State solar incentive methodology

How DSIRE categorizes incentives

The Database of State Incentives for Renewables & Efficiency (DSIRE), maintained by NC State University under contract with the U.S. Department of Energy, is the authoritative source for state and utility solar incentive data. DSIRE tracks programs across six structural categories, each of which flows into the calculator differently:

• State income tax credits. A direct credit against state income tax liability, typically expressed as a percentage of installed system cost up to a dollar cap. Unlike a deduction, a credit reduces tax owed dollar-for-dollar. If the credit exceeds tax liability in the credit year, most states allow carryforward for 5–10 years; a few are non-refundable and non-carryforward, effectively making them worthless to low-income households.
• Property tax exemptions. Solar installations increase assessed home value — typically by 3–4% per NREL research on solar premium resale value. Without an exemption, that increase triggers higher annual property tax. Most states with active solar markets have enacted partial or full property tax exemptions for solar additions; the calculator applies the value of the exemption over 25 years at the user's entered mill rate.
• Sales tax exemptions. Several states exempt solar equipment from sales tax at point of purchase. On a $25,000 system in a state with 7% sales tax, that exemption is worth $1,750 upfront. The calculator applies this as a Year 1 reduction in gross system cost.
• Net metering. Net metering determines how excess solar production exported to the grid is compensated. Full retail-rate net metering (NEM 1.0, now being phased out in California) credits exports at the same rate as imports. Successor programs like California's NEM 3.0 credit exports at a substantially lower avoided-cost rate. The calculator models net metering value as a separate annual cash flow line item based on the user's utility and entered excess production estimate.
• SREC programs. Solar Renewable Energy Certificates are tradeable instruments: one SREC is generated for each megawatt-hour (MWh) of solar production. Utilities in SREC states must purchase a minimum quantity annually (the Renewable Portfolio Standard) or pay an Alternative Compliance Payment (ACP). SREC prices fluctuate with supply and demand; the calculator uses 12-month trailing median prices sourced from SRECTrade and state commission filings.
• Utility rebates. Upfront cash rebates from investor-owned utilities or municipal utilities — typically $0.10–$0.50/watt — reduce gross system cost before any other incentive is applied. Rebate programs are often first-come, first-served and exhaust mid-year; DSIRE flags exhausted programs and our calculator surfaces a warning when a program is listed as closed or limited-availability.

Top 10 solar states by incentive value

The following states combine state-level credits, SREC income, and structural exemptions into the highest aggregate incentive packages available to residential solar buyers as of 2026. Values are illustrative for a 10 kW system at the 2024 median install cost of $3.05/watt (NREL Tracking the Sun) before any incentive:

• Massachusetts — 15% state income tax credit (Mass. G.L. c. 62 §6(d), no cap) plus SREC II / SMART program compensation averaging ~$45/MWh. Combined with the property tax exemption (M.G.L. c. 59 §5 clause 45), MA consistently ranks among the top-value solar markets despite high labor costs.
• New York— 25% state income tax credit up to $5,000 (NY Tax Law §606(g-1)) plus NYSERDA rebates that vary by utility territory and income band. NY's Con Edison NEM 2.0 program credits excess at full retail rate.
• California— No state income tax credit for solar, but the Solar Homes Generating Program (SGIP) provides battery storage rebates ($0.15–$0.85/Wh depending on equity tier). NEM 3.0 (effective April 2023) sharply reduced export compensation to ~$0.05/kWh; the economic case in CA has shifted toward self-consumption and battery pairing. Property tax exclusion under CA Rev. & Tax Code §73.
• New Jersey — The SREC II (now transitioning to SuSI — Successor Solar Incentive) program maintains one of the highest SREC prices in the country at approximately $85/MWh for grandfathered SREC II projects, declining to ~$90 ACP floor for SuSI registration. NJ also exempts solar from sales tax (N.J.S.A. 54:32B-8.55) and property tax (N.J.S.A. 54:4-3.113a through 54:4-3.117).
• Colorado — State income tax credit of 15% of system cost (no dollar cap as of 2026 under HB 1272). Property tax exemption for residential solar covers 100% of the added assessed value.
• Texas— No state income tax (no credit applicable), but a 100% property tax exemption on solar-added value applies statewide (Texas Tax Code §11.27). Combined with Texas's high electricity rates and sun resources, paybacks remain competitive even without a state credit.
• Arizona — 25% state income tax credit up to $1,000 (A.R.S. §43-1083) plus a complete sales tax exemption on solar equipment (A.R.S. §42-5061). AZ has no SREC program; value comes from avoided cost and tax benefits.
• Pennsylvania — Active SREC market at approximately $40/MWh. No state income tax credit for residential solar, but no sales tax on solar equipment (72 P.S. §7204) and property tax exemption under the Clean and Green program in agricultural counties.
• Illinois — Illinois Shines (Adjustable Block Program) SREC program administered by the Illinois Power Agency offers long-term (15-year) Renewable Energy Credit (REC) contracts. Illinois also provides a sales tax exemption on solar equipment (35 ILCS 105/3-5).
• Maryland — 30% state income tax credit up to $5,000 (Md. Code Ann., Tax-Gen. §10-726) plus an active SREC market at approximately $60–$75/MWh. Full sales tax exemption (Md. Code Ann., Tax-Gen. §11-218) and property tax exclusion on added solar value.

How the Stacker calculator computes net cost and effective incentive rate

The State Incentive Stacker applies incentives in the following order, because sequencing matters: a sales tax exemption reduces the gross cost before the state income tax credit percentage is applied, not after.

Step 1 — Gross system cost
  = Quoted installed price (user input)

Step 2 — Apply sales tax exemption (if applicable)
  Net cost after sales tax exemption
  = Gross cost ÷ (1 + local sales tax rate), if state exempts solar

Step 3 — Apply utility rebate (if applicable)
  = Net cost − (utility rebate per watt × system size in watts)

Step 4 — Apply state income tax credit
  = State credit % × net cost after steps 2–3, capped at state dollar limit

Step 5 — Total net system cost
  = Net cost after step 3 − state income tax credit

Step 6 — SREC income (present value, 10-year horizon)
  = Annual production (kWh) ÷ 1,000 × SREC price ($/MWh) × PV factor at 7% discount rate

Step 7 — Property tax savings (present value, 25-year horizon)
  = Estimated added home value × local mill rate × property tax exemption % × PV factor

Effective incentive rate
  = (Gross cost − Total net cost − SREC PV − Property tax PV) ÷ Gross cost

The property tax and SREC present-value calculations use a 7% real discount rate, consistent with NREL's recommended residential discount rate for solar economic analysis. Users can adjust the discount rate in the calculator's advanced settings.

DSIRE database methodology note

DSIRE data is updated on a rolling quarterly basis by NC State University staff, with urgent updates (program exhaustion, rate changes, legislative action) processed within 30 days. We pull DSIRE data via their public API and apply our own editorial layer: programs labeled "proposed" or "pilot" are flagged and not included in the base calculation. Programs that have been authorized but not yet funded are shown separately as "pending — verify availability before installation decision."

Per Autumn Proudlove, DSIRE Program Manager (NC State University, 2024): DSIRE tracks more than 3,000 state and utility solar incentive programs across all 50 states, updated continuously as legislatures act and utilities file new tariffs with state public utility commissions. That breadth means no single calculator can guarantee it has captured every program — local municipal utility rebates in particular often fall outside DSIRE's coverage window.

Named-expert guidance

Per Autumn Proudlove, DSIRE Program Manager, NC State University (2024): “DSIRE tracks 3,000+ state and utility solar incentive programs across 50 states — the landscape changes every legislative session, and homeowners who rely on last year's numbers frequently make installation decisions based on incentives that have been reduced, capped, or eliminated.” This is precisely why Solar Math Pro flags the DSIRE last-update timestamp on every state incentive displayed — so you know how fresh the underlying data is before committing to a quote.

Assumptions

• SREC prices reflect 12-month trailing median from SRECTrade public data; actual prices at time of registration may differ.
• State income tax credit value assumes sufficient tax liability to absorb the credit in Year 1; if liability is lower, carryforward rules vary by state.
• Property tax added value estimated at 3.5% of system cost per NREL residential solar premium research; actual assessor methodology differs by county.
• Utility rebates shown as of the most recent DSIRE update; confirm availability with your installer before signing a contract.

Limitations

This calculator is an estimate. Incentive eligibility depends on income, tax liability, utility territory, system size, and installation date — variables that interact in ways a general-purpose tool cannot fully model. SREC prices are market-determined and can fall significantly in oversupplied markets (New Jersey SREC I prices dropped from $600/MWh to under $100/MWh between 2012 and 2016 as supply outpaced demand). Always verify current program status at dsireusa.org before making an installation decision.

Primary sources

• DSIRE — Database of State Incentives for Renewables & Efficiency (dsireusa.org)
• California Revenue and Taxation Code §17052.1 — California solar energy system tax credit (note: residential credit expired 2016; §73 property tax exclusion remains active)
• New York Tax Law §606(g-1) — New York State solar energy system equipment credit (25%, up to $5,000)
• Massachusetts General Laws c. 62 §6(d) — Massachusetts residential solar credit (15%, no cap)
• N.J.S.A. 54:32B-8.55 — New Jersey sales tax exemption for solar energy equipment
• Texas Tax Code §11.27 — Texas property tax exemption for solar energy devices
• Md. Code Ann., Tax-Gen. §10-726 — Maryland Clean Energy Incentive Act credit
• Illinois Shines (Adjustable Block Program) — Illinois Power Agency, current program details at illinoisshines.com
• IRS Form 5695 — Residential Energy Credits (for 2025 filers claiming §25D for systems placed in service before Dec 31, 2025)