No, the federal government does not pay for solar panels outright, but it will cover a meaningful share of what you spend. The main answer to whether the government pays for solar panels is a 30% federal tax credit on the full installed cost, which for a typical home system returns $7,000 to $12,000 through your tax return.1Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit USDA grants, state tax exemptions, and net metering credits can shrink the remaining balance further, and stacked together these programs often cut the real price of going solar by 40% or more. Nothing on offer eliminates the upfront bill.
The 30% Federal Tax Credit
The Residential Clean Energy Credit under 26 U.S.C. ยง 25D lets you subtract 30% of your total solar project cost directly from the federal income taxes you owe. A 2025 amendment removed the phase-down that would have dropped the rate to 26% in 2033 and 22% in 2034, so the 30% rate now applies indefinitely to systems placed in service after December 31, 2021.1Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit Congress can change this in future legislation, but current law contains no expiration date.
The 30% applies to everything reasonably needed to get the system running: panels, wiring, inverters, mounting hardware, and labor for onsite preparation, assembly, and installation.2Internal Revenue Service. Residential Clean Energy Credit Battery storage also qualifies as long as the unit has a capacity of at least 3 kilowatt-hours, and the battery does not need to be connected to solar panels to be eligible.1Office of the Law Revision Counsel. 26 USC 25D – Residential Clean Energy Credit
Who Qualifies
You must own the equipment, whether you paid cash or financed with a loan. If you lease panels or sign a power purchase agreement where a company owns the hardware on your roof, that company claims the credit instead of you. The system must be installed at a home you actually live in, located in the United States.2Internal Revenue Service. Residential Clean Energy Credit
Second homes qualify if you live there at least part-time and don’t rent it out. Landlords and investment property owners are excluded. If you use part of your home for business, the credit still applies in full when business use is 20% or less. Above that, the credit shrinks to reflect only the personal-use share of the expense.2Internal Revenue Service. Residential Clean Energy Credit
What the Numbers Look Like
Residential solar systems in 2026 typically cost between $2.40 and $3.35 per watt before incentives. For a common 10-kilowatt system, that works out to roughly $24,000 to $33,500. A 30% credit on a $28,000 system saves $8,400 in federal taxes. That money does not arrive as a check. It reduces your tax bill, which matters more than it sounds.
How the Credit Actually Reduces What You Owe
The solar credit is nonrefundable. It can zero out your federal income tax for the year but will not generate a refund beyond what you already paid in.2Internal Revenue Service. Residential Clean Energy Credit If your total tax liability for the year is $5,000 and your credit is $8,400, the credit wipes out the $5,000 you owe and the remaining $3,400 carries forward.
That carryforward has no expiration date. You can keep rolling the unused balance into future tax years until you have claimed every dollar.3Congressional Research Service. Expiration and Carryforward Rules for the Residential Clean Energy Credit This matters most for retirees and others with modest tax bills. A $9,000 credit might take two or three years to fully absorb, but nothing is lost.
A common mistake is confusing tax liability with what your employer withheld. If $7,000 came out of your paychecks but your actual liability was only $5,000, you would normally get a $2,000 refund. The solar credit reduces the $5,000 liability, not the $7,000 withheld. Your refund jumps to $7,000 and the leftover $3,400 credit carries into the next year.
USDA Grants for Farms and Rural Small Businesses
The Rural Energy for America Program, run by the USDA, offers something closer to what people picture when they ask whether the government pays for solar. REAP provides actual grant money to cover a share of the project cost for qualifying applicants.4United States Department of Agriculture Rural Development. Rural Energy for America Program Renewable Energy Systems and Energy Efficiency Improvement Guaranteed Loans
Solar systems that produce zero greenhouse gas emissions at the project level, projects in designated energy communities, and tribal business projects can receive grants covering up to 50% of eligible costs. Other qualifying projects are capped at 25%. Combined with a REAP loan guarantee, total federal support can reach 75% of eligible project costs.5United States Department of Agriculture Rural Development. Rural Energy for America Program Renewable Energy Systems and Energy Efficiency Improvement Grants
Eligibility is narrow. You must be either an agricultural producer earning at least 50% of gross income from farming, or a small business located in an eligible rural area.4United States Department of Agriculture Rural Development. Rural Energy for America Program Renewable Energy Systems and Energy Efficiency Improvement Guaranteed Loans The typical suburban homeowner will not qualify. For those who do, REAP grants can stack on top of the 30% federal tax credit.
State and Local Programs That Stack on Top
State and local programs add a second layer of savings that varies with where you live, funded through state budgets and utility ratepayer fees rather than the federal treasury.
Property and Sales Tax Exemptions
Adding solar panels increases a home’s market value, which would normally raise property taxes. Roughly 36 states prevent that by exempting the added value of a solar installation from property tax assessments. Around 25 states also waive sales tax on solar equipment purchases. On a $28,000 system in a state with a 6% sales tax, that exemption alone saves roughly $1,700.
Net Metering
When your panels produce more electricity than you use, net metering lets you send the surplus to the grid in exchange for a credit on your utility bill. About 34 states plus Washington, D.C. and Puerto Rico have mandatory net metering rules. Several states have moved away from crediting exports at the full retail electricity rate, paying a lower “net billing” rate tied to wholesale prices instead. Most agreements grandfather existing customers for 15 to 20 years, so installing sooner generally locks in better terms.
Solar Renewable Energy Certificates
In states with renewable energy mandates, your panels generate tradeable certificates for each megawatt-hour of electricity they produce. Utilities that need to meet renewable targets buy the certificates, and the income flows to you as the system owner. Certificate values vary widely by state market.
What the Government Won’t Cover
Even with every incentive, you will pay for a significant portion of the installation yourself.
Local building permits and electrical inspections typically run $150 to $400 for residential systems. These fees are not covered by the federal tax credit.
Maintenance is your responsibility. Panels themselves need little upkeep, but inverters typically need replacement once during the system’s 25-year lifespan at a cost of $1,000 to $2,500. Batteries generally need replacement after 10 to 15 years.
Roof repairs or structural reinforcement needed before panels can be installed sit outside the credit calculation. One exception: if you install solar shingles that serve as both roofing and energy generation, the IRS allows the full cost to qualify, because the shingles are themselves the solar equipment.
One program some homeowners may have been counting on is no longer reliable. The EPA rescinded the $7 billion Solar for All program in August 2025 and announced its intent to cancel all 60 grants awarded under it. The decision is in federal litigation, and the program’s future is uncertain, so it should not factor into your plans.
How to Claim the Federal Credit
Claiming happens during your normal tax filing. You will need IRS Form 5695, Residential Energy Credits, attached to your Form 1040.6Internal Revenue Service. IRS Form 5695 – Residential Energy Credits The form walks you through entering the total cost of your solar property, calculating 30% of that amount, and comparing the result against your tax liability for the year. If the credit exceeds what you owe, line 16 calculates the carryforward amount you will apply in future years.7Internal Revenue Service. Instructions for Form 5695 – Residential Energy Credits
Before filing, gather your final installation invoice with an itemized breakdown of equipment, labor, and any battery storage. Keep documentation of the system’s capacity ratings and confirmation that the installation address matches your residence. If you financed the system with a loan, the full project cost counts for the credit, not just the portion you have paid off by tax day.
Tax software handles Form 5695 automatically when you answer prompts about home energy improvements. If you file with a preparer, tell them about the installation before they finalize your return. The most common way people leave money on the table is forgetting to file the form in the year the system was placed in service. If that happens, you can amend your return for up to three years to claim the credit retroactively.