The Ultimate Guide to Colorado Solar Tax Credits & Incentives in 2026
Colorado has positioned itself as one of the most solar-friendly states in the nation. While the federal government provides the bulk of the tax relief, the state of Colorado and local utility companies offer massive exemptions and performance-based incentives.
1. The 30% Federal Investment Tax Credit (ITC)
The most lucrative incentive is the Federal ITC. You are allowed to deduct 30% of the total gross cost of your solar and battery system directly from your federal income taxes. There is no cap on this credit, meaning a $25,000 system generates a $7,500 tax credit.
2. 100% Sales and Property Tax Exemptions
Colorado entirely exempts solar equipment from state sales and use taxes, saving you roughly 2.9% (plus local taxes) immediately at the point of sale. Furthermore, under Colorado law, the added equity that a solar system brings to your home is 100% exempt from property tax reassessments. You get the higher resale value without the higher annual tax bill.
3. Utility Rebates (Xcel Energy Solar*Rewards)
If you are an Xcel Energy customer, you can participate in the Solar*Rewards program. This is a performance-based incentive where Xcel pays you for the Renewable Energy Credits (RECs) your system generates, effectively sending you direct payments based on your system's production.
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