or successor programs. Active programs include New Jersey (now the SuSI / SREC-II successor program), Massachusetts (SMART, a per-kWh incentive that replaced the closed SREC program), Maryland, Pennsylvania, Ohio, Delaware, Illinois, and Washington, D.C.
Two things to understand before you bank on these. First, they are income that arrives over time, not an upfront discount on your install. Second, the prices are set by supply, demand, and policy, and they swing widely — they are not guaranteed. EnergySage's SREC overview is a reasonable primer, but always confirm the current market or program rate with your state program before assuming a value. Last year's SREC price is not a promise about next year's, so a specific dollar figure would be misleading — check the live rate.
Separate again from credits and SRECs is a quieter set of exemptions. According to SEIA, roughly three dozen states offer a property-tax exemption — so adding solar doesn't raise your assessed property value (and your property-tax bill) — and about two dozen offer a sales-tax exemption on solar equipment.
These are approximate aggregate counts, not a per-state guarantee, and they stack with any income-tax credit rather than replacing it. Confirm whether your specific state qualifies, and whether there's a cap or sunset, on DSIRE.
Programs change mid-year, so treat any summary — including the table above — as a starting point rather than the last word. Here's a three-step check:
If you're in a state with no residential credit, no SREC market, and no rebate — which now describes most of the country — the math doesn't disappear, it just changes shape. Your return comes from net metering or net billing value and from the avoided cost of utility electricity, which is rising in many markets. In other words, the case for home solar in 2026 increasingly rests on your power bill, not on incentives.
That's not automatically a bad deal — but it is a different deal than the 30%-federal-credit era, and it deserves a careful look. We walk through it in Is home solar worth it in 2026? and How to pay for home solar in 2026.
Run your numbers on our residential estimate tool — it uses the sourced state figures above and flags anything that's an estimate. You can also browse the state-by-state pages or read the broader 2026 solar incentives overview for how the federal, state, and utility layers fit together.
Figures verified against primary sources as of June 2026; state programs change frequently, so re-verify before you rely on a number.
Educational content, not tax, financial, or legal advice. Figures are current as of the update date above; verify with a qualified professional before acting.
A handful of states still offer a true residential solar income-tax credit in 2026: New York (25%, up to $5,000), Hawaii (up to 35%, capped at $5,000 per system), Arizona (25%, up to a $1,000 lifetime cap per residence), Massachusetts (15%, up to $1,000), New Mexico (10%, up to $6,000 per year), and South Carolina (25%, limited each year to the lesser of $3,500 or 50% of your tax liability). Most are non-refundable; New Mexico is the exception (excess is refunded). Rules change often, so verify your state on DSIRE and its revenue or energy office before relying on a number.
No. The federal Residential Clean Energy Credit (Section 25D) is not available for systems placed in service after December 31, 2025. A homeowner who buys solar with cash or a loan in 2026 gets $0 federal residential credit, which is why state programs are now the only incentive layer left for buyers. (The IRS page still carries stale 'phase-out beginning in 2033' language — that boilerplate is outdated; the operative rule on the same page is the December 31, 2025 cutoff.)
Mostly no — and that distinction matters. A non-refundable credit only helps if you owe enough state income tax to absorb it; if your tax bill is small (common for retirees on Social Security, for example), you may not be able to use the full amount, though most states let you carry the unused portion forward. New Mexico's New Solar Market Development Tax Credit is the standout exception: under a 2022 amendment, any amount that exceeds your tax liability is refunded to you, so you don't need a large state tax bill to capture it.
No. California has no state income-tax credit for residential solar. Instead, homeowners get a property-tax exclusion (adding an active solar energy system doesn't raise your assessed property value, under Revenue & Taxation Code section 73) and net billing under NEM 3.0, which credits exported power at avoided-cost rates well below the retail rate. Both are real benefits, but neither is a credit against your income tax. Note the section 73 exclusion applies to systems completed before January 1, 2027 under current law.
No — it's a tax deduction, not a credit. Under Idaho Code 63-3022C you can deduct 40% of the system cost the year you install it, then 20% per year for three more years, capped at $5,000 in any one year. A deduction only lowers your taxable income, so it is worth substantially less than a dollar-for-dollar credit of the same size.
Free, no obligation, and sourced from the IRS, USDA, and EIA.