State Solar Tax Credits That Stack With Federal Incentives

With the federal residential solar tax credit gone, state incentives matter more than ever. The good news: state incentives operate independently from federal rules and remain available in many states. Some states even expanded their programs after the federal credit expired. Here's what's available and how to stack them.

Why State Incentives Still Matter

State solar incentives are funded and administered at the state level. They don't depend on federal tax code provisions and are unaffected by the OBBBA's changes to Section 25D. Even without the federal credit, state incentives can reduce your net cost by 10-40% depending on where you live.

Importantly, if you qualify for the Section 48E credit (lease/PPA, commercial, rental), state incentives stack on top of the federal credit — they don't replace it.

States With the Strongest Solar Incentives

New York

• State Tax Credit: 25% of net system cost, up to $5,000
• NY-Sun Rebate: $0.20-$0.80/W depending on region and income
• Net Metering: Full retail net metering (VDER for commercial)
• Property Tax Exemption: Yes (15-year exemption on added value)
• Sales Tax Exemption: Yes (statewide)

Massachusetts

• State Tax Credit: 15% of net cost, up to $1,000
• SMART Program: Performance payments of $0.03-$0.14/kWh for 10 years
• Net Metering: Full retail (capped at 60% of historical load for some)
• Property Tax Exemption: Yes (20-year exemption)
• Sales Tax Exemption: Yes

Maryland

• Clean Energy Credit: Up to $1,000
• SREC Market: Active market, ~$40-$70/SREC
• Property Tax Exemption: Yes
• Sales Tax Exemption: Yes

Rhode Island

• Renewable Energy Growth Program: Performance payments via National Grid
• State Tax Credit: None (but strong performance payments)
• Net Metering: Full retail

Connecticut

• Residential Solar Investment Program (RSIP): Performance-based incentives
• Net Metering: Full retail
• Property Tax Exemption: Yes

District of Columbia

• Solar for All: Free solar for low-income households
• SREC Market: One of the highest SREC prices in the country (~$300-$400/SREC)
• Property Tax Exemption: Yes

Types of State Incentives

Tax Credits

State tax credits work like the federal credit — they reduce your state tax liability. NY, MA, and MD offer these. Some are a percentage of cost; others are flat amounts. Unlike the federal credit, most state credits are non-refundable but can be carried forward if you can't use them all in one year.

Rebates

Direct rebates ($/W or flat amount) are offered by state energy offices or utilities. These reduce your upfront cost and don't depend on your tax liability. NY-Sun, Massachusetts SMART, and California SGIP (for batteries) are examples.

SREC Markets

Solar Renewable Energy Certificates (SRECs) represent the environmental attributes of your solar production. You earn one SREC per megawatt-hour (MWh) of solar electricity generated. In states with SREC markets (NJ, MD, IL, DC, PA, MA), you can sell these certificates for cash — adding $500-$3,000+ per year depending on the market.

Property and Sales Tax Exemptions

Many states exempt solar equipment from sales tax and the added property value from property tax assessment. These exemptions are worth 5-8% of system cost (sales tax) and prevent your property taxes from rising after installation.

Net Metering

While not a direct financial incentive, net metering policy is the single biggest factor in solar economics. Full retail net metering means you're credited at the full retail rate for excess solar you export to the grid. States with strong net metering (NY, MA, NJ, CT, RI) make solar significantly more valuable. Check our NEM Policy Tracker for your state.

How State Incentives Stack With Federal Credits

State incentives are generally independent of federal credits. If you qualify for the Section 48E credit (lease/PPA, commercial, rental), you can claim both the federal credit and any applicable state incentives. The federal credit is typically calculated on the gross cost before state rebates, but some states calculate their credit on the net cost after the federal credit. Check the specific rules for your state.

For owned residential systems (no federal credit), state incentives are the only tax/rebate benefits available — making them the primary factor in your payback calculation.

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Sources: DSIRE Database of State Incentives for Renewables & Efficiency, state energy office websites, utility program administrators. Data current as of June 2026.