Solar Incentives in 2026
The federal residential credit died on December 31, 2025. The full picture below shows what's still available at the federal, state, and local level, plus the prepaid-lease workaround that captures the 30% commercial credit on behalf of residential homeowners.
Federal Picture
What's alive, what's dead, what changed
The One Big Beautiful Bill Act (OBBBA, signed July 2025) reshaped the federal solar tax landscape. Here's where each program stands for 2026.
Section 25D (Residential ITC)
EXPIREDThe residential clean energy credit expired December 31, 2025. Homeowners who buy a system with cash or a personal loan in 2026 get $0 federal credit on the purchase itself. This is the biggest change from prior years.
Section 48E (Commercial Clean Electricity ITC)
ACTIVEThe commercial credit is alive at 30% base rate. Available to third-party owners who install solar on residential rooftops under a lease or PPA. The lessor claims the credit and passes the value to the homeowner through lower pricing. This is the legal mechanism behind the prepaid-lease workaround below.
Solar Sales Tax Exemption
ACTIVEBoth CT (6.35%) and NY (4% state plus local) exempt residential solar equipment and installation labor from sales tax. On a $25,000 system, that saves $1,500 to $2,000 off the top.
Solar Property Tax Exemption
ACTIVECT and NY both exempt the added home value from solar from property tax assessment. A $30,000 system that adds $25,000 in resale value generates zero new property tax. CT is permanent. NY is 15 years.
The Prepaid-Lease 30% Workaround
Section 25D died for homeowners. Section 48E is alive for businesses. A prepaid lease lets a third-party owner (TPO) claim the 30% commercial credit and pass the value through to you in the form of a discounted lease price. Net effect: up to 30 to 35% off retail.
How the math works (typical 10 kW system)
Retail system cost
Typical 10 kW residential system before any incentive
$30,000
Section 48E credit (30%)
Claimed by the lessor (the TPO provider), passed through to your lease price
−$9,000
MACRS depreciation pass-through
Lessor depreciates the equipment over 5 years and passes a portion of that benefit to your price
−$1,500 to −$2,000
Your effective net price
30% to 35% below retail, paid as a one-time prepaid lease
$19,000 to $19,500
The mechanism, in plain English
- 1.A TPO provider (the lessor) buys the solar equipment and installs it on your roof.
- 2.Because they're a business and the equipment is "commercial use" in their hands, they claim the Section 48E credit (30% base rate) on their corporate taxes.
- 3.They also depreciate the equipment under MACRS over 5 years, which provides an additional 5 to 7 cents per dollar of equipment cost in tax benefit.
- 4.You pay a single upfront prepaid-lease price, set lower than the retail system cost to pass those tax benefits to you. The combined ITC + MACRS pass-through typically lands at 30 to 35% off retail.
- 5.The lessor keeps title to the equipment for 5 full years (the IRS recapture period). At the start of year 6, ownership transfers to you for $0 or a nominal $1 fee.
- 6.From year 6 onward, the system is yours. All the electricity it produces is yours. No monthly payments. No escalator. Same long-term economics as a cash purchase, at 30%+ less upfront cost.
Restrictions under the law (read these before signing anything)
This is a real legal mechanism, not a loophole. But it has hard rules.
Begin-construction deadline
The 30% rate applies only to TPO systems that begin physical construction by July 4, 2026, OR are placed in service by December 31, 2027. After those deadlines, the credit phases down. If you want the full 30% pass-through, you need to be in contract early enough that your installer can break ground before that window closes.
Five-year ownership requirement (IRS recapture)
The lessor must own the system for five full years from the date it's placed in service. If ownership transfers before then, the IRS recaptures the credit. In practice, most prepaid-lease contracts schedule the ownership transfer at the start of year 6 for an additional safety margin.
Year-6 transfer terms (read the contract)
Most TPO providers transfer ownership at the end of the recapture period for $0 or $1. Some contracts reference 'fair market value at the time of transfer' instead of a fixed nominal price. FMV at year 6 is typically low, but it's not zero by default. Confirm the transfer price in writing before signing.
FEOC (Foreign Entity of Concern) cost ratios
OBBBA introduced FEOC rules for 2026 onward. Solar facilities must meet minimum non-FEOC cost ratios, starting at 40% for projects beginning construction in 2026 and rising to 60% by 2030. Your installer needs to use equipment that meets the threshold for the lessor to qualify for the full credit. Reputable TPO providers handle this in their supply chain; ask for confirmation in writing.
Domestic content thresholds
Projects beginning construction in 2026 need at least 50% domestic content to claim the related domestic-content bonus. The base 30% credit does not strictly require domestic content, but stacked bonuses do. This affects which panel and inverter brands a lessor can use to get the maximum credit value.
Early-buyout penalty
If you want to buy out the lease before year 5, the buyout price is the greater of fair market value OR the present value of remaining lease payments discounted at 5%, plus any recaptured tax credits the lessor has to pay back to the IRS. Translation: an early buyout in years 1 to 4 is almost always a bad financial move. Plan to ride the recapture period.
Why this is the best 2026 option for most homeowners
With Section 25D gone, a cash buyer in 2026 pays full retail price and gets no federal credit. A loan buyer pays full retail price plus interest, also no federal credit. A prepaid-lease buyer pays roughly 70% of retail because the lessor captures the 30% commercial credit and passes it through. After 5 years, the prepaid-lease buyer owns the system free and clear.
In plain math: same system, 30% less out of pocket, same long-term ownership. That's why we rank prepaid lease as the best 2026 path for most homeowners in CT, NYC, and Long Island. Subject to the restrictions above and the July 4, 2026 begin-construction deadline.
Region · Connecticut
Connecticut Solar Incentives
CT has no state solar tax credit, but the incentive stack is still meaningful: Green Bank financing, full-retail RRES netting, the ESS battery program, and permanent sales and property tax exemptions. Average CT electric rate of 28 to 30¢/kWh keeps the payback math strong even without a federal credit.
CT Green Bank Smart-E Loan
6.99 to 7.99% APR · $0 down · up to $50,000
Low-interest solar financing through CT Green Bank's lender network. Loan term 5 to 15 years. Up to 25% of the loan can fund non-energy improvements like roof work. Income-qualified households may access additional rate buy-downs. Available statewide.
RRES Netting Tariff (Eversource and UI)
Full retail credit · 20-year rate lock
Residential Renewable Energy Solutions netting credits excess solar production at the full retail rate ($0.27 to $0.29/kWh in 2026). Locked for 20 years from your first interconnection. Heads up: 2026 added a $0.0402/kWh charge on all solar production, an 8x increase from the prior $0.005/kWh. For an 11 kW system, that costs about $520/year and reduces net savings by roughly 15%.
RRES Buy-All Tariff (alternative)
$0.3289/kWh fixed (2026 rate)
The Buy-All option sells all your solar production to the utility at a fixed rate, and you buy all your electricity at the standard retail rate. Better for homes with low daytime consumption or oversized systems. Your installer should model both tariffs against your actual usage before you pick one. The tariff choice is locked for 20 years.
Energy Storage Solutions (ESS)
$250 to $600 per kWh · capped at $16,000
Upfront incentive for battery storage paired with solar (or standalone). $250/kWh standard, $450/kWh in underserved communities, $600/kWh for low-income households. Cap is the lesser of $16,000 or 50% of equipment cost. For a 13.5 kWh battery, that's $3,375 to $8,100 back at install. Funding rolls in tranches and pauses when subscribed. Confirm current availability before counting on it.
100% Sales Tax Exemption
6.35% off the top
CT exempts residential solar equipment and installation labor from the 6.35% state sales tax. On a $25,000 system, that's about $1,588 in savings, applied at purchase rather than as a credit you have to claim later.
Permanent Property Tax Exemption
100% exempt indefinitely
CT General Statutes § 12-81(57) permanently excludes residential solar from property tax assessment. The full added home value from your system (typically $15,000 to $34,000 depending on size) is excluded from your taxable assessment forever. Some assessors request the CEEF-43 form for documentation; your installer can provide it.
Region · New York City
New York City Solar Incentives
NYC has the strongest incentive stack in our service area, primarily because of two programs: the 25% NY state tax credit (refundable for income-qualified, applies to leases) and the NYC SEGS property tax abatement that returns 30% of system cost over four years. Con Edison rates of 32 to 35¢/kWh mean every kWh of solar is worth more.
NY State Solar Tax Credit
25% of system cost · up to $10,000 in 2026
Tax credit equal to 25% of your solar system cost, capped at $10,000 (up from $5,000 in prior years). For 2026 installs, the credit is refundable for income-qualified households for the first time. Applies to both purchased AND leased systems. Non-refundable portion can be carried forward up to 5 years.
NYC SEGS Property Tax Abatement
30% of system cost over 4 years · 7.5%/year
The Solar Electric Generating System abatement reduces your NYC property tax by 7.5% of your solar system cost (net of NYSERDA rebate) each year for four years, totaling 30%. Cap is $62,500 per year, $250,000 total. Applies to systems placed in service between January 1, 2024 and January 1, 2035. Works for tax class 1, 2, and 4 properties (residential homeowners, condo owners, commercial buildings, co-op shareholders).
NY-Sun NYSERDA Rebate (Con Edison territory)
Low-income only as of March 2026
The standard-income MW Block incentive closed in Con Edison territory as of March 2026. Only low-income households (≤80% Area Median Income) are currently eligible for the Affordable Solar Residential Incentive. If you qualify, the rebate is applied upfront against system cost. NYSERDA reopens block funding periodically; ask before assuming it's available.
VDER Net Metering (Con Edison)
Value-of-DER credits at retail-equivalent rates
Value of Distributed Energy Resources framework compensates exported solar at rates reflecting energy value, location, and time of day. NYC's higher Con Edison retail rates ($0.32 to $0.35/kWh) mean VDER credits in NYC tend to be more valuable per kWh than upstate. Net metering is automatic once your interconnection is approved.
NY State Sales Tax Exemption
4% state + most local
NY exempts solar equipment from the 4% state sales tax, and most local jurisdictions (including NYC) also exempt the local portion. Combined with NYC local sales tax (4.5%), the total exempt rate is around 8.875%. On a $25,000 system, that's roughly $2,200 saved at purchase.
Local Law 92/94 Compliance
Mandatory on new construction and major roof work
Newly constructed buildings and buildings undergoing major roof renovations must install solar PV or green roofs. If you're already in a major renovation cycle, the solar install can satisfy the LL92/94 requirement at the same time as your roof work, avoiding a separate compliance project later.
Region · Long Island
Long Island Solar Incentives
Long Island shares the 25% NY state tax credit with NYC and the rest of the state. The PSEG LI standard MW Block has been closed since 2016, so the local rebate is now only available to income-qualified households. PSEG LI rates of 22 to 24¢/kWh keep solar economics strong even with the reduced rebate.
NY State Solar Tax Credit
25% of system cost · up to $10,000
Same statewide credit available to NYC and Long Island homeowners. 25% of system cost, capped at $10,000 in 2026 (up from $5,000), refundable for income-qualified, applies to purchased AND leased systems. Non-refundable portion carries forward up to 5 years.
NY-Sun PSEG LI Affordable Solar Incentive
$0.40/W for low-income · standard block closed
The standard residential MW Block in PSEG LI territory closed in April 2016. The remaining incentive is the Affordable Solar Residential Incentive at $0.40/W of nameplate capacity, available only to households at or below 80% Area Median Income. For a 10 kW system, that's $4,000. Check eligibility before assuming.
PSEG LI VDER Net Metering
Value-based credits, retail-rate-equivalent
PSEG LI applies the VDER framework to residential solar exports. Energy you sell to the grid becomes a credit applied against grid electricity you use later. PSEG LI's electricity rates (22 to 24¢/kWh average) make the credit valuable, though slightly less than Con Edison rates in NYC.
NY State Sales Tax Exemption
4% state + most local
Solar equipment is exempt from the 4% state sales tax plus local sales tax in most LI jurisdictions. Combined effective rate around 8.625%. On a $25,000 system, roughly $2,000 saved.
15-Year Property Tax Exemption
100% of added value excluded
NY state law excludes the added home value from solar from property tax assessment for 15 years. Some municipalities opt out, but most LI towns participate. Your installer files the RP-487 form on your behalf as part of the install paperwork.
Coastal-zone considerations
Permitting nuance, not an incentive
Long Island installs near the coast may require additional FEMA flood-zone or wind-load permitting. This isn't a financial incentive but it affects which installers can serve you. Local LI installers (SUNation, GreenLogic) tend to handle this routinely; out-of-area installers may need extra time.
Not tax advice
Incentive rules change. Eligibility depends on your specific situation, income, and timing. Confirm every credit with a CPA or qualified tax professional before signing a contract. Begin-construction deadlines and FEOC rules are evolving; ask your installer for written confirmation that their supply chain meets the requirements for the credit value you've been quoted.
Want us to calculate your exact stack?
We'll run every incentive you qualify for, model the prepaid-lease pass-through against cash and loan options for your specific home, and show you the real numbers.
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