The federal residential tax credit is dead in 2026. State incentive programs — from NJ SuSI ($90/MWh for 15 years) to MA SMART (monthly bill credits) — are now the main way to reduce your solar cost.
Best State
New Jersey
~$18,000 total value
Federal ITC
$0
for homeowners 2026
NJ vs NH Gap
$42,000
25-year difference
Third-Party ITC
30%
lease/PPA still get it
The Federal Credit Is Gone — State Programs Are Everything
Section 25D (the Residential Clean Energy Credit) expired December 31, 2025 as part of the One Big Beautiful Bill Act. Homeowners who purchase solar with cash or a loan in 2026 receive $0 in federal tax credits. The 30% credit that homeowners relied on to offset $8,000–$12,000 of system cost is gone. State-level incentive programs are now the primary — and often only — financial driver beyond utility bill savings.
Federal residential ITC (Section 25D): EXPIRED
$0 for homeowner cash/loan purchases in 2026. This is not a reduction or phase-down — it is complete elimination.
Third-party owned systems (lease/PPA) still qualify for 30% under Section 48/48E because the commercial entity — not you — claims the credit. This structural advantage makes lease and PPA pricing competitive in states without strong local incentives. The leasing company captures $10,500 on a $35,000 system and can pass savings to you through lower monthly rates.
Why State Programs Matter More in 2026
State incentives now determine whether solar makes financial sense. A homeowner in New Jersey with SuSI payments of $13,500 over 15 years has a 7.6-year payback despite losing the federal credit. A homeowner in New Hampshire with $500 in state incentives faces a 12.7-year payback. The difference: $13,000 in state support.
Real-world comparison — Two identical 10 kW systems
New Jersey
New Hampshire
Same equipment. Same sun exposure. $42,000 difference in total savings driven entirely by state policy.
State Incentive Overview
| State | Top Program | Est. Max Savings | Sales Tax Exempt |
|---|---|---|---|
| Massachusetts | SMART Program | $27,200 | |
| Connecticut | Residential Solar Investment Program (RSIP) | $8,200 | |
| Rhode Island | Renewable Energy Growth (REG) Program | $27,500 | |
| New Hampshire | NEM 2.0 Net Metering | $584 | |
| Vermont | Net Metering | $5,500 | |
| Maine | Net Energy Billing | Limited | |
| New Jersey | Successor Solar Incentive (SuSI) / ADI | $22,500 | |
| Pennsylvania | Solar Renewable Energy Credits (SRECs) | $4,500 | |
| New York | NY-Sun Residential Incentive | $12,800 | |
| Texas | Austin Energy Solar Rebate | $2,500 |
Best States for Solar Incentives in 2026
Excellent incentives (partial federal credit replacement)
New Jersey
Successor Solar Incentive (SuSI) / Administratively Determined Incentive (ADI) pays ~$90/MWh for 15 years. A 10 kW system producing 12 MWh/year earns $1,080/year × 15 years = $16,200. Add sales tax exemption ($2,000) and property tax exemption. Total value: $18,000+
Rhode Island
Renewable Energy Growth (REG) program pays above-market rates for production over 15 years (performance-based incentive worth $8,000–$12,000). Upfront rebate of $0.35/W ($3,500 on 10 kW). Sales tax exemption. Total: $12,000–$16,000
Massachusetts
SMART (Solar Massachusetts Renewable Target) provides monthly bill credits for 10 years. A 10 kW system in National Grid territory earns ~$400/year × 10 = $4,000. Add MassSave rebates and municipal programs. Total: $5,000–$8,000
Good incentives (significant but not full replacement)
New York
NY-Sun rebate ($0.20/W = $2,000 on 10 kW) + 25% state tax credit (up to $5,000, so $5,000 on $32,500 system). Total: $7,000. Property tax exemption adds value.
Connecticut
Residential Solar Investment Program (RSIP) rebate up to $0.25/W through Energize CT ($2,500 on 10 kW). Sales tax exemption ($2,000). Total: $4,500
Pennsylvania
Solar Renewable Energy Credits (SRECs) provide ongoing income. SRECs trade at $35–$45 each. A 10 kW system generates ~12 SRECs/year × $40 × 15 years = $7,200. Property tax exemption.
Limited incentives (weak replacement, long payback)
Vermont
Modest net metering credits and some utility programs. Total value: $2,000–$3,500
New Hampshire
Virtually no state programs. A few municipal utilities offer small rebates ($500–$1,000). Net metering provides value but no upfront incentive.
Maine
Limited state support. Community solar net energy billing helps but provides minimal upfront incentive. Total: $500–$1,500
Texas
No statewide incentive. Some local utility rebates (Austin Energy, CPS Energy) offer $0.10–$0.20/W. Most of Texas: $0. Low install costs compensate.
How to Stack State Incentives (and Common Mistakes)
Many homeowners leave money on the table by not understanding how incentives stack. State rebates, utility programs, sales tax exemptions, and SRECs can often be combined. Here's how to maximize your claim:
Apply for upfront rebates first
Programs like NY-Sun, CT RSIP, and RI upfront rebates require application before or during installation. These reduce your net cost immediately.
Claim state tax credits at year-end
NY's 25% state tax credit is claimed on your state income tax return. You need sufficient state tax liability to benefit. If your state tax is only $3,000, you can't claim a $5,000 credit (unlike the old federal credit, most state credits don't carry forward).
Enroll in performance-based programs
NJ SuSI, RI REG, MA SMART require enrollment within specific windows. Miss the deadline and you forfeit years of payments. Your installer should handle enrollment, but verify it's complete.
Register for SREC markets
In PA, NJ (older systems), and MA (legacy SREC programs), you must register your system and create SRECs. Each SREC represents 1 MWh of production. You sell them on the open market or through aggregators.
Don't forget sales/property tax exemptions
NJ, RI, CT, and NY exempt solar from sales tax (6–7% savings, $1,950–$2,275 on a $32,500 system). Property tax exemptions prevent reassessment from adding solar value to your tax bill.
Common mistake: Incorrect SMART tariff selection in Massachusetts
The MA SMART program has different tariff rates depending on your utility, system size, and whether you're in a low-income area. Selecting the wrong tariff can cost you 15–25% of your incentive value. A 10 kW system incorrectly enrolled in the Standard rate instead of Standard + Adder loses $800–$1,200.
Common mistake: Not checking municipal utility eligibility
Many state programs only apply to investor-owned utility (IOU) customers. Municipal utility customers (Concord Light, Wellesley Municipal Light, Reading Municipal Light, etc.) are often ineligible for state programs. These customers should look for municipal solar rebates specific to their utility.
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