New York Solar Tax Credits Explained: How to Stack Federal and State Incentives

New York’s solar incentive landscape looks different in 2026 than it did a year ago. The federal residential tax credit has expired for new customer-owned installations — and that’s created a lot of confusion about what’s still available, what’s gone, and whether the numbers still make sense.

The short answer: they do. New York’s state-level incentives remain intact, and for homeowners who understand how they work together, the savings case is still compelling. This guide covers the meaningful incentives available to Upstate NY homeowners right now — and exactly how to use them.

Key Takeaways

• The New York State Solar Tax Credit is available for owned, leased, and PPA systems — eligibility extends beyond outright purchase to qualifying lease and power purchase agreements
• NY-Sun reduces your upfront cost before tax credits are calculated — the incentive is applied by your installer at the point of sale
• New York’s property tax exemption means solar won’t raise your tax bill — the added home value from a solar installation can be excluded from your property assessment
• Full retail net metering is intact in New York — every kilowatt-hour you export earns a credit at the rate you pay to consume
• Solar equipment is exempt from New York State sales tax — the exemption is handled by your installer at the point of sale, with no separate application required.

The New York State Solar Tax Credit: How It Works

Officially called the Solar Energy System Equipment Credit, the New York State Solar Tax Credit is a 25% credit on qualified solar energy system equipment expenditures, up to a maximum of $5,000. Unlike a deduction — which reduces the income subject to tax — a tax credit reduces what you actually owe, dollar for dollar.

For most homeowners, this is the single largest one-time incentive available in 2026.

What the Credit Covers

The 25% credit applies to your total qualified equipment expenditures, which includes:

• Solar panels and equipment
• Labor and installation
• Permitting and engineering
• Interconnection fees

Battery storage installed alongside a solar system may also qualify, depending on how the system is configured. A tax professional can confirm eligibility for your specific setup.

Who Is Eligible

According to the NY Department of Taxation and Finance, you can claim this credit if you:

• Purchased solar energy system equipment outright, or
• Entered into a lease agreement for solar energy system equipment, or
• Entered into a PPA (a written agreement spanning at least 10 years for the purchase of power generated by solar energy system equipment not owned by you)

The system must use solar radiation to produce energy for residential use and must be installed and used at your principal residence in New York State.

Carrying the Credit Forward

If your state tax liability in the year of installation is less than the full credit amount, you can carry the unused portion forward for up to five years. This makes the credit accessible even for homeowners with moderate annual tax bills. The credit is claimed by filing Form IT-225 with your annual New York State tax return.

A Practical Example

*Credit caps at $5,000 regardless of system size.

        Always confirm your specific credit amount with a qualified tax professional. These figures are illustrative and based on starting prices before NY-Sun incentives are applied.

What Happened to the Federal Solar Tax Credit?

The 30% federal residential Investment Tax Credit (ITC) expired for customer-owned systems installed after December 31, 2025 — it no longer applies to new installations, and any contractor still quoting it for 2026 systems is giving you outdated information. If you installed before that date and haven’t yet addressed this on your taxes, consult a tax professional as extensions and amended returns may still be options.

NY-Sun and the NYSERDA Solar Rebate

NY-Sun is NYSERDA’s primary incentive program for residential and commercial solar installations in New York State. Its core residential incentive is the Megawatt Block program, which provides an upfront per-watt rebate that reduces your installed cost before tax credits are calculated. Rates vary by region and phase out over time as capacity fills — your installer can confirm the current rate for your area.

How the NY-Sun Incentive Works

Point-of-Sale Reduction

The NY-Sun incentive is applied directly by your installer at the point of sale — it flows from NYSERDA to the contractor, reducing the price you’re quoted. The incentive amount must be disclosed in your customer contract.

How Incentive Amounts Are Determined

According to NYSERDA, the exact incentive amount depends on project size and location. Incentives are structured to phase out over time as more New Yorkers install solar and the market matures — so the amount available to you will depend on when you install and where you are.

NYSERDA-Approved Installer Requirement

To access NY-Sun incentives, installation must be completed by a NYSERDA-approved contractor. New York Electric & Solar participates in the NY-Sun program, so customers installing through us are positioned to access available incentives in Upstate NY.

Why the Order of Stacking Matters

Because NY-Sun reduces your upfront cost, and the NY State Solar Tax Credit is calculated on your system cost, the sequencing affects your final numbers. In most cases:

1. NY-Sun incentive is applied first, reducing out-of-pocket cost
2. NY State Tax Credit (25%, up to $5,000) is calculated on the installed cost and claimed on your state return
3. Net metering credits begin accumulating once your system is activated

A tax professional can help you understand how the interaction between these two programs affects your specific credit calculation.

Net Metering in New York: Your Ongoing Return

Tax credits are a one-time event. Net metering is where the long-term financial return of solar lives — and New York’s net metering policy is one of its strongest ongoing advantages.

How New York Net Metering Works

Under full retail net metering, the excess electricity your solar panels send to the grid earns a credit at the full retail rate — the same rate you pay when you consume grid power. That’s a significantly better deal than wholesale buyback rates offered in some other states.

Monthly and Annual Credit Rollover

Credits roll over from billing period to billing period. Annual rollover treatment varies by utility and the terms of your net metering agreement — for many systems installed after 2018, credits can carry forward for the duration of the 20-year term, but some utilities apply an annual true-up where remaining credits are paid out at a reduced rate. Confirm the specifics with your utility before installation.

The Customer Benefit Contribution (CBC)

Homeowners who install solar after January 1, 2022 pay a monthly Customer Benefit Contribution (CBC) charge, ranging from $0.97 to $1.67 per kW of solar installed depending on the utility. This is a modest fee that partially offsets net metering benefits, but for most systems it has a minimal impact on overall savings.

20-Year Net Metering Term

New solar customers participate in the net metering program for a 20-year term from the date of interconnection. That’s two decades of locked-in full retail credit rates — meaningful protection against future changes in utility billing policy

A Note on VDER

New York also offers an alternative billing program called VDER (Value of Distributed Energy Resources). Under VDER, excess solar energy is valued using a formula based on multiple factors rather than the simple 1:1 retail credit of net metering. Homeowners can opt into VDER, but for most residential customers standard net metering will save more money.

New York has announced it will eventually phase out net metering in favor of VDER, though no official transition date has been set. Homeowners who install now are grandfathered into the current net metering program for 20 years regardless of when that change takes effect.

Two More Incentives Worth Knowing About

The NY-Sun incentive, state tax credit, and net metering get most of the attention — but there are two additional benefits that belong in any complete picture of New York solar incentives.

The New York State Real Property Tax Exemption

Installing solar can increase your home’s assessed value — which would normally mean a higher property tax bill. New York lets you exempt that added value from your property assessment for up to 15 years, so your solar system builds equity without raising your taxes. To claim the exemption, file Form RP-487 with your local property assessor after installation.

Important Caveat

Some local governments in New York have opted out of this exemption, meaning they will include the value of the solar installation in your property assessment. Check with your local assessor’s office — or ask your installer — before assuming the exemption applies in your municipality.

The New York Sales Tax Exemption

Solar energy system equipment is 100% exempt from New York State sales and use tax. This exemption is handled directly by your installer at the point of sale — there’s no separate application required. Some municipalities also offer a local sales tax exemption on solar equipment; your installer can confirm what applies in your area.

Financing Your System

New York Electric & Solar offers $0 down financing, and NYSERDA provides two additional low-interest loan products through Energy Finance Solutions: the On-Bill Recovery Loan, which adds your payment directly to your utility bill, and the Smart Energy Loan, which operates as a separate monthly payment. For homeowners who don’t qualify for traditional financing, NYSERDA’s products may offer lower interest rates than standard personal loans.

Use NYSERDA’s interest rate estimator to see what rate you may qualify for.

How to Stack New York’s Solar Incentives

For a 2026 installation in Upstate New York, here’s how the full incentive picture fits together:

Step 1 — NY-Sun Incentive (Upfront, at Point of Sale)

Applied by your NYSERDA-approved installer before you pay. Reduces your out-of-pocket cost directly.

Step 2 — New York State Solar Tax Credit (Year of Installation)

Claimed on your New York State income tax return as the Solar Energy System Equipment Credit. Worth 25% of your qualified system cost, up to $5,000. Available for purchased, leased, and qualifying PPA systems. Carry forward for up to five years if needed.

Step 3 — Property Tax Exemption (File After Installation)

Apply with your local property assessor to exclude the added home value from your property tax assessment. Confirm your municipality participates before installation.

Step 4 — Sales Tax Exemption (At Point of Sale)

Applied automatically by your installer. No action required.

Step 5 — Net Metering Credits (Ongoing, 20-Year Term)

Begin accumulating once your system is activated and interconnected. Credits roll over month to month and year to year, offsetting your utility bills for the life of the program term.

Frequently Asked Questions About New York Solar Tax Credits

Are solar panels tax deductible in New York?

Not as a deduction — but something more valuable: a direct tax credit. The Solar Energy System Equipment Credit reduces what you actually owe the state dollar for dollar, up to $5,000.

Is the federal solar tax credit still available in New York in 2026?

No — the 30% federal residential ITC expired for customer-owned systems installed after December 31, 2025. For new installations in 2026, it is not available.

What is the NY-Sun incentive and do I automatically get it?

NY-Sun is NYSERDA’s upfront incentive program for solar installations. You don’t receive it automatically — you must use a NYSERDA-approved contractor, and the incentive flows directly to the installer to reduce your cost. New York Electric & Solar is a participating NY-Sun installer in Upstate NY.

Can I stack the New York State Solar Tax Credit with NY-Sun?

Yes. These are separate programs and are generally stackable. NY-Sun reduces your upfront cost; the state tax credit is calculated on the system cost and claimed on your return. A tax professional can help you structure both correctly.

How long does solar take to pay back in New York?

Most Upstate NY homeowners on customer-owned systems see payback periods in the range of 7–10 years. Your actual timeline depends on system size, utility rates, and financing — a custom quote gives you the most accurate projection.

Making the Most of New York’s Solar Incentives in 2026

Most homeowners are aware of one or two solar incentives — few realize how many stack together in New York.

New York Electric & Solar serves Upstate NY homeowners with NYSERDA-approved installations, no-pressure consultations, and a 25-year warranty on equipment and workmanship. Get a free quote to see your numbers.