Your Complete Guide to Solar Tax Credits in 2026
Everything you need to know about the federal ITC, state rebates, and local incentives that make solar more affordable.
Solar energy has never been more affordable, thanks to a combination of federal, state, and local incentives. Understanding these programs can save you thousands of dollars on your solar installation. Here is everything you need to know for 2026.
The Federal Investment Tax Credit (ITC)
The cornerstone of solar incentives is the federal Investment Tax Credit. Under the Inflation Reduction Act, the ITC provides a 30 percent tax credit on the total cost of your solar energy system, including equipment, labor, permitting, and interconnection fees.
This 30 percent rate is locked in through 2032, after which it steps down to 26 percent in 2033 and 22 percent in 2034. For a system costing $25,000, the ITC reduces your federal tax liability by $7,500.
Key points about the ITC include that it applies to both residential and commercial systems, there is no cap on the credit amount, unused credits can be carried forward to future tax years, and battery storage systems qualify even when installed separately from solar panels.
State-Level Incentives
Beyond the federal credit, many states offer their own incentive programs. These vary significantly by location and can stack with the federal ITC for even greater savings.
California offers the Self-Generation Incentive Program (SGIP), which provides rebates for battery storage systems. The state also has NEM 3.0, which provides bill credits for excess solar energy exported to the grid.
New York provides one of the most generous state programs, with the NY-Sun incentive offering cash incentives of $0.20 to $0.40 per watt installed, plus a state tax credit of up to $5,000.
Texas offers a property tax exemption for the full value added by solar installations, meaning your home value increases without higher property taxes. Austin Energy customers can also receive up to $2,500 in local rebates.
Local Utility Rebates
Many utility companies offer additional rebates for solar installations. These programs change frequently, so it is important to check with your local utility before finalizing your system design. Some notable programs include performance-based incentives that pay you per kilowatt-hour generated, upfront capacity-based rebates, and time-of-use rate plans that maximize solar savings.
Solar Renewable Energy Credits (SRECs)
In states with Renewable Portfolio Standards, your solar system generates tradeable SRECs for every megawatt-hour of electricity produced. These credits can be sold on the open market, providing an additional revenue stream. SREC values vary by state, with some markets paying over $200 per credit.
How to Claim Your Credits
To claim the federal ITC, you will need IRS Form 5695, which is filed with your annual tax return. You should keep detailed records of all system costs, including equipment, installation labor, permitting fees, and any structural upgrades required for the installation.
We recommend working with a tax professional who is familiar with renewable energy credits to ensure you maximize your benefits and properly document all qualifying expenses.
Maximizing Your Incentive Stack
The key to maximizing your savings is to layer all available incentives. Start with the 30 percent federal ITC, add your state tax credit or rebate, include any local utility programs, and factor in net metering savings and SREC revenue. In many cases, this incentive stack can reduce the effective cost of a solar system by 40 to 60 percent.