Are There Rebates for Solar Panels? State Rebates and Tax Breaks

Rebates for solar panels are still available in 2026 through state agencies, local utilities, and state tax codes, but the federal Residential Clean Energy Credit that covered 30% of installation costs no longer applies to systems installed after December 31, 2025.¹ What remains for new installations is a mix of direct cash rebates, net metering credits, Solar Renewable Energy Certificates, and state sales and property tax exemptions. The size of your savings now depends heavily on where you live.

The Federal 30% Credit Is Gone for New Installations

The One Big Beautiful Bill Act, signed into law on July 4, 2025, terminated the Residential Clean Energy Credit under 26 U.S.C. § 25D for any expenditures made after December 31, 2025.¹ There is no grandfathering for contracts signed or deposits paid before the deadline. What matters is when installation was completed. If your system was fully installed and operational on or before December 31, 2025, you can still claim 30% of qualifying costs as a dollar-for-dollar credit on your 2025 federal return.² On a $25,000 install, that is $7,500 off your tax bill.

The credit is non-refundable, so it can bring your tax to zero but does not generate a refund by itself. Anything left over carries forward to future years until it is used up.³ You claim it on IRS Form 5695 attached to your Form 1040.⁴ Keep the installer invoice, permit, final inspection, and manufacturer certification with your records; you don’t submit them, but you’ll want them if the IRS asks.⁵

Homeowners who lease panels or use a power purchase agreement never qualified for this credit personally. The equipment owner claims it, and in a lease or PPA that is the solar company. Leasing companies typically fold their own tax savings into the monthly rate they offer you.

State and Utility Cash Rebates

Direct rebates from state energy offices and local utilities are the closest thing to what most people mean when they ask about solar panel rebates. They usually work one of two ways: the rebate is subtracted from your installation price before you pay the installer, or a check is mailed to you after your system passes inspection. Amounts range from a few hundred dollars to several thousand, depending on the program and your system size.

These programs run on fixed annual budgets, and they can close without warning once the money is gone or a target number of installations is reached. Confirm with your local utility and state energy office that funding is still open before you sign a contract, and ask what documentation the program requires. Some utilities pay the installer directly, which reduces the amount you finance. Others mail the check to you within 30 to 90 days after inspection.

Enhanced rebates for income-qualified households exist in several states and utility territories, with higher dollar amounts or priority enrollment for applicants below a set percentage of the area median income. Eligibility rules vary by program.

Net Metering Credits on Your Electric Bill

Net metering is not a rebate in the strict sense, but it delivers ongoing savings that often exceed the value of an upfront check. When your panels produce more electricity than your home is using, the surplus flows back to the grid and your meter runs in reverse. You draw on that banked credit at night or on cloudy days.

Compensation rates differ by utility. Some pay the full retail rate for every kilowatt-hour you export. Others pay a lower wholesale or “avoided cost” rate. Even at reduced rates, net metering meaningfully shortens the payback period on a solar system. Most utilities still charge a minimum delivery or connection fee, so your bill won’t drop to zero even if your panels cover all your usage. Check with your provider for your local compensation rate and any cap on system size.

Solar Renewable Energy Certificates

In states that require utilities to source a certain percentage of their power from solar, homeowners can earn Solar Renewable Energy Certificates based on how much electricity their system actually produces. You earn one SREC for every megawatt-hour (1,000 kilowatt-hours) your panels generate, and utilities buy those certificates to meet their compliance obligations.⁶

Prices swing widely by state. Where solar targets are aggressive and supply is tight, a single SREC can be worth several hundred dollars. Where solar capacity is abundant, prices can fall below $20.⁶ Most homeowners sell through an aggregator or broker who lists the certificates on a trading platform. Contracts typically run three, five, or ten years. Some aggregators will buy all the future SRECs from your system in one upfront lump sum, which gives you immediate cash but ends the income stream. SREC markets exist only in states with solar-specific renewable portfolio standards, so check whether your state participates before counting on this income.

State Sales and Property Tax Exemptions

Two state-level tax breaks reduce solar costs without requiring an application.

Sales Tax Exemptions

More than 30 states exempt solar equipment from state sales tax. With rates that generally run between 4% and 9%, the exemption can shave hundreds or thousands of dollars off panels, inverters, and mounting hardware. It’s applied at the point of sale, so you pay the lower price directly with no separate filing. Local or district-level sales taxes may still apply even when the state portion is exempt.

Property Tax Exemptions

A solar system generally raises a home’s market value, and roughly half the states block local assessors from adding that value to your property tax assessment. You get the resale benefit without a higher annual tax bill. Some states exempt 100% of the added value, others a large portion. Many exemptions apply automatically, though some jurisdictions want a one-time filing with the local assessor.

Battery Storage Rebates

Home batteries with at least 3 kilowatt-hours of capacity qualified for the same 30% federal credit as solar panels if installed by December 31, 2025.² That federal piece is gone for new installations. State and utility battery incentives still operate in some areas, funded through utility budgets or state energy offices. Some are open to all residential customers; others are limited to income-qualified households or homes in areas with grid reliability concerns. Your state energy office or utility can tell you what’s currently funded.

Costs No Rebate Program Covers

A few costs sit outside the incentive system. Utility interconnection fees, which your utility charges once to tie your system to the grid, and local building permit fees are your responsibility, and they vary widely by location. If your roof needs structural repairs before it can carry panels, those repairs generally don’t qualify for solar incentives. The IRS specifically excludes traditional building components like roof trusses and standard shingles that merely support panels, even when replaced during a solar project.² Solar roofing tiles and shingles that actually generate electricity do qualify, because they serve a dual function.

The financial case for solar in 2026 depends on stacking what’s left: a state or utility rebate at purchase, sales and property tax exemptions on the equipment, net metering credits on the monthly bill, and SREC income if your state has a market. Call your utility and state energy office before you sign anything, because rebate budgets close mid-year and program terms change.

1
Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under the One Big Beautiful Bill
2
Internal Revenue Service. Residential Clean Energy Credit
3
Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit
4
Internal Revenue Service. Instructions for Form 5695 (2025)
5
Internal Revenue Service. How to Claim a Residential Clean Energy Tax Credit
6
US EPA. State Solar Renewable Energy Certificate Markets