7 Solar Tax Credits and Incentives for Homeowners in 2025

Want to save big on solar in 2025? Here’s how. Homeowners can take advantage of seven key solar incentives this year to lower installation costs and maximize long-term savings. From federal tax credits to state and local programs, these opportunities make solar energy more affordable and appealing.

Quick Overview of 2025 Solar Incentives:

• Federal Solar Tax Credit (ITC): 30% tax credit on solar costs through 2032.

• California Solar Programs: Rebates (SGIP), property tax exclusions, and low-income support.

• New York Solar Equipment Credit: 25% state tax credit, up to $5,000.

• Local Rebates: City and county-level programs offering additional savings.

• Solar Renewable Energy Certificates (SRECs): Earn money for every megawatt-hour your system generates.

• Net Metering: Offset electricity bills by earning credits for excess solar power.

• Solar Property Tax Exemptions: Avoid higher property taxes due to increased home value.

Example Savings:

For a $20,000 solar system:

• Federal Tax Credit: $6,000 savings.

• State and Local Incentives: Additional rebates and credits vary by location.

• Net Metering and SRECs: Ongoing monthly and yearly savings.

Why Now?

With solar installation costs dropping 40% over the past decade and federal programs like the Inflation Reduction Act extending benefits through 2032, 2025 is the perfect time to invest in solar energy.

Keep reading to learn how these incentives work and how to claim them.

Solar Tax Incentives in 2025: What We Know, So You Can Plan

1. Federal Solar Tax Credit (ITC)

The Federal Solar Tax Credit, officially called the Residential Clean Energy Credit, is one of the top financial incentives for homeowners planning to install solar panels in 2025. This program offers a 30% tax credit on eligible solar costs through 2032.

For example, if your solar installation costs $20,000, you could qualify for a $6,000 tax credit. Unlike deductions, this credit directly reduces your tax bill dollar-for-dollar.

What Expenses Qualify?

Here’s what you can include:

• Solar panels and related equipment

• Professional installation labor

• Costs for system preparation

• Wiring and mounting hardware

• Battery storage systems

This credit applies to both primary residences and second homes, as long as they’re not primarily rental properties.

Key Requirements

To qualify, your system must meet these conditions:

• It must be installed and operational during the tax year you claim the credit.

• The system should be new or used for the first time.

• You must own the system (leased systems don’t qualify).

Carry-Forward Provision

If your credit exceeds your tax liability, you can carry the unused portion forward to future tax years. For instance, if you qualify for a $6,000 credit but owe only $4,000 in taxes, the remaining $2,000 can be applied in a later year.

How to Calculate Your Credit

Subtract any rebates or state incentives before calculating the 30% credit. For example, if you receive a $1,000 utility rebate on a $20,000 system, your credit would be based on $19,000.

How to Claim the Credit

To claim the credit, fill out Form 5695 when filing your federal tax return. Remember, the credit applies to the year your system is installed and operational, not when you make the purchase or down payment.

Next, we’ll look at state-specific incentives that can add to these savings.

2. California Solar Programs

California is at the forefront of solar energy adoption in the U.S., thanks to its state-driven incentives. By mid-2024, the state had installed 49,421 megawatts of solar capacity, powering over 14.8 million homes.

Self-Generation Incentive Program (SGIP)

The SGIP offers rebates for adding energy storage to solar panel systems. The California Public Utility Commission has allocated over $800 million through 2024, with more than 80% of the funds focused on energy storage.

Here’s what you get with SGIP:

• Higher rebates for residents in areas at high risk of wildfires

• Special rates for homes affected by Public Safety Power Shutoffs

• Extra support for low-income and medically vulnerable individuals

• Upfront incentives provided after project completion

Property Tax Exclusion

California’s solar property tax exemption, valid until January 1, 2027, ensures your property taxes won’t increase after installing a solar system. This can lead to substantial savings over time.

DAC-SASH Program

The Disadvantaged Communities Single-Family Solar Homes (DAC-SASH) program helps low-income households with solar adoption:

• Offers up to $3 per watt

• Focuses on communities identified as disadvantaged

• Provides $8.5 million in yearly incentives through 2030

• Requires applicants to meet CARE or FERA income guidelines

These programs work alongside federal incentives to make solar installation more affordable.

Regional Program Administration

Cost Impact

Solar systems in California, typically costing $25,000–$50,000, become more budget-friendly when state incentives are paired with the federal tax credit. For instance, a $30,000 system could benefit from:

• A $9,000 federal tax credit (30%)

• Additional rebates through SGIP

• Property tax savings

• Possible local incentives

These programs significantly reduce installation costs and increase overall savings.

California’s $106.8 billion investment in solar projects highlights its dedication to renewable energy. To take full advantage of these incentives, reach out to your utility company’s program administrator for application details and the latest incentive rates.

3. New York Solar Equipment Credit

New York offers a 25% tax credit on qualified solar equipment, capped at $5,000, through its Solar Energy System Equipment Credit program.

Proposed changes under Senate Bill S1385 aim to boost this credit. If passed, the credit rate would increase to 40%, the cap would rise to $10,000, and any leftover credit would become refundable starting January 1, 2026.

Qualification Requirements

To qualify, homeowners must meet these conditions:

• The solar system must be installed at their primary residence in New York State.

• The equipment must generate energy using solar radiation for heating, cooling, hot water, or electricity for home use.

Eligible Purchase Options

Application Process

Homeowners can claim this credit by filing Form IT-255 (Claim for Solar Energy System Equipment) with their tax return. While the credit is currently non-refundable, any unused amount can be carried forward for up to five years.

"To help New Yorkers seeking to utilize solar energy by increasing the residential solar energy credit and creating a new solar STAR credit, while restoring and strengthening local control in potential project developments."
– Sponsor Memo, Senate Bill S1385

Cost Impact Example

A solar installation costing $30,000 would result in:

• A $5,000 credit under the current program.

• A $10,000 credit under the proposed changes in Senate Bill S1385.

This means an additional $5,000 in savings if the bill is enacted. Up next, we’ll look into local solar rebates that can help cut costs even further.

4. City and County Solar Rebates

Local governments often provide rebates to help reduce the cost of residential solar installations. These programs vary by location, but in some areas, they can cut costs by more than $5,000.

Examples of Local Programs

Cities like Cincinnati and Cleveland offer 15-year residential tax abatement programs. These programs exempt homeowners from paying higher property taxes after installing solar panels, saving residents between $100 and $240 annually, depending on median home values.

What You’ll Need to Apply

To qualify for most rebate programs, you'll typically need the following:

Key Points to Keep in Mind

Some rebate programs are no longer available or have reached capacity. Newer programs may require battery storage systems to qualify for rebates. Many installation companies take care of the rebate application process for you, often deducting the rebate amount directly from the total installation cost.

Tips for Accessing Local Rebates

To get the most savings:

• Reach out to your local government, utility providers, and manufacturers for details.

• Get quotes from several contractors to compare costs.

• Ensure your equipment and installer meet all necessary qualifications.

Seasonal Deals

Some solar installers offer additional rebates during the winter. These seasonal promotions can be combined with government incentives to further increase savings.

Check with local authorities to confirm current programs. When combined with federal and state tax credits, these local rebates can significantly reduce your solar installation expenses.

5. Solar Energy Certificates (SRECs)

Solar Renewable Energy Certificates (SRECs) provide homeowners with an opportunity to earn extra income from their solar systems. For every megawatt-hour (MWh) of electricity your solar panels generate (equal to 1,000 kilowatt-hours), you earn one SREC, which can then be sold to utility companies.

How SRECs Work

To estimate how many SRECs your system might generate annually, multiply your system's size in kilowatts by 1.2. For example, a 5-kilowatt system typically produces around 6 SRECs each year.

Current SREC Values by State

SREC prices vary depending on where you live, with some states offering higher returns than others. Here's a snapshot of recent SREC market values as of March 2025:

*Estimates based on 10–13 SRECs per year for a typical residential system
**Some states may no longer accept new applications

Now that you have an idea of SREC values, here’s how to get started.

Getting Started with SRECs

If you want to take advantage of SRECs, follow these steps:

• Check Eligibility: Find out if your state has an active SREC market through the Database of State Incentives for Renewables & Efficiency (DSIRE).

• Register Your System: Certify your solar installation with your state’s public utility commission.

• Choose a Trading Method: Partner with an SREC aggregator to help you get competitive pricing.

Market Considerations

SRECs operate separately from net metering. This means you can potentially earn income from selling SRECs while also receiving credits for any excess energy your system generates. The value of SRECs depends on factors like state-specific solar requirements, supply and demand, Alternative Compliance Payment (ACP) rates, and overall market competition. When combined with other solar incentives, SRECs can further lower your overall solar investment costs.

6. Net Metering Benefits

Net metering lets homeowners offset their electricity bills by earning credits for extra solar power their panels generate. This setup makes solar energy even more appealing by turning surplus electricity into savings.

How Net Metering Works

When your solar panels produce more electricity than you use, the excess flows back into the grid, effectively running your meter backward. At night or during cloudy periods, when your system generates less power, you pull electricity from the grid, moving the meter forward. At the end of the billing cycle, you're charged only for the "net" usage - the difference between what you consume and what you send back. This can lead to noticeable savings every month.

"Net metering is an electric billing tool that makes solar even more affordable. Think of it as a virtual piggy bank for your electricity; when your panels overproduce, the extra energy flows into the grid, earning you credits through your utility." - EnergySage

Credit Values and Savings

The value of net metering credits depends on state policies, which directly affect your savings. Here's a breakdown of how credits typically work:

State-Specific Policies

As of 2025, 34 states, Washington, D.C., and Puerto Rico require net metering programs. In California, the introduction of NEM 3.0 in April 2023 has adjusted compensation rates, making solar systems paired with storage a more attractive option for homeowners.

Maximizing Your Benefits

• Design your system to cover nearly 100% of your electricity needs.

• Use major appliances during off-peak times to optimize energy use.

• Check your utility's net metering policies on platforms like DSIRE.

Grid Benefits

Typically, only 20-40% of solar energy enters the grid. This benefits nearby customers, reduces energy loss during transmission, and helps utilities handle peak demand more efficiently.

"Net metering allows residential and commercial customers who generate their own electricity from solar power to sell the electricity they aren't using back into the grid." - Solar Energy Industries Association (SEIA)

7. Solar Property Tax Breaks

Solar property tax exemptions help homeowners avoid extra taxes from the increased home value that solar panels bring. By excluding the added value of solar systems from property tax calculations, these exemptions make solar energy systems more budget-friendly in the long run.

State-Level Exemptions

As of 2025, 29 states have rules in place to exempt some or all of the added value from solar panels in property tax assessments. Here are a few examples:

Value Impact and Savings

Installing solar panels often raises home values by around 4%. Without exemptions, this could mean an extra $62–$245 in annual property taxes on a $13,000 solar system.

"Solar property tax exemptions give homeowners the right to remove the added value of a solar panel system from the valuation of their home for tax purposes."

• Jacob Marsh, EnergySage

Local Government Programs

Some local governments also offer tax benefits to encourage solar adoption:

• New York City: Reduces property taxes by 5% of solar costs over four years.

• Cleveland: Provides a 100% tax abatement for 10–15 years.

• Cincinnati: Offers full tax abatements for qualifying solar systems.

These local programs work alongside state exemptions, offering even greater savings.

How to Qualify

To take advantage of these exemptions, follow these steps:

• Check your state’s specific rules for solar tax exemptions.

• Contact your local tax assessor for guidance.

• Provide proof of installation and system specifications.

• Submit all required documents before the stated deadlines.

Impact on ROI

These tax breaks can significantly improve your return on investment (ROI) by reducing costs and shortening the payback period, especially when paired with other solar incentives.

Conclusion

In 2025, combining solar tax credits and rebates can significantly lower the upfront cost of solar installations. By taking advantage of multiple incentives, homeowners can maximize their overall savings.

Total Potential Savings

For a standard 7.2‑kilowatt solar system priced at $21,816:

• Federal Solar Tax Credit: $6,544 (30% of the total cost)

• State Tax Credits: Up to $5,000 in states like Hawaii and New York

• Local Utility Rebates: Amounts vary depending on location

These combined savings highlight the financial advantages available to homeowners in 2025.

2025 Market Outlook

Here are some trends shaping the solar industry:

Next Steps

To make the most of these benefits, follow these steps:

1. Check your eligibility for federal, state, and local incentives.

2. Gather documentation for system specifications and installation costs.

3. Complete IRS Form 5695 to claim the Federal Solar Tax Credit.

4. Install your solar system before program deadlines expire.

5. Consult with a tax professional to ensure you claim all possible benefits.

With the Inflation Reduction Act offering tax credits through 2032 and utility rates on the rise, 2025 presents a great opportunity to invest in solar energy. This combination of incentives not only reduces upfront costs but also provides long-term savings, making solar a smart choice for homeowners looking to cut energy expenses and increase their return on investment.

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