South Carolina homeowners have access to one of the better remaining state-level solar incentives in the Southeast — a state income tax credit that survived the federal ITC’s expiration. Understanding exactly what it covers, what it doesn’t, and how to combine it with other available incentives is the most important financial homework you can do before signing a solar contract in 2026.
Last updated: May 2026
South Carolina Solar Tax Credit — The Basics
South Carolina offers a 25% state income tax credit on the cost of a residential solar energy system, capped at $3,500 per year with a 10-year carryforward period.
Here’s what that means in practice:
- Install a $25,000 solar system in 2026 → 25% = $6,250 in available credits
- Apply $3,500 in year one, carry forward $2,750 to year two
- You must have SC state income tax liability to use the credit; it doesn’t trigger a refund
- The 10-year carryforward gives most homeowners enough time to use the full credit
The credit applies to the cost of the solar energy system, including panels, inverter, mounting hardware, and installation labor. It does not include battery storage costs unless the battery is charged exclusively by solar — verify this with your installer and a tax professional before filing.
The Federal ITC Is Gone for 2026 Purchases
The 30% federal residential solar tax credit (ITC) expired December 31, 2025 for homeowners purchasing systems with cash or a loan. This is a significant change from prior years when SC homeowners could stack the federal 30% and state 25% credits.
In 2026, the SC state credit stands alone for purchased systems. Solar leases and PPAs still qualify for the business-side 48E federal credit through 2027, which installers typically pass through as lower monthly rates. If you’re deciding between buying and leasing, factor this in.
Other South Carolina Solar Incentives
Property Tax Exemption
South Carolina exempts the added value of a solar energy system from property taxes. A solar installation that adds $20,000 to your home’s assessed value won’t increase your annual property tax bill. This is a permanent, ongoing benefit — not a one-time credit.
Sales Tax Exemption
SC exempts solar energy systems from the state’s 6% sales tax. On a $25,000 system, that’s a $1,500 savings before you even claim the income tax credit. Confirm your installer applies the exemption at purchase — it shouldn’t appear as a line item on your invoice.
Net Metering — Duke Energy Carolinas and Dominion Energy SC
Both major SC utilities offer net metering, crediting your account for excess solar power exported to the grid. The credit rate is the avoided cost rate — not full retail — which means self-consumption is more financially valuable than exporting. Size your system to offset your usage, not to maximize exports.
Duke Energy Carolinas customers: see our related guide on Duke Energy Solar Buyback Rates in the Carolinas 2026 for exact current rates.
How to Claim the SC Solar Tax Credit
- Install your system — must be at your primary or secondary residence in South Carolina
- Get your final invoice — document the total installed cost before any rebates or incentives
- File SC Form I-335 — Active Trade or Business Income Tax Credit; attach to your SC state return
- Claim up to $3,500 per year — carry forward the remainder for up to 10 years
Use the total project cost before subtracting any utility rebates. Work with a CPA familiar with SC energy credits — the interaction between the state credit and battery storage costs has nuances that vary by installation configuration.
Is Battery Storage Eligible?
This is where it gets complicated. South Carolina’s solar credit covers “solar energy equipment.” Battery storage installed as part of a solar system may qualify if it’s charged solely by solar — but the statute isn’t crystal clear, and guidance from SCDOR has been limited.
The practical approach: ask your installer to invoice solar equipment and battery storage separately. Claim the credit on the clearly eligible solar components. If you want to include battery storage, get a written opinion from a SC-licensed CPA before filing.
Battery storage is worth considering regardless of the tax treatment. South Carolina’s summer storm season and Duke Energy’s growing interest in demand charges make storing your own solar power more financially valuable than exporting it. The EcoFlow DELTA Pro Ultra is a popular whole-home battery add-on for SC solar installs, offering whole-home backup via a transfer switch and compatibility with most string and microinverter systems.
Stacking All SC Solar Incentives in 2026
A $28,000 solar system in South Carolina in 2026:
| Incentive | Value | Notes |
|---|---|---|
| SC State Tax Credit (25%) | $7,000 | Capped at $3,500/yr; 2-year claim |
| SC Sales Tax Exemption (6%) | $1,680 | Applied at purchase |
| Property Tax Exemption | Ongoing | Preserves home value benefit |
| Federal ITC | $0 | Expired Dec 31, 2025 for purchased systems |
| Total first-year savings | ~$5,180 | Plus year-2 carryforward credit |
That stacks to meaningful savings — not as dramatic as 2025’s combined 30%+25% scenario, but still a compelling incentive to act.
Frequently Asked Questions
What is the South Carolina solar tax credit in 2026?
SC offers a 25% state income tax credit on residential solar system costs, capped at $3,500 per year with a 10-year carryforward. On a $25,000 system, that’s $6,250 in total credits — $3,500 in year one, $2,750 carried to year two. The federal 30% ITC expired December 31, 2025 for purchased systems and no longer applies to 2026 installations.
Does South Carolina have a sales tax exemption for solar?
Yes. SC exempts solar energy systems from the state’s 6% sales tax. On a typical residential system, that’s $1,500–$2,000 in savings. Your installer should apply this at purchase — confirm before signing your contract that they’re handling the exemption correctly.
Can I claim the SC solar credit if I lease my system?
No. If you lease a solar system or use a PPA, you don’t own the equipment and cannot claim the state tax credit. The credit belongs to the leasing company. However, leased systems may still benefit from the federal 48E credit through the installer, which is often passed through as a lower monthly rate.
How long does it take to break even on solar in South Carolina?
With the state tax credit and sales tax exemption, most SC homeowners see a payback period of 8–12 years on a cash purchase in 2026. Financed systems vary based on interest rate. Net metering credits and rising utility rates improve the payback timeline — Duke Energy and Dominion SC rates have increased 15–20% over the past four years.
Bottom Line
South Carolina remains one of the better states for solar in the Southeast in 2026, even without the federal ITC. The 25% state credit (capped at $3,500/year with a 10-year carryforward), sales tax exemption, and property tax exemption stack into real, meaningful savings on a solar installation. Get at least three quotes, confirm the sales tax exemption is applied at purchase, and work with a CPA on your Form I-335 filing — especially if you’re adding battery storage to the system.
Ready to Claim the SC Tax Credit? The credit applies to systems installed by a licensed SC contractor. Compare quotes from vetted South Carolina solar installers on EnergySage, or see our full SC solar cost guide for pricing context.