Why solar incentives matter in 2025
Going solar is one of the smartest financial decisions homeowners can make – but the real key to maximizing your return lies in understanding and using available incentives. With the federal solar tax credit still at 30 percent in 2025, and multiple state and local programs available, homeowners stand to save thousands. However, these incentives are scheduled to step down in the coming years.
Here’s your updated guide to everything available in 2025 – and how to claim it before it’s gone.
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The federal solar tax credit (ITC)
The Investment Tax Credit allows you to deduct 30 percent of the total cost of your solar system from your federal taxes. This includes:
- Panels, inverters, mounting hardware
- Battery storage
- Labor and installation
- Permitting and inspection fees
For example, a $25,000 system would earn a $7,500 tax credit, reducing your true cost to $17,500.
Eligibility requirements:
- Must be installed on a residential property you own
- Must be your primary or secondary residence
- Must be placed in service during the tax year claimed
Important: The ITC begins to decrease after 2025
- 30% through 2025
- 26% in 2026
- 22% in 2027
- 0% for residential (10% for commercial) in 2028 unless extended by Congress
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California solar incentives (NEM 3.0 and beyond)
As of April 2023, California moved to Net Billing (NEM 3.0), which significantly changed how homeowners are credited for excess solar sent to the grid. Under NEM 3.0:
- Exported electricity earns less than retail value
- Battery storage becomes critical for maximizing solar value
Incentives still available in California include:
- The Self-Generation Incentive Program (SGIP): Rebates for adding battery storage, with increased rebates for low-income or high-risk fire zones
- Solar on Multifamily Affordable Housing (SOMAH): Incentives for solar on qualifying multi-unit dwellings
- Local city or county programs and rebates
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Utility rebates and local programs
Depending on where you live, your local utility may offer additional incentives such as:
- Upfront cash rebates per watt installed
- Performance-based incentives (payments over time based on production)
- Solar renewable energy credits (SRECs)
How to find local rebates:
- Visit your utility company’s website
- Use the DSIRE database (dsireusa.org) to search incentives by zip code
- Ask your installer (like Sky Solar Pro) for tailored local guidance
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Bonus incentives for low-income households
The Inflation Reduction Act of 2022 included bonus incentives for projects benefiting low-income communities or located in designated energy communities. These may offer additional tax credits or grant-style funding on top of the ITC.
How to claim your incentives
- Federal tax credit: File IRS Form 5695 with your tax return
- State and local rebates: Your installer will often apply on your behalf, or provide guidance
- Keep all invoices and proof of payment
Final thoughts: Don’t wait
If you’re considering going solar, 2025 is the final year to take full advantage of the 30 percent federal credit. Combined with local programs and battery rebates, this could be your most affordable chance to go solar.
Sky Solar Pro helps you navigate every incentive available and ensures you don’t leave money on the table.
Book a free consultation and let us build your solar savings plan before incentives drop.
