Different incentives affect a solar project in different ways. Start with the current rule, then check who qualifies, who receives the benefit, and what documentation the project requires.
Federal Residential Clean Energy Credit
The federal Residential Clean Energy Credit under Section 25D ended for new expenditures after December 31, 2025. For qualifying residential clean-energy expenditures made through 2025, the credit was generally 30% of eligible costs. The credit is nonrefundable, and unused qualifying credit may be carried forward to reduce tax liability in later years.
For a new residential solar project in 2026, do not include a Section 25D homeowner credit in the economics unless current IRS guidance specifically supports it.
Last reviewed August 2026 · IRS Form 5695 instructions and IRS Residential Clean Energy Credit guidance.
State and local incentives
Solar incentives vary substantially by state. Depending on location, homeowners may encounter state tax credits, rebates, performance-based incentives, property-tax treatment, or other programs. Use the relevant state guide for current rules, amounts, eligibility, and deadlines.
Net metering and utility compensation
Net metering is not the same thing as a tax credit or rebate. It governs how electricity imported from and exported to the grid is measured and credited. The value of exported solar can depend on state rules, utility territory, system eligibility, project size, and tariff structure. Read the net-metering guide for the basic flow, then use a state guide for local rules.
Who owns the system matters
Cash purchases and solar loans typically leave the homeowner owning the system. With leases and PPAs, the solar provider typically owns the equipment. That distinction can determine who is eligible for ownership-based incentives and who receives their economic benefit.
Always verify each incentive separately. Financing interest and loan-origination fees, for example, were not eligible costs under the former federal Residential Clean Energy Credit.
Incentive eligibility checklist
- What is the official program and who administers it?
- What current amount or rate applies to this project?
- Who qualifies and who actually receives the benefit?
- What deadline, installation, interconnection, or application requirement applies?
- Does financing or third-party ownership change eligibility?
Solar incentives FAQ
What types of solar incentives exist?
Homeowners may encounter federal tax treatment, state credits, rebates, production-based incentives, utility programs, and ownership-related benefits. Each has its own eligibility, timing, and documentation rules.
Do I automatically qualify for every incentive?
No. Eligibility can depend on the system, property, owner, tax situation, utility, program capacity, and when the project expenditure or installation qualifies under the applicable rule.
Does financing change how incentives work?
It can. Cash purchases and solar loans typically leave the homeowner owning the system. With a lease or PPA, the provider typically owns the equipment. That distinction can affect who is eligible for an ownership-based incentive and who receives its economic benefit.
Are incentives the same as utility credits?
No. A tax credit, rebate, production incentive, and net-metering credit are different mechanisms. A proposal should identify the benefit, who receives it, and the rule that supports it.