Grants and Subsidies for Installing Solar Panels

The shift toward clean energy is no longer just a trend—it’s a critical necessity. In the United States, more homeowners and businesses are turning to solar energy as a sustainable and cost-effective alternative to conventional electricity. However, the upfront cost of installing a solar power system can still be a significant barrier. This is where grants and subsidies come into play, making it possible for more people to make the switch without breaking the bank.

Across the U.S., there are numerous financial incentives, rebate programs, and tax credits available to help reduce the cost of going solar. These incentives are offered at the federal, state, and local levels, and they vary depending on your location, your electricity usage, and the type of system you plan to install.

This article provides a comprehensive and up-to-date guide to the available grants and subsidies for solar panel installation in the U.S. We’ll break down what these incentives are, who qualifies, how to apply, and what you need to consider before moving forward with your solar project. Whether you’re a homeowner, a small business owner, or part of a nonprofit, understanding your options can help you save thousands and significantly shorten your return on investment.

What Are Grants and Subsidies for Solar Energy?

In the context of solar energy, grants and subsidies refer to financial incentives designed to lower the cost of installing solar photovoltaic (PV) systems. These can take various forms, such as direct cash grants, federal and state tax credits, rebates from utility companies, or property tax exemptions.

All of these mechanisms share a common goal: making renewable energy more affordable and accessible. By reducing the financial burden of going solar, grants and subsidies encourage more widespread adoption of solar technology, which in turn supports national goals related to energy independence, sustainability, and carbon emission reductions.

The most well-known of these incentives is the Federal Solar Investment Tax Credit (ITC), which has been instrumental in expanding residential and commercial solar installations across the U.S. But it’s far from the only program available. Many states and municipalities offer their own incentives, creating a complex but potentially very rewarding landscape for prospective solar users.

Federal Incentives: The Investment Tax Credit (ITC)

At the federal level, the primary incentive for solar panel installation is the Solar Investment Tax Credit, commonly referred to as the ITC. This program allows individuals and businesses to deduct a percentage of the cost of installing a solar energy system from their federal taxes.

As of 2025, the ITC allows for a 30% tax credit for residential and commercial solar systems. That means if you install a $20,000 solar system on your home, you can claim $6,000 back on your federal income taxes. There is no cap on the amount you can claim, and the credit applies to both equipment and installation costs.

This credit is nonrefundable, which means you must have enough tax liability to use the credit. However, any unused portion of the credit can be rolled over to future tax years.

For businesses, the ITC is part of the broader Investment Tax Credit program under the IRS Code Section 48, and it can be combined with other incentives, such as accelerated depreciation (MACRS), for even greater savings.

State and Local Solar Incentives

In addition to the federal ITC, many U.S. states offer their own grants and subsidies for solar energy installations. These incentives vary widely from state to state, and sometimes even between cities and counties.

Some of the most common state-level incentives include:

• Cash rebates: Offered by state energy departments or local utilities, these rebates reduce the upfront cost of installation.

• State tax credits: Similar to the federal ITC, these allow you to deduct a portion of your solar system costs from your state income taxes.

• Performance-based incentives (PBIs): These pay you based on the actual electricity your system generates over time.

• Sales and property tax exemptions: In some states, you don’t have to pay sales tax on your solar equipment, and your property’s assessed value won’t increase because of the added solar system.

A few examples of leading states with strong solar incentive programs include California, New York, Massachusetts, Illinois, and Maryland, but even traditionally less-sunny states like Minnesota or New Jersey offer meaningful benefits.

Because programs change often, it’s essential to check with your state energy office or local utility to get the most accurate and up-to-date information about the incentives available in your area.

Net Metering: Another Way to Save

Although not a direct grant or subsidy, net metering is a crucial policy that significantly boosts the value of a solar investment. With net metering, any excess electricity your solar panels produce is sent back to the grid, and your utility gives you a credit on your bill for that power.

This means that on sunny days when your panels generate more electricity than you use, your meter runs backward, reducing your overall utility bill. At night or during cloudy days, you can draw energy from the grid using those credits.

While net metering policies vary by state and utility provider, it remains one of the most valuable forms of indirect financial support for solar users.

Who Qualifies for Grants and Subsidies?

Eligibility for grants and subsidies typically depends on several factors:

• Property ownership: Most programs require that you own the home or building where the solar system is being installed.

• System size and type: Some incentives apply only to residential systems, while others are tailored for commercial or agricultural use.

• Installer requirements: In many cases, you must use a licensed or certified solar installer for your system to qualify for incentives.

• Geographic location: State and local programs are often limited to residents of specific areas or served by specific utility companies.

Homeowners, renters (with landlord participation), nonprofits, schools, farmers, and businesses of all sizes can all potentially benefit. The key is to understand which programs apply to your specific situation.

The Importance of Choosing Certified Installers

One of the most important steps in qualifying for grants and subsidies is choosing the right installer. Most incentive programs, whether federal, state, or local, require that the installation be done by a licensed, certified solar contractor.

Using a certified installer ensures that your system meets technical standards, complies with local codes, and is eligible for financial incentives. Certified installers are also more likely to be familiar with the paperwork and application processes needed to claim rebates, tax credits, or grants.

Additionally, reputable installers often offer assistance with incentive applications as part of their service package, which can save you time and reduce the risk of missing important deadlines.

How Much Can You Save?

Thanks to the combination of grants and subsidies, solar panels are now more affordable than ever. The average residential solar installation in the U.S. costs between $15,000 and $25,000 before incentives. After applying the federal ITC alone, that cost drops by 30%.

If you live in a state with additional incentives, you could see your net cost reduced by 40% to 60% or more. Add to that the long-term savings on your electricity bill—often ranging between $600 and $1,500 per year, depending on your energy usage—and the financial case becomes even stronger.

Most homeowners can expect to break even on their solar investment within 5 to 8 years, after which the electricity generated is essentially free. Considering that most solar panels come with 25-year warranties, the potential for long-term savings is significant.

What to Know Before You Apply

Before jumping into the application process for grants and subsidies, it’s important to take a few preliminary steps:

1. Assess your energy usage: Understand how much electricity you consume each month to determine what size system you need.

2. Evaluate your roof’s condition: Your roof should be in good shape and ideally face south for maximum solar exposure.

3. Get multiple quotes: Compare bids from at least three certified installers to ensure you’re getting a fair price and quality equipment.

4. Research all local incentives: Check federal, state, and local databases to see what financial programs you can apply for.

5. Understand the terms and deadlines: Some incentives are time-sensitive or limited in availability, so acting promptly can be crucial.

Environmental and Community Impact

Beyond financial savings, grants and subsidies for solar energy offer substantial environmental benefits. Solar panels reduce your carbon footprint, lower greenhouse gas emissions, and decrease air pollution. By adopting solar energy, you’re contributing to a cleaner, more sustainable energy grid.

On a broader level, solar adoption helps create local jobs in installation, manufacturing, and maintenance. It also reduces strain on the national power grid, which is especially valuable during peak demand seasons.

Government-supported solar programs can also improve energy equity by helping low-income households and underserved communities access renewable energy and reduce utility bills.

The Future of Solar Incentives in the U.S.

Looking ahead, the landscape for grants and subsidies in the U.S. is expected to grow even more favorable. Federal policies, such as the Inflation Reduction Act, have extended and expanded clean energy tax credits through 2032, and many states are ramping up their own green initiatives.

Additionally, innovations like community solar programs, which allow renters and people with unsuitable roofs to benefit from shared solar installations, are making renewable energy more inclusive.

Battery storage incentives and electric vehicle (EV) integration with solar systems are also becoming more prevalent, allowing homeowners to further maximize their energy independence.

The bottom line: solar incentives are here to stay—and they’re becoming more accessible and beneficial than ever.

Frequently Asked Questions (FAQ)

1. Can I still get a solar grant if I lease my panels?
Generally, most grants and subsidies apply only to purchased systems, not leased ones. However, some third-party providers may offer rebates or pass on some benefits to lease customers.

2. How do I claim the Federal Solar Tax Credit?
You’ll need to file IRS Form 5695 with your federal tax return in the year the system is installed. Your installer can usually provide a cost breakdown to include with your filing.

3. Are solar incentives taxable?
Grants may be considered taxable income, while tax credits directly reduce your tax liability. Check with a tax professional for your specific situation.

4. Do all states offer solar incentives?
Not all states have active solar incentive programs, but many do. Always check with your state energy office or a local solar professional to find out what’s available where you live.

5. Can I get incentives for adding a battery to my solar system?
Yes, many states and utilities now offer incentives for battery storage, and the federal tax credit applies to batteries when paired with a solar installation.