The 30% federal credit expired at the end of 2025. But between Hawai'i's own 35% state credit and the highest electricity rates in the country, going solar in 2026 still pays — if you know how to stack what's left.
If you've been putting off solar, you've probably heard the news by now: the federal solar tax credit is gone. For nearly two decades, the Residential Clean Energy Credit let homeowners knock 30% off the cost of a solar system on their federal taxes — and then, at the end of 2025, it expired. A lot of Hawai'i families have taken that to mean the window on affordable solar has closed. Here in the Islands, that's simply not true. Let's walk through what actually changed, what's still on the table, and why 2026 is a more important year to act than most people realize.
The credit that ended is Section 25D, the Residential Clean Energy Credit — the 30% federal tax credit for homeowner-owned solar, batteries, and solar water heating. Under the tax law signed in mid-2025, that credit was cut off nearly a decade ahead of its original phase-out schedule. Any customer-owned residential system placed in service in 2026 or later no longer qualifies for the 30% federal credit.
There's one important footnote: if you already had a system installed and running before December 31, 2025, you can still claim the credit on your 2025 return, and the IRS lets you carry forward any unused portion of that credit into future tax years. But for a brand-new install this year, the federal 30% is off the table. That's the part that's made headlines — and it's understandably given homeowners pause.
Here's the context the national headlines leave out: Hawai'i pays the highest electricity rates in the United States by a wide margin. The average residential rate now sits around 42¢ per kWh — roughly 130% above the national average of about 18¢. When your power is that expensive, every kilowatt-hour your roof produces is worth more than it would be almost anywhere else on the mainland. That's why an estimated 49% of single-family homes on Oahu — and about 47% in Maui County — already have rooftop solar. The payback math here was never driven mainly by the federal credit; it's driven by what you're paying HECO every month.
And Hawai'i still offers its own incentive. The Renewable Energy Technologies Income Tax Credit (RETITC) gives homeowners a state income tax credit worth 35% of a solar PV system's cost, up to $5,000 per system. That credit is still in effect for 2026. On a typical residential install, that's thousands of dollars back on your Hawai'i state return — a benefit mainland homeowners simply don't have.
Here's the piece that makes timing matter. In 2026 the Legislature passed Act 24, which reshapes the RETITC starting in 2027. Beginning that year, the state credit faces a new $40 million statewide aggregate cap — a shared pool that, once claimed for the year, is gone — before the credit winds down toward zero over the following years. In plain terms: the generous, uncapped version of Hawai'i's credit is on its way out.
To protect homeowners already in motion, Governor Green issued Executive Order 26-02, confirming that systems placed in service during the 2026 calendar year are not subject to that $40 million cap. So 2026 is effectively the last year to lock in Hawai'i's full-strength state credit without competing against a shared annual pool. Waiting until 2027 or later means smaller potential savings and more uncertainty about whether the credit is still available when your system goes in.
The federal credit isn't entirely out of reach, either — it just works differently now. Systems that are third-party owned (a solar lease or power purchase agreement) can still qualify for a federal commercial credit that goes to the system's owner, who can pass those savings on to you through a lower monthly rate. For homeowners who'd rather not pay cash up front, that's a real path to lower bills without the tax credit in your own name.
On top of that, Hawai'i's battery incentives are still very much alive. HECO's Bring Your Own Device Plus (BYOD Plus) program pays $400 per kW of committed battery export capacity up front — $800 per kW for qualifying lower-income households — plus ongoing monthly export credits. Pairing storage with your panels lets you use your own cheap solar power at night instead of buying it back at 42¢, and it earns those incentives on top of your state credit.
Losing the 30% federal credit is real, and it's fair to feel a little discouraged by it. But solar in Hawai'i has always run on different math than the rest of the country. With power at 42¢, a state credit still worth up to $5,000, battery incentives that stack, and financing paths that keep a federal benefit in play, 2026 remains a genuinely smart year to make the switch — arguably the last year to do it under Hawai'i's strongest state terms.
The honest answer to "does it still pay?" depends on your roof, your usage, and your household. That's exactly what we're here to figure out with you — no pressure, no sales script, just the real numbers for your home.
The state credit is still worth thousands — but 2026 is the window. Get a free, no-pressure quote from your Hawai'i neighbors.
