Solar Panel Tax Credit Calculator

How to use this calculator

The calculator above stacks the percentage credit, a flat-rate state or utility rebate, and your gross system cost into a single net-cost number and effective discount percentage:

1. Gross system cost — total contract price quoted by your installer before any incentives. EnergySage’s H2 2025 marketplace data puts the U.S. residential median at $2.85/W installed, so a typical 7 kW system runs about $20,000.
2. Tax credit (% of cost) — start with 30 for the federal ITC alone. Add your state credit if applicable: New York 25%, South Carolina 25%, Hawaii 35% (capped at $5,000), Massachusetts 15% (capped at $1,000), Arizona 25% (capped at $1,000). Stacking is additive but watch the per-state cap.
3. Additional flat rebate — utility cash rebates and state up-front rebates that arrive as a check, not a tax-return line. New Jersey TREC/SREC II programs, NY-Sun MW Block payments, Mass SMART, Illinois Solar for All, Connecticut RSIP, Long Island PSEG rebate, etc. Cap by program is published on DSIRE.

How the math works

Both incentive types reduce your net cost, but they apply at different points in your tax flow:

percentage_credit = gross_cost × pct/100   (claimed on Form 5695, reduces tax owed)
flat_rebate       = state_rebate_amount    (received up-front from utility or state)
total_incentive   = percentage_credit + flat_rebate
net_cost          = gross_cost - total_incentive

A 7 kW system at $20,000 in New York with a $1,500 NY-Sun residential block payment:

• Federal ITC: $20,000 × 30% = $6,000 credit on Form 5695
• NY state credit: $20,000 × 25%, capped at $5,000 → $5,000 on NYS Form IT-255
• NY-Sun flat rebate: $1,500 received from utility
• Net cost: $20,000 − $6,000 − $5,000 − $1,500 = $7,500
• Effective discount: 62.5%

Note the federal ITC is calculated on the gross cost only when state credits and utility rebates are after-tax. Up-front utility rebates that come as a discount on the contract price reduce the basis. If the utility writes you a $1,500 check after install, your ITC is still on $20,000. If the installer takes a $1,500 utility assignment off the contract and bills you $18,500, your ITC is on $18,500. Read the rebate terms carefully.

Federal Residential Clean Energy Credit — what qualifies

Section 25D covers the following equipment installed at a primary residence or qualifying second home:

• Solar electric (PV) panels and inverters — modules, microinverters, string inverters, optimizers, racking, balance of system, conduit, wiring, monitoring.
• Solar water heating — collectors, storage tank, controls, certified by SRCC OG-300.
• Battery storage — standalone or PV-paired, ≥3 kWh capacity, since 2023.
• Geothermal heat pumps — closed-loop or open-loop, EPA-Energy-Star certified.
• Small wind turbines — up to 100 kW nameplate.
• Fuel cells — minimum 0.5 kW capacity (fuel cells have a $500/0.5 kW limit).

Not eligible: leased systems (the third-party owner claims the ITC), used equipment, expanding an existing system that was already credited, or systems on rental properties (commercial ITC route required).

State income-tax credits worth claiming (2026)

The DSIRE database (NC State University) is the authoritative source. The biggest stackable state credits in 2026:

These are tax credits — they reduce your state income-tax liability. Filing requirements vary by state; most use a residential energy credit form attached to the state income-tax return.

Utility rebates and state cash programs (flat-rebate slot)

Programs that pay cash rather than reducing tax. Big ones in 2026:

• NY-Sun (NYSERDA) — MW Block residential incentives, $0.20–$0.50/W depending on region and queue position. Check current block at nyserda.ny.gov.
• Mass SMART — declining-block production-based incentive, paid out per kWh over 10 years. Compensation ranges $0.05–$0.20/kWh by service territory and block.
• NJ SREC-II / SuSI — successor to SREC; pays per MWh produced for 15 years. ~$85/SREC current market.
• Illinois Solar for All / Adjustable Block — guaranteed $0.075/kWh for low-income; market rates for general residential.
• Long Island PSEG Long Island — $300–$400 cash rebate plus net metering.
• CT Residential Solar Investment Program (RSIP) — closed but check Eversource and UI for successor performance-based incentive.
• Austin Energy Solar PBI — $2,500 flat residential rebate plus net metering.
• Sacramento SMUD — production-based incentive plus interconnection rebate.

Federal ITC with batteries — worked example

Battery storage qualifies for the 30% credit since 2023, even standalone. Combined solar + battery example:

• 7 kW PV: $20,000
• 13.5 kWh Tesla Powerwall 3: $11,500 installed
• Combined gross: $31,500
• Federal ITC: $31,500 × 30% = $9,450 credit on Form 5695
• Net cost: $22,050

If you live in a state with a stackable battery rebate (Mass Connected Solutions pays Powerwall owners $1,000–$2,000/yr to enroll; CA SGIP equity tier pays $850–$1,000/kWh on qualifying batteries), the effective net can drop another 15–30%.

ITC vs. lease vs. PPA — who claims the credit?

The 30% Residential Clean Energy Credit goes to the system owner, not the user. Three financing structures:

• Cash purchase / loan — you own it, you claim the 30%.
• Lease (third-party-owned) — the leasing company owns the system and claims the ITC. You receive a monthly payment for the use of the equipment but no credit.
• PPA (Power Purchase Agreement) — same as lease for ITC purposes — third-party owns, third-party claims.

If maximizing tax credits matters and you have enough tax liability, cash purchase or loan beats lease/PPA. See our solar lease vs. buy calculator for a full 25-year cashflow comparison.

Pair this with the investment tax credit calculator, cost calculator, and payback calculator

The tax credit calculator gives you the static net cost; the payback calculator turns that into break-even years; the cost calculator validates your gross before incentives. Run all three before signing — and verify state and utility programs at DSIRE before plugging numbers in.

Sources

• IRS — Residential Clean Energy Credit (Form 5695 instructions) — definitive authority
• DSIRE database (NC State University) — every state, utility, and local incentive
• EnergySage Solar Marketplace Report H2 2025 — installed cost-per-watt benchmarks
• SEIA — Solar Investment Tax Credit Resource Page — policy summary and FAQ
• DOE — Homeowner’s Guide to the Federal Tax Credit — qualifying expenditures
• NYSERDA NY-Sun — residential block schedule