Solar Tax Credits and Incentives: What PA Homeowners Need to Know

One of the most common misconceptions about solar is that it is only affordable for wealthy homeowners. The reality is that a combination of federal tax credits, state programs, and utility rebates has made solar accessible to a much wider range of households — and in Pennsylvania, the incentive landscape is genuinely strong.

Here is a complete breakdown of every major incentive available to PA homeowners right now.

The Federal Investment Tax Credit (ITC) is the single biggest financial incentive for homeowners who purchase a solar system. It allows you to deduct a percentage of your total solar installation cost directly from your federal income taxes.

• If you purchase a solar system for $25,000, you can claim a tax credit of 30% ($7,500) directly against your federal tax liability
• This is a dollar-for-dollar reduction in taxes owed — not just a deduction from taxable income
• If your credit exceeds your tax liability in one year, the remaining credit can be carried forward to future tax years

• You must own the solar system (purchased outright or financed with a loan)
• The system must be installed at your primary or secondary residence
• You must have sufficient federal tax liability to use the credit

Important: The ITC does not apply to solar leases. If you lease your system, the leasing company claims the tax credit — which is one reason lease payments can be priced lower than you might expect.

The ITC is currently set at 30% through 2032, then steps down to 26% in 2033 and 22% in 2034 before expiring for residential installations. Acting sooner rather than later locks in the full 30% credit.

Pennsylvania has a Renewable Portfolio Standard (RPS) that requires utilities to source a portion of their electricity from solar. To meet this requirement, utilities purchase Solar Renewable Energy Credits (SRECs) from solar system owners.

Each SREC represents 1,000 kWh (1 MWh) of solar energy produced. You earn one SREC for every 1,000 kWh your system generates, and you can sell those SRECs to utilities through brokers or aggregators.

SREC values fluctuate based on market demand, but they represent an ongoing revenue stream for solar system owners — separate from your electricity savings.

As covered in our net metering guide, Pennsylvania law requires utilities to credit solar customers at the full retail rate for excess energy sent to the grid. Over a year, this can be worth hundreds of dollars in bill credits.

Pennsylvania exempts the added value of a solar system from your property tax assessment. This means that even though solar increases your home's value (studies show by $15,000–$25,000 on average), your property taxes will not increase because of the solar installation.

This is a significant benefit that is often overlooked when calculating the total return on a solar investment.

Pennsylvania exempts solar energy systems from the state's 6% sales tax. On a $25,000 system, that is a $1,500 savings right off the top.

If you are a PECO customer in the Philadelphia region, you may be eligible for additional rebates:

• PECO Smart Ideas Rebate — Up to $500 rebate for qualifying solar installations in PECO's service territory
• Time-of-Use Rate Plans — PECO offers rate plans that reward customers who shift energy usage to off-peak hours, which pairs well with solar production patterns

Check with your PECO account representative or our team during your free consultation to confirm current rebate availability and eligibility requirements.

If you choose a $0 Down Solar Lease (our most popular option for PA homeowners), the incentive picture looks different:

With a lease, the leasing company captures the tax credit and SRECs — but passes those savings back to you in the form of a lower monthly payment. The lease is specifically structured so that your total monthly energy cost (lease payment + remaining utility bill) is less than what you were paying before solar.

Here is how incentives stack for a homeowner who purchases a solar system in Pennsylvania:

• System cost: $28,000
• Federal ITC (30%): -$8,400
• PA Sales Tax Exemption: -$1,680 (already excluded from purchase price)
• PECO Rebate: -$500
• Net cost after incentives: ~$17,600
• SREC income (est. 25 years): -$2,000–$5,000 (market dependent)
• Electricity savings (25 years): -$30,000–$50,000

Total 25-year return on a $17,600 net investment: $30,000–$55,000

The combination of federal tax credits, state exemptions, utility rebates, and net metering makes solar one of the best-returning home investments available to Pennsylvania homeowners. The key is understanding which incentives apply to your specific situation — owned system vs. lease, PECO vs. PPL, and your individual tax situation.

Our team will walk you through every applicable incentive during your free consultation and show you the real numbers for your home. Schedule your free solar consultation today — there is no obligation and no pressure.