State incentives are now the main subsidy for homeowners who buy solar with cash or a loan in 2026. The federal residential tax credit (Section 25D) expired December 31, 2025, so the 30% credit cash and loan buyers used to claim is gone. Lease and PPA customers can still benefit from Section 48E, the commercial credit, with the benefit reflected in their monthly rate. For solar, a project that begins construction after July 4, 2026 must be placed in service by December 31, 2027 to qualify. Either way, what your state offers now decides whether your payback math works.
How the federal change reshapes the state picture
Section 25D, the 30% residential federal credit, expired December 31, 2025. Cash and loan buyers in 2026 cannot claim any federal credit on their return. The payback math has to clear without that 30% backstop.
Section 48E is the commercial-side credit, also 30%, and it remains available for solar under current law, but a project that begins construction after July 4, 2026 must be placed in service by December 31, 2027. Lease and PPA customers benefit indirectly: the third-party owner claims the credit and can pass part of the savings through in the monthly rate.
That split is the biggest shift in residential solar finance this decade. Cash and loan buyers now depend on state incentives because those programs are their only meaningful subsidy. Lease and PPA customers can stack state incentives on top of the 48E pass-through where the state program allows it.
The size of the state-level gap varies enormously by zip code. New York's main lever is now its 25% state credit up to $5,000, since the NY-Sun residential rebate blocks have closed. Massachusetts pays small system owners per kWh for 20 years. Texas offers a property tax exemption and not much else. Where you sit on that spectrum should drive your financing decision.
The nine states where the math changes the most
New York leads on stacked incentives, though the upfront rebate is gone for now. The NY-Sun Megawatt Block program paid a declining per-watt rebate, and its residential blocks have all closed: the last standard blocks in the Con Edison and Upstate regions closed in May and December 2025, and the $0.80 per watt income-eligible blocks closed in October 2025 and March 2026. Most 2026 buyers rely on the state credit, which returns 25% of cost up to $5,000. Check the NYSERDA dashboard in case a new block opens in your region.
New Jersey runs no state credit but stacks a property tax exemption and a sales tax exemption with the Administratively Determined Incentive (ADI) program, part of its Successor Solar Incentive. ADI pays one SREC-II per MWh produced for 15 years, at $77 per MWh for residential registrations received on or after July 27, 2026, down from $85. An 8 kW system producing about 10,000 kWh a year would earn roughly $770 a year.
Massachusetts pays small system owners per kWh through the SMART program, with the utility making the payments. Under SMART 3.0, systems of 25 kW AC or less earn $0.03 per kWh produced, or $0.06 for low-income households, fixed for 20 years. The $0.04 energy storage multiplier sits in the rate table for systems larger than 25 kW, so a home battery does not raise the small-system rate. A 10 kW system producing 11,000 kWh a year earns about $330 a year, plus a state income tax credit of 15% of cost, capped at $1,000.
Illinois pays through Illinois Shines, which buys 15 years of a system's renewable energy credits upfront and over time. For home systems up to 10 kW AC in the 2026-27 program year, the price is $70.37 or $80.77 per credit depending on the utility area, usually paid through your installer's contract. New ComEd and Ameren customers who applied for net metering from 2025 on also get a distributed generation rebate of $300 per kW, and state law lets owners ask the assessor to value the system no higher than conventional equipment.
Maryland's former $1,000 Residential Clean Energy Grant no longer appears on the Maryland Energy Administration's program list. Income-eligible households can apply to the Maryland Solar Access Program, which opened for fiscal year 2027 applications on July 29, 2026, and Maryland exempts residential solar from property tax. Arizona caps its 25% state credit at $1,000, exempts equipment from sales tax, and excludes the system from property tax assessments.
California offers no state credit. Its property tax exclusion for new solar, Revenue and Taxation Code section 73, is winding down. The statute says it "applies to property tax lien dates for the 1999–2000 fiscal year to the 2025–26 fiscal year, inclusive," and that it "shall remain in effect only until January 1, 2027." Systems that qualify before January 1, 2027 stay excluded until a later change in ownership. A 2026 bill to extend it, AB 2389, was held in committee on May 14, 2026. Whether a system completed now qualifies is a question for your county assessor, so confirm with the assessor before you count on it. The Self-Generation Incentive Program's general-market home battery rebate has closed at every program administrator, leaving only low-income equity funding, open at SCE and PG&E and waitlisted elsewhere. NEM 3.0 cut export credits sharply, so most new California systems now include a battery.
Florida and Texas have no state income tax and no state credit, but both fully exempt residential solar from property tax. Florida also exempts equipment from sales tax.
What each incentive type actually does for your bottom line
A state income tax credit reduces what you owe your state in the year your system turns on. Caps run from $1,000 in Massachusetts and Arizona to $5,000 in New York. You need enough state tax liability to absorb the full credit, and most states block lease and PPA customers from claiming it.
A rebate is cash off the price, usually applied by your installer. Rebate programs pay out in funding blocks that fill as applications come in, which is why New York's NY-Sun home blocks have closed. Illinois Shines works in a similar way, paying for a system's renewable energy credits partly upfront through the installer.
A property tax exemption stops the assessor from adding your system's value to your home's taxable basis. On a $30,000 system in a 1% jurisdiction, that runs about $300 a year, roughly $7,500 over 25 years.
A sales tax exemption strips the state portion of sales tax off your equipment purchase at signing. In a 6% state, that's $1,800 off a $30,000 system.
SRECs are production credits. New Jersey's SREC-IIs pay a fixed $77 per MWh for new residential registrations, roughly $960 a year for a 10 kW system producing about 12,500 kWh, paid over 15 years rather than upfront. Illinois buys its credits through Illinois Shines contracts instead. Treat the income as potentially taxable. We recommend consulting an independent tax professional.
Net metering credits show up on your utility bill when your system exports more than you use. Some utilities pay retail rate, others wholesale, others almost nothing. The rules come from your state legislature or utility commission and reach you through your utility's tariff, and they shape long-run savings as much as any program on this list.
Stacking 48E with state incentives if you lease or sign a PPA
The cleanest 2026 financing setup combines the Section 48E pass-through with whatever state incentives apply to your address. Cash and loan buyers see no 48E benefit, but they still capture state credits, exemptions, and REC payments. Lease and PPA buyers can capture both.
Here is how the stack plays out for a 10 kW lease in Massachusetts. The company that owns the system claims Section 48E and can pass part of it through in your monthly payment. The system also qualifies for SMART at $0.03 per kWh, about $330 a year at 11,000 kWh, so ask who receives that payment, since in a lease it may go to the company that owns the system. Sales tax on equipment is waived at install. State credit rules for leased systems vary, so confirm eligibility before you sign.
The same logic applies in New Jersey with SREC-IIs and in Illinois with Illinois Shines credit payments. Owners do not get the 48E pass-through. The state side of the stack is still available to them, sometimes worth more than the federal credit was in 2025.
How to verify what your state offers right now
State programs change every quarter. Funding blocks fill, caps reset, and rules around lease and PPA eligibility shift without much notice. Start every conversation with current data, not last year's article.
The Database of State Incentives for Renewables and Efficiency at dsireusa.org is the authoritative source. North Carolina State University maintains it, and filtering by state plus technology returns every active federal, state, local, and utility program with current amounts and deadlines.
Cross-check DSIRE against what your installer quotes. Reputable installers build state incentives into proposals correctly, but rebate blocks can close between your fit call and your contract date.
Two questions are worth asking before you sign. Which state incentive is built into my proposal, at what rate, and is that rate locked. And does my financing method qualify for the state credit, or only ownership.
Then run the kWh side in the Solrova Solar Design Studio with your address and utility. It estimates what your roof produces and what that design typically costs before any incentive, so you can subtract the state programs you confirmed on DSIRE yourself.