How Solar Incentives Are Expected to Change in the Next 5 Years

Solar power adoption in the U.S. has been propelled by a mix of federal and state incentives. These programs are subject to change, though, and in the next five years, homeowners and businesses can expect significant shifts in available solar tax credits, rebates, and policies. Below, we’ll break down the current landscape and anticipated changes, and offer guidance on how to navigate this evolving incentive environment.

Understanding the Current Landscape of Solar Incentives

For most homeowners looking to install solar panels, cost is a major factor in deciding when they install and how large their system is. Solar tax credits and rebates help cover installation costs, and programs like net metering help you save even more money after installation. Understanding your solar rebate forecast can help you maximize savings while incentives remain generous.

Overview of Current Solar Tax Credits and Rebates 

The cornerstone of solar incentives in the U.S. is the federal Investment Tax Credit (ITC), also known as the Residential Clean Energy Credit. This powerful incentive currently covers 30% of the total cost of a solar installation, providing an average savings of $3,000 to $9,000 for homeowners, a significant savings that has helped homeowners nationwide adopt solar.

On top of federal support, many states and utilities offer local rebates and credits to reduce the cost further. For example, Delaware’s Green Energy Program offers $0.70 per watt (capped at $6,000) to qualifying customers, while past programs in Maryland provided $1,000 rebates before shifting to more targeted grants. States like New Jersey, Pennsylvania, and Virginia continue to leverage other programs, including SREC markets, net metering, and property tax exemptions, to encourage adoption.

Legislative Context of Solar Incentives

Federal solar incentives date back to the late 1970s, but the modern incentive framework began with the Energy Policy Act of 2005, which introduced the 30% ITC. Over the years, this credit has been renewed, extended, or adjusted in response to market conditions and legislative priorities.

In addition to tax credits, state-level Renewable Portfolio Standards and net metering regulations have shaped the growth of solar markets. The 2019 Clean Energy Jobs Act in Maryland, for example, created a mandate for 50% renewable energy by 2030, with a significant solar carve-out. More recently, the Inflation Reduction Act (IRA) of 2022 reinforced solar’s momentum by extending the 30% ITC and broadening eligibility to include storage systems.

Anticipated Changes in Solar Incentives Over the Next Five Years

Although it’s impossible to predict the future of solar incentives, recent federal and state policy changes have trended in one direction: reducing solar incentive programs. Even as public support for renewable energy grows, lawmakers are beginning to phase out or restructure long-standing subsidies, often redirecting funds toward targeted or income-based initiatives. 

Potential Legislative Shifts and Their Implications 

In July 2025, a federal budget package known informally as the “One Big Beautiful Bill Act” set a surprising new course: the Residential Clean Energy Credit (30% ITC) will now expire on December 31, 2025. Originally slated to last through 2032, this change dramatically shortens the timeline and could lead to a rush of installations before the cutoff. These ITC changes could mark a turning point for the future of solar tax credit policy in the US.

At the state level, net metering programs are also under pressure. In Virginia, for instance, Appalachian Power proposed reducing net metering rates from $0.16/kWh to $0.04/kWh, citing cost burdens on non-solar customers. Similar proposals have emerged in California, North Carolina, and Florida. Additionally, legacy incentive programs like New Jersey’s SREC system have already been replaced or scaled down, and more states are expected to follow suit.

Review of the Investment Tax Credit (ITC) 

Currently, the ITC covers 30% of residential and commercial solar system costs, including batteries. This benefit was scheduled to step down gradually starting in 2033, but the 2025 legislation abruptly ended the residential credit after December 31, 2025. To qualify, residential systems must be fully installed and operational by that deadline. Construction on commercial projects must begin by July 4, 2026, and be completed by 2027 to retain the credit.

What does this mean for you? If you’re considering solar, there hasn’t been a better time to get it installed! The value of this tax credit is substantial, and missing the deadline could mean leaving thousands of dollars on the table.

Future Solar Rebate Forecasts 

While the ITC’s expiration captures headlines, state and utility rebates are also shifting. Some states, like Maryland, are replacing their rebate programs with income-based grants. Delaware’s Green Energy Program offers diminishing returns beyond a certain wattage, and many programs have capped budgets or sunset clauses.

Overall, the trend is clear: as solar technology becomes cheaper, direct rebates are being scaled back or redirected toward underserved communities. Homeowners should expect fewer broad-based rebates in the future and plan accordingly to secure current benefits.

The Role of Government Policies in Solar Energy Adoption

When it comes to solar, policy still drives the conversation. Federal and state programs work best in sync, helping reduce costs for homeowners ready to make the switch. On the plus side, as incentives start to shrink, falling prices and better technology are helping to close the gap.

Interplay Between Federal and State Policies 

Federal and state policies work best in tandem. The ITC provides a universal foundation, while state programs fine-tune incentives based on local needs. For example, a Delaware homeowner can combine the 30% ITC with state rebates and SREC payments, amplifying savings. States also rely on federal grants, like the $156 million recently allocated to Virginia, to fund local solar policies.

When federal support weakens, states may attempt to fill the gap, but budget limitations can hinder their efforts. Thus, consistency and alignment across both levels of government are critical for sustained solar growth.

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Technological Advancements vs. Policy Changes 

The National Renewable Energy Laboratory has found that solar panel prices have dropped more than 60% since 2010 due to innovation, and battery prices have fallen even faster. These advances reduce the reliance on subsidies and have made solar competitive with traditional electricity in many regions.

However, policy still matters. When California slashed its net metering credits under NEM 3.0, residential solar adoption dropped by up to 85% in some areas. This shows that even as technology becomes more affordable, policy changes can dramatically affect consumer decisions.

The Importance of Consumer Awareness

Incentives don’t last forever, and the ones available today might be gone tomorrow. Staying up to date on policy changes, using trusted resources, and speaking up when incentives are at risk can make all the difference for homeowners and the future of solar alike.

Staying Informed About Solar Incentives 

Incentives can change fast. Maryland’s rebate program disappeared in less than a year, and the ITC’s early expiration surprised many. If you’re planning your solar installation more than a year in advance, be aware that the incentives you see today might not exist when you’re ready to install.

To stay ahead, consumers should use resources like the DSIRE database, which is a comprehensive online database of federal, state, and local programs. Partnering with reputable solar installers can also ensure you don’t miss critical updates. You can search by state or zip code to see a current list of all solar-related incentives, from big programs to niche credits.

Beyond the DSIRE, consider following energy news outlets or newsletters. Many solar companies (Solar Energy World included) and nonprofits publish blogs or email updates whenever a significant policy change is in the works. Reputable solar installation companies will also keep you updated after you begin discussing installation. 

The Impact of Public Sentiment on Policy Decisions 

Public support plays a major role in shaping solar policy. In 2022, Florida residents successfully pressured Governor DeSantis to veto legislation that would have gutted net metering due to overwhelming public support for rooftop solar. The legislature had passed a bill to significantly roll back net metering credits for solar owners, which would have undermined the value proposition of rooftop solar. However, polls showed that roughly 84–90% of Floridians, across party lines, supported rooftop solar, so DeSantis vetoed the bill to protect Floridians from the financial strain it would cause.

Many current incentive programs have their roots in public advocacy; for example, Pennsylvania’s Solar for Schools grant program was championed by local coalitions of parents, teachers, and clean energy advocates who made their case to lawmakers. When incentive programs come under threat, these same stakeholders often rally to defend them. Organized advocacy, whether through environmental groups or concerned citizens, continues to influence regulatory outcomes and preserve incentives. 

Navigating the Future of Solar Incentives

If you’re considering solar, the time to act is now. Begin by checking your eligibility for federal, state, and local incentives. Plan your installation timeline around known deadlines, particularly the 12/31/2025 ITC expiration. Allow time for permitting, equipment ordering, and installer availability, especially as demand surges.

Consider bundling a battery system with your solar installation to maximize the 30% credit before it expires. And don’t wait for the perfect moment; the perfect time is when incentives are still in place.

The solar landscape will keep changing, but proactive homeowners and businesses can still capture meaningful savings. By staying informed, planning ahead, and advocating for strong policies, you can help ensure solar remains accessible for years to come.

Ready to take advantage of the ITC incentive? The team at Solar Energy World is here to help! Reach out today to schedule your free solar estimate.