Installing solar panels on your Hilo home represents a significant investment, but various incentives and programs can substantially reduce your out-of-pocket costs. Between federal tax credits, state programs, utility incentives, and net metering, Hawaii homeowners have access to some of the most valuable solar incentives in the country.
Understanding which programs you qualify for and how to claim them can save you thousands of dollars and dramatically improve your solar investment’s return. This guide explains every available incentive for Hilo homeowners in 2026, how they work, and how to take full advantage of them.
Federal Solar Investment Tax Credit (ITC)
The federal solar Investment Tax Credit remains the most significant financial incentive available to homeowners installing solar panels.
How the Federal Tax Credit Works
The ITC allows you to deduct 30% of your total solar installation cost from your federal income taxes. This isn’t a rebate or refund—it’s a credit that directly reduces the amount of tax you owe.
If your solar system costs $25,000, you can claim a $7,500 tax credit, reducing your net investment to $17,500.
What Costs Qualify for the Tax Credit
The ITC covers nearly all solar-related expenses:
- Solar panels and photovoltaic cells
- Inverters and electrical equipment
- Racking and mounting hardware
- Labor costs for installation
- Permitting fees
- Inspection costs
- Sales tax on equipment and installation
- Battery storage systems (if installed with solar)
Essentially, the total contract price from your installer qualifies for the credit.
Eligibility Requirements
To claim the federal solar tax credit, you must:
Own Your Home: The credit applies to homeowners, not renters. The system must be installed on your primary or secondary residence in the United States.
Own the Solar System: You must purchase the system outright (cash or loan). Leased systems don’t qualify because the leasing company owns the equipment and claims the credit.
Have Tax Liability: You need sufficient federal tax liability to use the credit. If you owe $5,000 in federal taxes but have a $7,500 credit, you can only use $5,000 that year.
System is New: The equipment must be new, not used or refurbished.
Installation Date: The system must be installed and operational during the tax year you’re claiming.
Carrying Forward Unused Credits
If your tax credit exceeds your tax liability for the year, you can carry the remaining credit forward to future tax years. There’s no limit on how many years you can carry it forward.
For example, if you have a $7,500 credit but only $4,000 in tax liability this year, you use $4,000 now and carry the remaining $3,500 to next year.
How to Claim the Federal Tax Credit
When you file your federal tax return, complete IRS Form 5695 (Residential Energy Credits). This form calculates your credit and transfers the amount to your Form 1040.
You’ll need documentation from your solar installer showing:
- Total installation cost
- Installation date
- Equipment specifications
- Property address
Keep all receipts, contracts, and related paperwork for at least seven years in case of an audit.
Future of the Federal ITC
The current 30% rate is scheduled to remain in effect through 2032. After that, the rate drops to 26% in 2033 and 22% in 2034, unless Congress extends the program.
For Hilo homeowners considering solar, this means the next several years offer the maximum federal incentive.
Hawaii State Solar Incentives
Hawaii has historically offered various state-level solar incentives, though programs have changed over the years as solar adoption has increased.
Current State Tax Credit Status
Hawaii previously offered a state solar tax credit separate from the federal program, but this credit expired at the end of 2021 and has not been renewed. As of 2026, there is no active Hawaii state tax credit for residential solar installations.
However, Hawaii residents still benefit from other state-level advantages:
Property Tax Exemption
Hawaii offers a property tax exemption for renewable energy systems. When you install solar panels, the added value to your home is exempt from property tax assessment.
In most states, adding $20,000-$30,000 worth of solar equipment would increase your property’s assessed value and your annual property tax bill. In Hawaii, this doesn’t happen—your property taxes don’t increase due to your solar installation.
This exemption continues for the life of your solar system, representing ongoing savings.
General Excise Tax (GET) Exemption
Solar energy systems installed in Hawaii are exempt from the state’s General Excise Tax (GET), which is similar to sales tax in other states. This exemption applies to the purchase and installation of renewable energy equipment.
While not as substantial as income tax credits, this exemption still saves homeowners several hundred to over a thousand dollars on larger systems.
Possible Future State Programs
Hawaii’s energy policy continues evolving. The state remains committed to achieving 100% renewable energy goals, so new incentive programs may be introduced. Check the Hawaii State Energy Office website periodically for updates on new programs or reinstated credits.
HELCO Net Energy Metering (NEM)
Net energy metering through Hawaii Electric Light Company provides ongoing value throughout your solar system’s lifetime.
How Net Metering Works in Hilo
When your solar panels produce more electricity than your home uses, the excess flows to the grid. With net metering, HELCO credits you for this excess production at the retail rate you would otherwise pay for electricity.
During sunny midday hours when your system produces peak power, you might generate more than you’re using. These credits accumulate on your account and offset electricity you draw from the grid during evenings, cloudy days, or other times when your panels aren’t producing enough to meet your needs.
NEM Credit Value
Hilo homeowners enrolled in net metering receive credits at the retail electricity rate, which is among the highest in the nation. When HELCO rates are $0.40 per kWh, your excess generation earns credits at that same rate.
This retail-rate crediting makes Hawaii’s net metering program more valuable than states that offer only wholesale rates for excess generation.
Monthly Bill Credits
Your HELCO bill shows:
- Electricity you drew from the grid
- Electricity you sent to the grid
- Net usage (draw minus generation)
- Credit or charges based on net usage
- Fixed connection charges
If you generate more than you use in a month, credits roll forward to the next month. During summer months with longer days, you might accumulate significant credits that offset winter usage.
Annual True-Up
At the end of each 12-month period, any remaining excess credits are typically reconciled. HELCO’s specific policies on annual excess credit handling should be confirmed with the utility, as these policies can change.
NEM Program Stability
Hawaii’s net metering program has undergone changes over the years. The current program (often called Customer Self-Supply or Smart Export) has different options with varying terms. Your solar installer will help you understand which program applies to your installation and its specific benefits.
New policy changes can affect future solar installations, so current rates and terms aren’t guaranteed for systems installed years from now. However, once you’re enrolled under a particular program, you’re typically grandfathered under those terms.
HELCO Rebates and Utility Programs
Check with Hawaii Electric Light Company for any current rebate programs or incentives. Utility programs can change based on renewable energy goals, budget availability, and regulatory decisions.
Historical Utility Rebates
In the past, HELCO and its parent company Hawaiian Electric Industries have offered various programs including:
- Upfront rebates for solar installations
- Battery storage incentives
- Time-of-use rate programs
- Demand response programs
Current Program Availability
As of 2026, program availability varies. Contact HELCO directly or check their website for:
- Active rebate programs
- Application requirements
- Funding availability
- Deadlines and caps
Utility incentives often operate on a first-come, first-served basis with limited funding, so applying early when programs are announced can be advantageous.
Battery Storage Incentives
Hawaii has shown particular interest in battery storage to help grid stability. Special programs or incentives for pairing solar with battery storage may be available. These programs help homeowners provide backup power while supporting grid management during peak demand periods.
Local and County Programs
Hawaii County occasionally offers programs or incentives for renewable energy adoption.
County-Level Initiatives
Check with Hawaii County’s Department of Research and Development and the Mayor’s Office for:
- Green building incentives
- Renewable energy grants
- Property improvement programs that might include solar
- Streamlined permitting processes
While less common than federal or state programs, county-level initiatives can provide additional savings or benefits.
Community Solar Options
Some areas offer community solar programs where multiple households share a larger solar installation. These programs can benefit homeowners whose properties aren’t suitable for rooftop solar. Check if any community solar projects are available in the Hilo area.
Combining Incentives for Maximum Savings
The real power comes from stacking multiple incentives together.
Example: Typical Hilo Solar Installation
Let’s look at how incentives reduce the actual cost of a solar system:
Gross System Cost: $24,000
General Excise Tax Exemption: ~$1,000 in savings (compared to paying GET)
Subtotal: $23,000 (effective cost after GET exemption)
Federal Tax Credit (30%): -$7,200
Net Cost After Incentives: $15,800
Property Tax Exemption: Ongoing savings of $100-$300 annually (compared to paying increased property tax)
Net Metering Value: $1,800-$2,400 annual electricity savings
The combination of upfront incentives and ongoing savings through net metering and tax exemptions significantly improves your return on investment.
Maximizing Your Incentive Value
To get the most from available programs:
Act While Federal Credit is at 30%: The current rate offers maximum savings compared to future reductions.
Install Battery Storage Simultaneously: Adding batteries later means missing out on the federal tax credit for that component.
Choose Ownership Over Leasing: Only system owners can claim tax credits. Leasing might seem cheaper upfront but eliminates access to thousands in incentives.
Keep Detailed Records: Maintain all documentation for tax credits and future reference.
Apply for Utility Programs Early: Limited funding programs operate first-come, first-served.
Special Situations and Considerations
Some homeowners have unique circumstances affecting their ability to use incentives.
Limited Tax Liability
If you’re retired, have lower income, or have limited federal tax liability, you might not be able to use the full tax credit immediately.
Solution Options:
- Carry forward unused credits to future years
- Consider whether your spouse’s income provides sufficient tax liability
- Consult a tax professional about strategies to maximize credit usage
- Factor in that partial credit usage still provides value
New Homeowners
If you’re buying a home with solar already installed, the previous owner likely claimed the federal tax credit. You can’t claim it again for an existing system, but you benefit from ongoing electricity savings and net metering.
If you’re building a new home and including solar in construction, the solar costs qualify for the federal tax credit.
Second Homes
The federal tax credit applies to second homes as well as primary residences. If you own a vacation property in Hilo, you can claim the credit for solar installed there.
However, rental properties have different rules. If you rent out the property, the system may need to be depreciated as a business asset rather than claimed through the residential tax credit. Consult a tax professional for rental property situations.
Home Batteries Without Solar
The federal tax credit for battery storage only applies if installed in conjunction with a solar system. Installing a standalone battery without solar doesn’t qualify for the residential renewable energy tax credit.
However, if you later add solar to a home with an existing battery, the combined system may qualify depending on specific circumstances.
Filing for Your Federal Tax Credit
Understanding the filing process helps avoid mistakes and ensures you receive your full credit.
Required Documentation
Gather these materials before tax filing:
Installation Contract: Shows total system cost and payment details.
Final Invoice: Confirms all work completed and final costs.
Manufacturer Certifications: Verify equipment meets IRS requirements (your installer typically provides these).
Proof of Payment: Canceled checks, credit card statements, or loan documents.
Installation Date Documentation: Usually the utility permission to operate or final inspection date.
Completing Form 5695
IRS Form 5695 walks you through calculating your credit:
Part I: Calculate your residential energy efficient property credit (this is where solar goes).
Line 1: Enter the total cost of your solar system.
Line 14: Multiply line 1 by 30% (0.30) to calculate your credit.
Transfer to Form 1040: The credit amount transfers to your main tax form and directly reduces your tax liability.
Common Filing Mistakes to Avoid
Incorrect Cost Amounts: Include all eligible costs, not just equipment. Installation labor, permits, and related expenses all qualify.
Wrong Tax Year: Claim the credit for the year the system was installed and operational, not when you signed the contract.
Forgetting to Carry Forward: If you can’t use the full credit in one year, remember to carry it forward on future returns.
Missing Documentation: Keep all paperwork in case the IRS requests verification.
Working with Tax Professionals
If you’re uncomfortable preparing your own taxes or have a complex tax situation, consider working with a CPA or tax preparer experienced with solar tax credits. The cost of professional preparation is often offset by avoiding mistakes and ensuring maximum credit value.
Financing Considerations and Incentives
How you pay for your solar system affects which incentives you can access.
Cash Purchase Benefits
Paying cash upfront allows you to:
- Claim the full federal tax credit immediately
- Avoid interest charges
- Maximize lifetime savings
- Simplify the incentive process
Solar Loan Advantages
Solar loans let you access incentives while spreading payments:
- You own the system, so you claim the federal tax credit
- Many homeowners use their tax credit refund to pay down the loan
- Monthly loan payments often equal or are less than electricity savings
- You benefit from property tax exemptions immediately
Why to Avoid Leases and PPAs
Solar leases and Power Purchase Agreements (PPAs) have significant incentive disadvantages:
No Federal Tax Credit: The leasing company owns the system and claims the credit, not you.
No Property Tax Exemption Benefit: Since you don’t own the equipment, this advantage is less relevant.
Limited Net Metering Value: Depending on the agreement structure, you may not capture full net metering benefits.
Smaller Long-Term Savings: After paying lease fees for 20 years, your total savings are far less than owning the system.
For Hilo homeowners who qualify for loans or can pay cash, ownership provides dramatically better incentive access and long-term value.
Future Changes to Watch For
Solar incentive programs evolve over time based on policy, budget, and renewable energy goals.
Federal Program Changes
The federal tax credit is currently set at 30% through 2032, then drops to 26% in 2033 and 22% in 2034. Congress could extend the 30% rate or make other changes, but current law shows the rate declining after 2032.
Installing while the credit is at its maximum provides the best federal incentive value.
Hawaii Policy Development
Hawaii continues pursuing ambitious renewable energy goals (100% renewable electricity by 2045). This commitment might lead to:
- New state incentive programs
- Enhanced utility programs
- Additional battery storage incentives
- Community solar expansion
- Grid modernization programs that benefit solar owners
Net Metering Policy Evolution
Net metering policies can change as solar adoption increases and utilities adjust to distributed generation. Future changes might affect:
- Credit rates for excess generation
- Program structures and options
- Grandfathering provisions for existing systems
Once enrolled in a net metering program, you’re typically protected under those terms, even if future policy changes occur.
Staying Informed
To keep track of incentive changes:
- Monitor the Hawaii State Energy Office website
- Check HELCO’s renewable energy webpage
- Follow local solar industry news
- Ask your installer about upcoming program changes
- Review the Database of State Incentives for Renewables & Efficiency (DSIRE)
Frequently Asked Questions About Hilo Solar Incentives
Can I claim both federal and state tax credits?
Currently, the Hawaii state solar tax credit has expired. You can claim the federal tax credit, benefit from the property tax exemption, and access GET exemption, but there’s no active state income tax credit for residential solar in 2026.
What happens if I sell my home before using all my tax credit?
The federal tax credit is tied to the installation, not ongoing ownership. If you sell your home after installation, you keep any unused credit to carry forward on your personal tax returns. The new owner doesn’t get to claim the credit for an existing system.
Do I need to report my solar system to HELCO?
Yes, your solar installer handles the interconnection application with HELCO as part of the installation process. This application is required before your system can operate and connect to the grid.
Can I get incentives if I install solar myself?
DIY solar installations can technically qualify for the federal tax credit if you meet all requirements. However, you’ll need to handle permits, inspections, and utility interconnection yourself, and equipment warranties may be voided without professional installation. Most homeowners find professional installation worth the cost.
Are there income limits for solar incentives?
The federal tax credit has no income limits, though you need sufficient tax liability to use it. The property tax exemption and GET exemption have no income requirements. Any utility programs would specify their own eligibility criteria.
How long do I have to file for the tax credit?
You claim the credit on your tax return for the year your system was installed and operational. If you miss that year, you can file an amended return within three years of the original filing deadline.
Getting Help with Solar Incentives
Navigating multiple incentive programs can feel overwhelming, but you don’t have to figure it out alone.
Your Solar Installer’s Role
Reputable installers help you understand available incentives and provide documentation needed for claims. They should explain:
- Which programs you qualify for
- Estimated incentive values
- Required forms and documentation
- Filing timelines and requirements
However, installers aren’t tax professionals and can’t provide specific tax advice for your situation.
Tax Professional Assistance
For complex tax situations, consult with:
- Certified Public Accountants (CPAs)
- Enrolled Agents
- Tax attorneys
- Tax preparation services familiar with renewable energy credits
The cost of professional tax help is often worthwhile for ensuring you maximize available credits.
State and Utility Resources
Contact these organizations directly with program-specific questions:
Hawaii State Energy Office: Information on state programs, policy, and resources.
Hawaii Electric Light Company: Net metering details, interconnection requirements, and utility programs.
Hawaii County Offices: Local programs and permitting information.
Take Advantage of Available Incentives for Your Hilo Solar Installation
Understanding and accessing solar incentives can reduce your investment by $8,000 to $12,000 or more, dramatically improving your solar system’s financial return. Combined with ongoing electricity savings through net metering, these incentives make solar more affordable and attractive for Hilo homeowners.
The federal tax credit remains at its maximum 30% rate through 2032, providing a limited-time opportunity to capture full federal incentives. Hawaii’s high electricity rates and strong net metering program add to the value proposition, making solar one of the best home investments available.
Solar Saint helps Hilo homeowners navigate the entire solar process, including understanding and maximizing available incentives. We provide clear explanations of which programs you qualify for, accurate documentation for your tax filings, and assistance with utility interconnection.
Our team stays current on federal, state, and local incentive programs to ensure you receive every dollar you’re entitled to. We’ll walk you through the numbers, show you exactly how incentives reduce your investment, and project your real savings over time.
Contact Solar Saint today for a free consultation. We’ll evaluate your property, explain all available incentives, and show you exactly how much you can save with solar panels on your Hilo home.