Alabama solar rebates and incentives: 2025 guide

Alabama’s mild winters and above-average natural gas prices make it a natural fit for an all-electric home—which is a natural fit for going solar, and powering your home with clean, sustainable energy. There aren’t many state-level solar incentives for homeowners in Alabama, but federal tax credits can still take a big bite out of the upfront costs. However, the federal solar tax credit will no longer be available for systems installed after December 31, 2025, so you have to go solar this year to claim it.

As an Alabama homeowner, the ITC is the most impactful way to bring down your solar costs.

Residential Clean Energy Credit

The Residential Clean Energy Credit, formerly known as the federal investment tax credit (ITC), can reduce your solar panel system's cost by 30%. Your entire system qualifies for this incentive, including equipment, labor, permitting, and sales tax. 

However, this credit will no longer be available after December 31, 2025. On July 4, 2025, President Trump signed legislation that eliminates the residential solar tax credit entirely starting January 1, 2026—nearly a decade ahead of its original expiration date. Solar projects typically take several months from consultation to installation, so homeowners considering solar should act quickly to lock in these savings.

When you file your federal income taxes, you can claim this incentive as a credit towards your federal tax bill. Just keep in mind that to qualify for the ITC, you need to purchase your system either with cash or a solar loan–if you lease your system, you won't be eligible. 

You also need a high enough tax bill to use the credit, though you can roll over any remaining credit year-to-year, according to a tax expert EnergySage spoke with. The IRS doesn't specify an end date for credit rollovers, meaning you can theoretically roll over unused credits indefinitely based on current law. However, Tax Form 5695 may no longer exist after 2025, so you likely will no longer be able to use that form. Please speak with a tax professional for specific guidance.

Remember: Your system must be installed by December 31, 2025 to qualify for this credit.

Alabama offers a solar property tax exemption. Solar panels generally raise the property value of your home, but thanks to this law, you might not have to pay extra tax on that added value.

Alabama doesn't offer a state-wide net metering program, but Alabama Power, the state’s largest utility, does offer a solar buyback program.

While the sun is shining, your solar panels might produce more electricity than your home needs at any given moment. Under Alabama Power’s net billing solar buyback program, you can sell that excess power back to the grid for credits on your electricity bill. 

The catch is that the utility company only offers partial credit for every kWh—you’re selling the electricity to them at a significant discount, compared to what they’ll charge you to buy that electricity back later. 

Rates change over time, but it’s generally less than half the retail rate. From June through September 2024, you’ll earn $0.043 per kWh during peak hours and $0.0309 per kWh during off-peak times. Those rates are reduced further from October through May; you’ll only receive $0.0333 for your excess generation during peak times and $0.0316 per kWh during off-peak periods. 

Considering you pay around $0.15 per kWh for electricity in Alabama, this solar buyback program isn’t great. The best way to maximize the value of your solar panels under net billing is to install a solar battery with your panels. 

Alabama doesn't offer any state-specific battery incentives. However, all batteries above 3 kWh in size are eligible for the 30% federal tax credit. 

Solar batteries paired with solar panels can make good financial sense in Alabama. They boost energy independence and provide backup power during an outage, helping you keep more of your own (free) solar power rather than letting the utility company take it at a steep discount. 

If you're looking for solar installers in Alabama, see the complete list.