Understanding Hawaii's solar panel tax credits

Federal tax credit disclaimer (updated October 30, 2026): The 30% federal Residential Clean Energy Credit is no longer valid for new residential solar or battery installations after December 31, 2025. Any references to that credit or savings based on it below are historical, not a current offer. Separate business or third-party-owned system incentives have different rules. Confirm your eligibility with a qualified tax professional.

If you are weighing the cost of installing solar panels on your Hawaii home, Hawaii’s state solar tax credit may help reduce that cost. The federal residential credit ended after 2025 and does not apply to new installations. Understanding current state requirements helps you plan your installation and tax filing.

Tax credit versus tax deduction

It helps to start with the distinction. A tax deduction reduces the income you are taxed on. A tax credit reduces the tax you owe, dollar for dollar. Solar incentives in Hawaii are structured as credits, which makes them a direct, and often substantial, reduction in what a system actually costs you out of pocket.

The Hawaii state solar tax credit

Hawaii may offer a state tax credit for eligible residential solar energy systems. Review our Hawaii solar tax credit guide and the current Hawaii Department of Taxation requirements. Confirm applicable forms, eligibility and filing rules with your tax professional.

Because the exact caps and rules can be adjusted by the state legislature over time, it is worth confirming the current terms with a tax professional or the Hawaii Department of Taxation before you file, rather than relying on a number from a prior tax year.

The federal solar tax credit

The federal Residential Clean Energy Credit previously covered 30% of qualifying residential solar and battery costs. It ended for new installations after December 31, 2025. Form 5695 may still be relevant to an eligible earlier installation or unused prior credit, but it does not create eligibility for a new installation in 2026. Confirm any prior-year claim with a tax professional.

How to review your eligibility

1. Gather documentation. Keep every invoice, contract, and receipt related to your solar installation. You will need proof of both the cost and the date the system was placed in service.
2. Confirm eligibility. A tax professional can confirm which tax year your installation falls into and which credit percentages apply.
3. File Form N-342 with your Hawaii state return to claim the state credit.
4. For a qualifying installation completed by the end of 2025 only, ask your tax professional whether Form 5695 applies to a prior-year federal claim or carryforward. New installations after 2025 do not qualify for the residential federal credit.
5. Keep your records. Retain your paperwork in case of an audit; both state and federal tax authorities can request documentation well after the credit is claimed.

Why professional guidance matters here

Solar tax credit rules change. Percentages, caps, and expiration dates have moved multiple times over the past decade at both the state and federal level, and what applied to a system installed a few years ago is not necessarily what applies today. A CPA or tax preparer familiar with renewable energy credits is the right resource to confirm exact numbers for your specific installation date and household situation. Our team can provide the documentation you need, but we are not a substitute for tax advice on your specific return.

Tax credits are only part of the incentive picture

Eligible Hawaii state tax credits may complement other Hawaii-specific incentives, including Hawaiian Electric programs related to battery storage and grid services. If you are also considering a solar battery alongside your panels, review our overview of Hawaii solar incentives and confirm which programs apply. Do not include the expired residential federal credit in a new installation’s budget.

The bottom line

The Hawaii state credit may offset part of an eligible solar installation’s cost, alongside ongoing savings from lower electric bills. The expired residential federal credit is not available for new installations after 2025. Before signing a contract, confirm current state requirements with a tax professional and get a realistic installation timeline.

Get a free estimate from Independent Energy Hawaii, and we will walk you through the documentation you will need to bring to your tax professional.