Going solar is one of the best investments a homeowner can make — and state and utility incentives can meaningfully shorten your payback period, especially now that the federal tax credit is gone. Here's what's available in 2026.
What Happened to the Federal Solar Tax Credit
The federal Investment Tax Credit (ITC / Residential Clean Energy Credit) used to give homeowners a 30% tax credit on the full cost of solar installation — panels, inverter, mounting hardware, and labor, with no dollar cap. The One Big Beautiful Bill Act, signed July 4, 2025, terminated it for any system placed in service after December 31, 2025. If your installation wasn't complete and operational by then, you cannot claim it in 2026 or later.
This means the roughly $6,000 credit that used to apply to a $20,000 system is no longer available. State and local incentives, covered below, are separate programs and are not affected by this federal change.
Top States for Solar Incentives
California
California has the largest solar market in the US. Net Energy Metering (NEM 3.0) has changed the economics somewhat — export rates are lower than under previous versions — but property tax exemptions for solar installations and the Self-Generation Incentive Program (SGIP) for battery storage still make California attractive. The average payback period is 6–9 years.
Texas
Texas offers a property tax exemption on the added home value from solar installations, which is significant given Texas property taxes. Many utilities offer net metering or bill credit programs. With no state income tax and the federal credit now expired, these local incentives plus strong solar irradiance are what make Texas solar economics work.
New York
New York offers one of the most generous state packages: a 25% state tax credit (up to $5,000), a sales tax exemption on solar equipment, and a property tax exemption for 15 years. With the federal credit expired, the state credit alone can still offset a meaningful share of system cost for New York homeowners.
Florida
Florida offers a full sales tax exemption on solar equipment and a property tax exemption for the added value of solar systems. Net metering is available through most utilities. Florida's high solar irradiance means systems produce more electricity, improving the economics further.
Massachusetts
Massachusetts has a strong solar incentive package including a 15% state tax credit (up to $1,000), a sales tax exemption, a property tax exemption, and the SMART Program — a feed-in tariff that pays you for every kWh your system produces for 10 years, regardless of whether you use it.
Arizona
Arizona offers a 25% state tax credit (up to $1,000) and a sales tax exemption. High solar irradiance and a reasonable net metering policy make Arizona one of the better solar states despite the modest state credit cap.
Net Metering: What to Know
Net metering allows you to sell excess solar electricity back to the grid, offsetting future bills. The rates and policies vary significantly by state and utility. Some states credit you at the full retail rate; others credit at a lower wholesale rate. Net metering policy is one of the most important factors in solar economics — check your specific utility's policy before buying.
Battery Storage Incentives
The federal 30% credit for battery storage expired along with the solar credit, for the same December 31, 2025 deadline. Several states still offer their own battery incentives, including California's SGIP and Massachusetts's ConnectedSolutions program — check whether your state has a standalone battery program even though the federal credit is gone.
How to Find Your Local Incentives
The Database of State Incentives for Renewables & Efficiency (DSIRE) at dsireusa.org is the most comprehensive resource for state and local incentives. Enter your zip code to see every program available in your area — many local utilities offer additional rebates not widely advertised.
Could You Still Qualify for the Federal Tax Credit?
Only if your solar system was placed in service (installed and operational) on or before December 31, 2025 — in that case, you can still claim the 30% Residential Clean Energy Credit on your 2025 tax return using IRS Form 5695. If your system will be installed in 2026 or later, the federal credit does not apply, regardless of when you signed the contract or made a deposit. Always consult a tax advisor to confirm your specific situation.
Net Metering Policy Map
Net metering policy is one of the most important variables in solar economics — it determines how much you're credited for excess electricity your panels send to the grid. As of 2026: full retail net metering is available in most states including New York, New Jersey, Massachusetts, Texas, and Florida. California moved to reduced-rate export (NEM 3.0) in 2023, which lowered the economics for systems exporting significant excess. Some states have eliminated net metering entirely for new customers, replacing it with avoided-cost credits (typically 3–8¢/kWh vs. 13–30¢/kWh retail). Always verify your utility's current net metering policy before sizing your system — this single factor can change payback period by 3–5 years.
Calculate Your Solar Savings
Use our Solar Panel Savings Calculator and Solar Panel ROI Calculator to estimate how much you'd save and when your system would pay for itself based on your location and energy use.