If you were planning to put solar on the roof and counting on a state rebate to make the math work, run the numbers again. Most state and utility programs have been cut, paused, or restructured in the past year. The federal credit is still 30%. The rest of the stack got thinner.
The fix is to model the actual incentive stack in your state today, not last year’s numbers. Then decide.
The federal credit: what is still in place
The Investment Tax Credit (ITC) for residential solar installations is still 30% and stays there through the end of 2032. The Inflation Reduction Act of 2022 extended and expanded the credit, and despite multiple legislative challenges in 2025, it survived intact.
The 30% credit applies to the full cost of the system, including panels, inverters, mounting hardware, battery storage (if installed at the same time as the panels), and installation labor. On a $25,000 system, the credit reduces your federal tax liability by $7,500.
The credit does not cover installation costs for battery-only projects unless the battery charges exclusively from the solar array.
After 2032, the credit steps down to 26% in 2033, 22% in 2034, and then expires for residential installations unless Congress acts again.
What state incentives have been cut or expired
The state-level picture is messier. Several states that used to offer real additional incentives have restructured or killed their programs in 2025 and early 2026.
California: The California Solar Initiative ran out of available rebates in 2024. The current structure is Net Energy Metering 3.0 (NEM 3.0), which cut the export compensation rate hard compared to NEM 2.0. Homeowners exporting excess solar to the grid now get roughly $0.05-0.08 per kWh, down from $0.28-0.32 under the previous program. The state self-generation incentive program (SGIP) for battery storage still has funding in some tiers.
New York: NY-Sun is still active but was restructured in late 2025. The residential statewide incentive dropped from $0.25 per watt to $0.20 per watt. The upstate incentive zone is more generous at $0.30 per watt for some utilities.
Arizona: Arizona killed its state solar income tax credit (25% of costs up to $1,000) in the 2025 budget. The state still has no income tax on solar sales for systems under a certain size threshold.
Texas: Texas has no dedicated state solar tax credit, but property tax exemptions for the added value of solar panels remain in place in most counties.
Massachusetts: The Solar Massachusetts Renewable Target (SMART) program is still active and remains one of the better state programs, especially for systems under 25 kW.
How to stack what remains
The strongest combinations available in 2026:
Federal ITC (30%) + Utility rebate: Many utilities still offer direct rebates for solar installation, ranging from $0.05 to $0.30 per watt. A $0.20/watt rebate on a 10 kW system adds $2,000 in direct incentives. Unlike the tax credit, utility rebates reduce the cost basis of the system, which slightly trims the dollar amount of the 30% ITC.
Federal ITC + SGIP battery credit (California): California’s SGIP program offers rebates for qualifying battery storage systems, currently in the range of $150-$200 per kWh of storage capacity for residential systems. A 13.5 kWh battery can pull $2,000-$2,700 in SGIP money, stackable with the federal credit.
Federal ITC + NY-Sun + utility VDER: New York homeowners can stack the federal ITC, the NY-Sun per-watt incentive, and the Value of Distributed Energy Resources (VDER) export compensation.
What documentation you need before filing
You cannot claim the ITC without proper documentation. Before your installer finishes the job, make sure you have:
- Signed installation contract with full system specifications
- Final invoice showing total project cost with line items (panels, inverters, labor, permits, battery if applicable)
- Interconnection approval from your utility
- System commissioning documentation from the installer
Keep copies in your tax files. IRS Form 5695 requires the credit amount calculation, and auditors may ask for backup on large credits.
If you used a solar loan, the full purchase price, not the down payment, is the basis for the credit. The loan structure does not affect your ITC eligibility.
The window is still open, but narrowing
The 30% federal credit is the strongest it has been since the original ITC was created. State-level programs have thinned a lot, and utility export compensation in large solar markets like California has fundamentally changed the economics of bigger installations.
Run the numbers with the current incentive stack in your state before you sign a contract. The DSIRE database (dsireusa.org) maintains a state-by-state list of active incentive programs and updates regularly. Check it this week.