Colorado has no state solar income-tax credit for panels, but the real 2026 stack is strong: a 100% state sales and use tax exemption on solar equipment (C.R.S. 39-26-724), a property-tax exemption on the home value your system adds (C.R.S. 39-3-118.5), net metering required at Xcel Energy and Black Hills Energy (C.R.S. 40-2-124), and Xcel’s Solar*Rewards for eligible customers. The 30% federal homeowner credit ended December 31, 2025.
Colorado is one of the sunniest solar markets in the country, and its incentives are widely misread online. There is no general state solar tax credit for panels here, and Xcel’s headline $1-per-watt rebate is now aimed at income-qualified households, not every customer. What is genuinely valuable in 2026 is a pair of state tax exemptions, net metering that state law requires your utility to offer, and utility programs for those who qualify. This page lays out the honest Colorado solar incentive stack for 2026: what each piece does, who it is for, why the federal homeowner credit no longer applies, and what does NOT exist so you are not surprised at signing.
How Colorado solar incentives actually work in 2026
Colorado does not offer a general state income-tax credit for residential solar panels. Several guides imply one exists, but the state’s own incentive landscape confirms there is no broad solar PV income-tax credit for homeowners (DSIRE Colorado). Anyone who tells you to expect a Colorado state solar tax credit on your panels is mistaken.
What Colorado gives you instead are two tax exemptions, statute-backed net metering, and targeted utility programs. The state waives sales and use tax on solar equipment, exempts the added home value from property tax, and requires investor-owned utilities to offer net metering (DSIRE Colorado). Unlike the federal homeowner credit, these are still in place in 2026.
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What solar makes on a Colorado roof
Solar pays in Colorado because of high-altitude sun and the grid power it replaces. The average Colorado residential electricity price is about 16.16 cents per kWh (EIA retail sales, residential Colorado, as of May 2026). Colorado’s clear, dry, high-elevation climate delivers strong year-round irradiance, so every kilowatt-hour your roof produces offsets one you would otherwise buy.
That sun turns into strong production. According to MySolarFY’s own analysis (as of August 2026), a 6 kW rooftop system in Denver is modeled to produce about 9,570 kWh a year (NREL PVWatts v8 run, NSRDB typical-year data). At the state average price, that output offsets roughly $1,546 of grid power a year, before any incentive. Actual production depends on your roof’s pitch, orientation, and shading, so estimate your own roof with NREL’s free PVWatts calculator before you size a system.
Colorado solar incentives at a glance
Colorado has no state solar income-tax credit and no statewide cash rebate for all homeowners, so its value comes from two tax exemptions, required net metering, and utility and local programs for those who qualify. Here is what each piece does in 2026 and the fine print worth knowing.
| Incentive | What it does | 2026 status | Source |
|---|---|---|---|
| State sales and use tax exemption | Waives the 2.9% state sales and use tax on qualifying solar components | Available statewide for renewable-energy components (C.R.S. 39-26-724) | C.R.S. 39-26-724 |
| Property-tax exemption | Excludes the added home value from a qualifying residential solar system from property tax | Ongoing, no current sunset (C.R.S. 39-3-118.5 and related provisions) | DSIRE Colorado |
| Net metering | Credits exported solar toward your bill at the retail kWh rate, carried forward | Required at investor-owned utilities (C.R.S. 40-2-124) | DSIRE / Colorado RES |
| Xcel Solar*Rewards | Upfront per-watt rebate and/or a production incentive for eligible Xcel customers | Active for eligible customers; the $1/W upfront rebate targets income-qualified and disproportionately impacted community households; verify current terms | Xcel Energy |
| Residential energy-storage credit | A state income-tax credit for a qualifying home battery (not the panels) | 10% credit for residential storage, available through December 31, 2026 (Form DR 1307) | DSIRE Colorado |
| State solar income-tax credit (panels) | A state income-tax credit for solar PV | None; Colorado has no general state solar PV income-tax credit | DSIRE Colorado |
| Federal residential (Section 25D) | A 30% homeowner credit | Ended for expenditures made after December 31, 2025 | IRS |
The two exemptions apply to nearly every Colorado homeowner who buys a system. They are not tied to the federal credit that ended after 2025, and the sales-tax exemption does not require a tax return, so they help cash and loan buyers across the state. For how programs stack across states, see our solar incentives overview, and for the full local picture start at our Colorado solar hub.
Heads up on the federal change: the 30% federal Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025, under the One Big Beautiful Bill Act (IRS, as of January 2026), so a Colorado homeowner who buys solar with cash or a loan in 2026 cannot claim it. Confirm every figure against the linked source, and ask a tax professional about your own situation. MySolarFY does not provide tax advice. For what the change means, see our guide to the federal solar tax credit in 2026.
The Colorado sales and use tax exemption on solar equipment
Colorado waives its 2.9% state sales and use tax on components used to produce electricity from a renewable source. Under C.R.S. 39-26-724, qualifying components are exempt, including solar modules, inverters, racking and supporting structures, wiring, and control systems (C.R.S. 39-26-724; Colorado Legislative Council tax-expenditure review). On a typical residential system that is a real up-front saving, because the panels, inverter, and racking all come off the state taxable amount.
One caveat worth knowing: the exemption covers the state’s 2.9% portion. Labor and some non-generation items such as battery storage devices are not covered, and local city or county sales taxes are handled separately, so confirm the current treatment with your installer and the Colorado Department of Revenue before you count on an exact figure.
The Colorado property-tax exemption on added home value
Solar raises what your home is worth, and Colorado keeps that added value from raising your property-tax bill. The state exempts qualifying residential renewable-energy property, so the value a home solar system adds is excluded from property taxation (C.R.S. 39-3-118.5 and related residential-property provisions; DSIRE Colorado). A system that increases your home’s market value does not increase your annual tax.
This is the incentive most Colorado homeowners overlook. It is not a one-time payment; it protects you every year you own the home. Assessment is handled by your county assessor, so confirm the current form and any filing step with your county before you rely on it.
Net metering in Colorado is required by state law
Colorado law requires your investor-owned utility to offer net metering. Under C.R.S. 40-2-124, qualifying retail utilities, including Xcel Energy and Black Hills Energy, must let solar customers offset their bills with the power their roof exports (Colorado Renewable Energy Standard, via DSIRE). Credits are applied at the retail kWh rate and typically carry forward month to month.
The details differ by utility, so read your tariff. At Xcel Energy, residential customers earn retail-rate net-metering credits that roll forward, with any year-end surplus trued up at the utility’s incremental cost. Black Hills Energy offers net metering as well, with monthly retail-rate crediting and an annual true-up for net excess generation at an avoided-cost rate. System size is generally tied to a percentage of your annual usage, so confirm the current cap and terms with your utility before you size a system. For the mechanics of how export credits work, see how net metering credits your solar exports, and for utility-specific rules see our Xcel Energy Colorado solar guide.
| Utility | Type | Rough service area | Net metering (2026) |
|---|---|---|---|
| Xcel Energy (Public Service Co. of Colorado) | Investor-owned | Denver metro and much of the Front Range | Retail-rate credits rolled forward, year-end surplus trued up at incremental cost, per C.R.S. 40-2-124; verify current terms |
| Black Hills Energy | Investor-owned | Southern Colorado, including Pueblo and Canon City areas | Retail-rate monthly credit with annual avoided-cost true-up for net excess, per C.R.S. 40-2-124; verify current terms |
| Municipal and co-op utilities | Municipal / cooperative | Cities and rural areas outside the IOUs | Set their own net-metering rules, which may differ; confirm directly with your utility |
Xcel Solar*Rewards and who actually qualifies
Xcel Energy runs Solar*Rewards, but the headline rebate is not for everyone. In 2026 the well-known $1-per-watt upfront rebate (up to 10 kW AC) is targeted at income-qualified and disproportionately impacted community customers, not every residential customer (Xcel Energy Solar*Rewards). Standard residential customers may see a smaller production-based incentive or different terms, and program budgets and enrollment windows change year to year.
Because the terms shift, verify eligibility directly with Xcel before you count on a rebate. Program tiers, per-watt amounts, and whether a production incentive applies all depend on your customer class and the current program year. If you are an income-qualified household, this can be a substantial saving worth confirming early.
Is solar worth it in Colorado?
For many Colorado homeowners, yes, because the fundamentals line up. Strong high-altitude sun, two tax exemptions, required net metering, and utility programs for eligible customers combine into a solid case even without a state credit. The honest catch is that the federal homeowner credit is gone as of 2026, so a cash or loan purchase this year cannot claim it. Whether solar pays for your specific home comes down to your roof, your utility, and your usage. For a deeper look, see whether solar panels are worth it and what a system runs on our Colorado solar cost guide.
How you pay decides which benefits you keep. The 30% federal homeowner credit (Section 25D) ended for expenditures made after December 31, 2025, so it is not part of a 2026 purchase on any path. If you buy the system with cash or a loan, you own it and take the state exemptions and net-metering credit directly. If you lease or sign a power-purchase agreement, a third party owns the panels, you typically pay little or nothing up front, and the company that owns the system claims any commercial credit (Section 48E), not you. On any path, Colorado’s sales-tax and property-tax exemptions still apply to a qualifying system. Solar panels are not free and monthly payments apply on a lease or PPA. MySolarFY matches you with licensed Colorado installers so you can compare real local quotes side by side, with no obligation.
For the full set of dated Colorado solar statistics, including per-city production estimates, utility net-metering treatment, and the current incentive stack, see our Colorado solar data and statistics.
Frequently asked questions
What solar incentives does Colorado offer in 2026? Colorado offers a 100% state sales and use tax exemption on qualifying solar equipment (C.R.S. 39-26-724), a property-tax exemption on the home value a system adds (C.R.S. 39-3-118.5 and related provisions), net metering required at investor-owned utilities (C.R.S. 40-2-124), and Xcel’s Solar*Rewards for eligible customers. There is no general state solar PV income-tax credit for panels, and the 30% federal homeowner credit ended for expenditures made after December 31, 2025. Confirm current terms with each source before you sign.
Does Colorado have a state solar tax credit? No. Colorado has no general state income-tax credit for residential solar panels. The state’s value comes instead from a sales and use tax exemption on the equipment, a property-tax exemption on the added home value, and required net metering. Colorado does offer a separate 10% state income-tax credit for a qualifying home battery (residential energy storage, Form DR 1307) through December 31, 2026, but that is for storage, not the panels.
Is Xcel Solar*Rewards still available in Colorado in 2026? Yes, Xcel Energy still runs Solar*Rewards in 2026, but the headline $1-per-watt upfront rebate (up to 10 kW AC) is targeted at income-qualified and disproportionately impacted community customers rather than every residential customer. Standard customers may see different terms or a production-based incentive. Program budgets and enrollment windows change, so verify your eligibility and the current per-watt amount directly with Xcel.
Does Colorado have net metering in 2026? Yes. Under C.R.S. 40-2-124, qualifying retail utilities including Xcel Energy and Black Hills Energy must offer net metering. Credits are applied at the retail kWh rate and typically carry forward, with any year-end surplus trued up at the utility’s incremental or avoided cost. System size is generally tied to a percentage of your annual usage, and municipal and co-op utilities set their own rules, so verify current terms with your utility.
Is solar equipment exempt from sales tax in Colorado? Yes. Under C.R.S. 39-26-724, components used to produce electricity from a renewable source, including solar modules, inverters, racking, and wiring, are exempt from Colorado’s 2.9% state sales and use tax. Labor and some non-generation items such as battery storage devices are not covered, and local city or county taxes are handled separately, so confirm the current treatment with your installer and the Colorado Department of Revenue.
What happened to the federal solar tax credit in Colorado? The 30% federal Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025, under the One Big Beautiful Bill Act, so a Colorado homeowner who buys solar in 2026 with cash or a loan cannot claim it. A separate commercial credit (Section 48E) can apply to leased and PPA systems, but the business that owns the system claims it, not the homeowner. Colorado’s own sales-tax and property-tax exemptions were not affected.
Reviewed by the SolarFY editorial team. Figures were verified against the linked EIA, NREL, IRS, Colorado Revised Statutes, DSIRE, and Xcel Energy sources as of August 2026; Colorado utility program terms and county assessment practices change, so confirm current net-metering, rebate, and exemption terms with your utility and county before you decide. MySolarFY does not provide tax or financial advice; consult a licensed professional about your own situation. See how we source our numbers in our data and methodology, and browse more states from our solar by state hub.
MySolarFY is a free service that matches homeowners with licensed solar installers. We are not an installer, financing company, or government program. “No up-front cost” refers to qualifying lease or PPA financing, where eligible homeowners may have no out-of-pocket cost at installation. Lease and PPA terms typically run 20 to 25 years, may include an annual price escalator, and total payments may exceed the cost of a cash purchase. Homeowners do not get the federal residential credit that ended after December 31, 2025; on a leased system the company that owns it claims any commercial credit. Solar panels are not free and monthly payments apply. Eligibility, savings, incentives, and rates vary and are not guaranteed. See our full disclaimer.
