Key takeaways

  • The federal solar tax credit gives you 30 percent of the cost of your solar system in credit when you file your taxes.
  • Many states offer local solar rebates and incentives you can combine with the federal tax credit.
  • You must own your solar system to qualify for most solar incentives. Consumers who lease solar panels will not qualify.

Solar panel rebates and incentives in 2024

Solar panels are expensive, despite solar prices falling 40 percent in the last decade. Federal, state and local governments created lucrative incentives to help offset the high upfront costs.

The federal government offers a solar tax credit available in every state. Additionally, residents can apply for state solar rebates and incentives. State solar tax credits will vary based on where you live and can make solar panels more affordable when combined with the federal solar credit. This page covers what you should know about solar panel incentives by state, the federal tax credit and how to apply for solar energy incentives.

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Federal solar investment tax credit (solar ITC)

The federal solar investment tax credit, known as the Residential Clean Energy Credit, runs through 2034 and offers a tax credit valued at 30 percent of the total cost of a solar system.

The federal solar tax credit was created in 2005 to make it easier for property owners to invest in solar panels. It was originally set to expire in 2006, but Congress extended it several times. In 2020, the tax credit amount lowered from 30 percent to 26 percent and remained there through 2021. In 2022, the Inflation Reduction Act extended the tax credit through 2034 and increased the amount back to 30 percent for 10 years, with  slight decreases planned in the final two years.

Once your solar installation is complete, you can apply for the federal solar tax credit through the IRS. You’ll receive 30 percent of the cost of your solar system as a credit when you file your annual tax return.

How much can I save with the federal solar tax credit?

The amount you receive through the federal solar tax credit depends on the total cost of your solar system. In 2022, the total installed cost of an 8.6 kilowatt (kW) home solar system in the US was $31,558, according to data from the Lawrence Berkeley National Laboratory, a Department of Energy Office of Science laboratory.

30 percent of the average system cost equals approximately $9,467. There is no ceiling on the amount you can receive through the federal tax credit, so you can claim the full 30 percent no matter the size or total cost of your system.

What does the federal solar tax credit cover?

According to the Office of Energy Efficiency and Renewable Energy, the federal solar tax credit covers:

  • Solar panel modules or photovoltaic cells
  • Labor costs, including onsite preparation, installation, permitting fees, inspection costs and developer fees
  • Wiring, inverters and mounting equipment
  • Energy storage devices, like solar batteries, with a capacity rating of 3 kilowatt-hours (kWh) or greater (applies only to systems installed after December 31, 2022).
  • Sales tax on qualifying expenses

Federal solar tax credit eligibility

Single-family homes, apartments, condominiums, mobile homes and multi-family dwellings qualify for the federal solar tax credit. You can also claim the tax credit if you own a rental property, although you’ll only be eligible if you live there for at least part of the year. The percentage you can claim depends on how much time you live in your rental property each year. For example, if you live in a property for half of the year and rent it the other half, you can claim  50 percent of the credit.

If you lease your system or sign a power purchase agreement (PPA), you will not qualify for the federal tax credit. You must own your system to qualify for the tax credit.

You are eligible for the federal solar tax credit if:

  • You installed or will install a functioning solar panel system between January 1, 2006 and December 31, 2034.
  • You installed solar panels on your primary or secondary residence and you live there for at least part of the year.
  • You own the system and are not renting it through a lease or PPA. (As a reminder, if you sign a lease or PPA, the solar company retains ownership of the solar system.)
  • You invested in a community solar project and the energy it generates is credited against and does not exceed your home’s electricity usage.
  • The solar panel system is new or installed for the first time. You won’t qualify if you purchased a house with a solar system already installed.

How to claim the federal solar tax credit in 2024

To receive the 30 percent tax credit in 2024, fill out and return IRS form 5695 (PDF) after your solar panels are installed. The IRS provides instructions to help you fill out the form correctly. Once you’ve been approved by the IRS, you will receive your 30 percent savings in the form of a tax credit when you file this year’s annual tax return. If the value of the credit is more than you owe in taxes, you can carry the remaining amount over to the following year until you’ve received the full amount.

Types of solar incentives

There are a few different types of solar incentives available at the federal, state and local levels. Depending on where you live, you may qualify for a number of incentives after investing in solar panels. Here are some of the most common types of federal and state solar panel incentives.

Tax credits

A tax credit lowers the amount you owe in federal taxes. You don’t receive a check in the mail or literal cash back when you apply for a tax credit, like the Residential Clean Energy Credit. Instead, you receive a percentage or set dollar amount in credit on your federal tax return, reducing the amount you owe in taxes. If your tax burden exceeds the credit, you may receive a refund on the income taxes you paid.

Solar panel rebates

Solar rebates offer an amount of money (usually set in advance) if you purchase a solar system or a qualifying piece of technology (like a solar battery). Solar panel rebates are more common at the state, local or installer levels. You can usually qualify for a solar rebate even if you don’t owe anything in federal taxes.

Low-interest loans

Some states, utilities and solar installation companies offer low-interest loans designed for residents who want to purchase a solar system. These loans help you finance your solar panels, making the initial purchase easier. While you will have a monthly loan payment, these loans come with a lower interest rate.

Solar Renewable Energy Certificates

Solar Renewable Energy Certificates (SRECs) are credits you receive based on the amount of energy your solar panels generate. In some states, public utility companies are required to purchase a set amount of SRECs from consumers to meet renewable energy goals. Depending on where you live, you may be able to sell your SRECs to your utility company in exchange for cash.

Performance-based incentives

Some states offer performance-based incentives (PBIs), which provide solar owners with a set cash amount for every kilowatt-hour their solar system generates.

Property and sales tax exemptions

Tax exemptions are a common solar energy incentive at the state level. An installed and functioning solar panel system tends to increase the value of a home, often by as much as $15,000, according to the Office of Energy Efficiency and Renewable Energy. In some states, if you install a solar system, you will be exempt from paying increased property taxes if the amount you owe increases due to the value of the solar panels.

Your state may also offer a sales tax exemption if you purchase solar panels. With this incentive, you will not have to pay a sales and use tax for your solar system (this only applies if you purchase your system instead of leasing).

Net metering

Net metering is perhaps the most well-known solar incentive available in a number of states. If you own a grid-tied solar system (meaning the system is connected to the power grid, i.e. not an off-grid system), you can enroll in net metering through your utility.

Net metering lets you send extra energy generated by your solar panels to the power grid in exchange for credits on your electricity bills. Net metering rates vary by state and utility, so the amount you can earn will depend on where you live and how much energy your system produces. Check with your utility to learn the details of net metering in your area.

Top solar panel incentives in 2024

 

State Local Incentives
California
  • Net metering: California legislators revised the state’s net metering program (now called NEM 3.0) and the changes went into effect in 2023. Homeowners with complete permission to operate applications submitted by April 15, 2023 secured NEM 2.0 rates, which are much more favorable for consumers. Under NEM 3.0, you can earn credits on utility bills for sending solar power to the grid, although the rate you’ll earn is lower than it was under NEM 2.0.
  • Property tax exemption: If you install solar panels before the end of 2024, you will be exempt from paying increased property taxes.
  • Sales and use tax exemption: Solar panels and other solar equipment are exempt from sales and use tax in California.
  • Self-Generation Incentive Program: If you install a solar battery for your home or business, you can qualify for a rebate valued at 15–20 percent of the battery cost.
Texas
  • Austin Energy Residential Solar Rebate Program: If you live in Austin and complete Austin Energy’s solar education course, you may be eligible for a $2,500 rebate.
  • Garland Power & Light EnergySaver Solar Rebate Program: If your utility is Garland Power & Light and you install solar panels, you can receive bill credits for every kWh of extra solar your system produces.
  • Oncor Electric Residential Solar Program: Oncor customers with solar panels and battery storage installed may qualify for a variety of utility rebates and incentives.
  • Property tax exemption: If you install solar panels in Texas, you can apply for an exemption from paying increased property taxes.
  • TXU Energy Home Solar Buyback: TXU Energy customers can receive bill credits for extra solar power their system generates.
Florida
  • Property tax exemption: Florida residents who install solar panels won’t have to pay more in property taxes as a result of the increase in their home value.
  • Sales tax exemption: Solar energy systems are exempt from sales tax in Florida.
North Carolina
  • Property tax exemption: North Carolina residents who own a solar system that is not used to generate income or in connection with a business are exempt from paying increased property taxes on their solar panels.
Nevada
  • Solar easement laws: Nevada’s solar easement laws prohibit restrictions on solar (and wind) energy systems. This means, for example, your homeowner’s association cannot ban solar panels in your neighborhood.
  • Partial property and sales tax exemptions: The Renewable Energy Tax Abatement program in Nevada offers a partial sales and use tax as well as property tax reductions for renewable energy installations, including solar panels. Solar owners can get a 55 percent property tax abatement for 20 years after installation and will only have to pay a 2.6 percent sales and use tax on their panels.
Arizona
  • Mohave Electric Cooperative SunWatts Renewable Energy Rebate: Residents who install solar panels may qualify for several solar panel rebates from this utility company.
  • Property tax exemption: Arizona residents who install solar panels won’t have to pay taxes on the increased value of their home.
  • Residential Solar and Wind Energy Systems Tax Credit: Arizona offers a statewide tax credit worth 25 percent of the cost of your solar panels, capped at $1,000. 
  • Sales tax exemption: If you purchase solar panels in Arizona, you won’t have to pay sales tax.
Georgia
  • Solar easement laws: Georgia’s solar easement law protects your access to sunlight. For example, a tree on your neighbor’s property cannot reach a height where it blocks your access to sunlight because of this law. All easements must be documented in writing in Georgia.
New York
  • NY-Sun Program: NY-Sun offers several financial incentives if you install solar panels. This initiative funds New York’s Megawatt Block Incentive (a rebate program offering money based on the size of your system) and the state’s community solar program. 
  • Residential Solar Tax Credit: New York’s state solar tax credit offers 25 percent of the cost of your solar panels in credit, with a cap of $5,000.
Virginia
  • Property tax exemption: If you own solar panels, you may qualify for a partial or total exemption on higher property taxes if your property value increases because of your solar system.
  • SREC program: Under the Virginia Clean Economy Act, the state is required to generate at least 1 percent of electricity from solar. If you own solar panels, you can earn one SREC for every megawatt-hour of energy your system produces and sell SRECs to your utility.
Colorado
  • City of Boulder – Solar Sales and Use Tax Rebate: Boulder residents will receive a 15 percent refund of what they pay in sales and use tax after installing a solar system.
  • Property tax exemption: Colorado residents won’t have to pay increased property taxes if the value of their home increases after installing solar panels.
  • San Miguel Power Association Rebate Program: Customers of this utility may qualify for a rebate of up to $300 for installing a residential solar panel system.
Massachusetts
  • Solar Massachusetts Renewable Target (SMART): The SMART program pays customers of Massachusetts utilities a fixed amount for every kilowatt-hour of energy residential solar panels produce.
  • Supplier rebates: There are a variety of electricity suppliers in Massachusetts offering solar rebates based on the size of your system. Reach out to your supplier for details.
New Jersey
  • Property tax exemption: If your property value increases after installing solar panels, you won’t have to pay higher property taxes.
  • Sales tax exemption: You won’t have to pay sales tax on the purchase of a solar panel system.
  • Successful Solar Incentive (SUSI) Program: SUSI replaced New Jersey’s SREC program in 2021 and offers a certificate (called SREC-IIs) valued at $85 for every 1,000 kWh of solar energy a system generates. Like SRECs, you can sell the SREC-IIs to utility companies.

U.S. solar incentive FAQs

  • Yes, you can apply for and claim multiple solar rebates and tax credits. The residential clean energy credit, for example, can be combined with state solar incentives tax credits, meaning you receive credit from both incentives when you file your taxes.
  • Every incentive has unique qualifications. Check the requirements for each program before applying. The Database of State Incentives for Renewables & Efficiency offers a comprehensive list of incentives by state, including the qualifications for each program. If you lease your solar system, you will not qualify for most solar incentives.
  • No, you only qualify for the federal solar tax credit (and most state solar tax credits) if you file a federal income tax return. If the 30 percent tax credit is worth more than you owe in taxes in 2024, you can carry over any unused credit the following year.