Solar Incentives in Colorado
Colorado homeowners considering solar in 2026 can draw on several active state-level programs. A property-tax exemption removes qualifying residential solar electric systems — those located on residential property, producing electricity primarily for on-site use, and sized at no more than 100 kilowatts AC — from Colorado property taxation entirely. A companion state sales-and-use-tax exemption covers the components used to generate alternating-current electricity from renewable sources, including solar modules, inverters, racking, wiring, and related balance-of-system parts; note that local jurisdictions may handle their own taxes differently. Colorado law also requires qualifying retail utilities to offer net metering, allowing customers to carry monthly bill credits forward indefinitely, though export-credit rates and billing structures vary by utility and are subject to PUC oversight — no single statewide rate applies. Xcel Energy customers in Colorado may additionally apply for the Solar*Rewards performance-incentive program, which pays per unit of production at rates set each program cycle by PUC-approved plans. Black Hills Energy offers a separate solar net-metering program for its southern Colorado customers, banking excess generation as credits for future use. Community solar gardens are another option for customers who cannot or choose not to install on-site, with subscriber credits governed by rules stabilized under HB23-1137 (2023).
The federal picture changed significantly for installations completed after December 31, 2025. The residential Clean Energy Credit under §25D — commonly referenced as the 30% federal tax credit — expired for systems placed in service in 2026 and beyond under the One Big Beautiful Budget Act (Pub. L. 119-21). Homeowners who installed before that deadline may still claim the credit on their prior-year return, but new 2026 installations do not qualify. The loss of that credit meaningfully lengthens payback periods compared to prior years, making the remaining state exemptions and utility incentive programs relatively more significant to a project's economics.
Colorado's residential electricity rate averaged approximately 16.74 cents per kilowatt-hour as of March 2026, roughly 1.70 cents higher than a year earlier. That upward rate trend modestly improves the value of solar generation avoided from the grid, partially offsetting the expiration of the federal credit, though the net effect on any individual project depends on system size, utility territory, applicable net-metering or performance-incentive rates, and financing method.
These figures reflect information verified as of June 2026 against official and legislative sources; programs, rates, and eligibility rules change with each legislative session and PUC rate case. Because this state carries a medium confidence rating — some official sources required additional verification — readers should treat the Colorado Public Utilities Commission, the Colorado Department of
Federal credit update. The federal residential Clean Energy Credit (the 30% “solar tax credit” under §25D) expired for systems placed in service after December 31, 2025. New 2026 residential installs do not qualify; a 2025 install can still be claimed on a 2025 return (IRS Form 5695). What this means for 2026 →
Current solar incentives in Colorado
Property Tax Exemption for Residential Renewable Energy Equipment
Independently owned residential solar electric generation facilities are exempt from Colorado property taxation. To qualify, the system must be located on residential real property, produce electricity primarily for use in the residential improvements, and have a production capacity of no more than 100 kilowatts of AC electricity. The exemption applies to the renewable energy personal property itself, not to the underlying real property.
| Amount | Full exemption from property taxation for qualifying residential solar equipment. |
|---|---|
| Who qualifies | Residential solar electric systems located on residential real property, used primarily for the residence, with capacity of 100 kW AC or less, meeting the criteria of section 39-1-102(6.8), C.R.S. |
| Administered by | Colorado Division of Property Taxation / county assessors |
Source: Sections 39-3-102 and 39-1-102(6.8), C.R.S. Official source →
Sales and Use Tax Exemption for Components Used to Produce Energy from a Renewable Energy Source
Colorado exempts from state sales and use tax the components used in the production of alternating-current electricity from a renewable energy source. Qualifying components include solar modules, trackers, generating equipment, supporting structures or racks, inverters, towers and foundations, and balance-of-system parts such as wiring, control systems, and switchgear. The exemption does not cover components beyond the generator step-up transformer, labor, energy storage devices, or remote monitoring systems.
| Amount | Full exemption from Colorado state sales and use tax for qualifying renewable energy components; local jurisdictions may tax these items separately. |
|---|---|
| Who qualifies | Purchases of qualifying components used to produce AC electricity from renewable energy sources, including residential and commercial solar installations. |
| Administered by | Colorado Department of Revenue |
Source: Section 39-26-724, C.R.S. Official source →
Net Metering (Net Metering Service for Customer Distributed Generation)
Colorado requires qualifying retail utilities to offer net metering service and to purchase energy produced from customer-sited renewable energy resources. Following SB21-261 (2021), eligible on-site installations may be up to 1 megawatt, and customers may carry forward monthly bill credits indefinitely at any service address within the utility's territory, or choose annual reimbursement or donation of excess credits to a low-income energy assistance program. The Public Utilities Commission implements the requirements through its electric rules, including standards for interconnection and meter collar adapters.
| Amount | Monthly bill credits for excess generation; credits carry forward indefinitely unless the customer elects annual reimbursement. Specific crediting mechanics are set in PUC electric rules (4 CCR 723-3) and utility tariffs. |
|---|---|
| Who qualifies | Customers of qualifying retail utilities with on-site renewable generation up to 1 MW; off-site installations limited to 500 kW (single-meter) or 300 kW per meter (multi-meter). Municipal utilities and cooperatives have separate but comparable policies. |
| Administered by | Colorado Public Utilities Commission / qualifying retail utilities |
Source: Section 40-2-124, C.R.S., as amended by SB21-261; PUC electric rules 4 CCR 723-3 Official source →
Community Solar Gardens
Colorado law requires electric retail utilities to purchase the output of community solar gardens located in their service territory through net metering credits to subscribers. HB23-1137 (2023) stabilized how the net metering credit is calculated, providing one calculation when subscriber bill credits change annually and a different calculation when subscriber bill credits remain fixed. Subscribers receive bill credits for their share of a shared solar array without installing panels on their own property.
| Amount | Bill credits to subscribers based on their subscribed share of the garden's output; credit calculation method depends on whether subscriber credits are annually adjusted or fixed. |
|---|---|
| Who qualifies | Utility customers within the service territory of the utility purchasing the community solar garden's output. |
| Administered by | Colorado Public Utilities Commission / electric retail utilities |
Source: Section 40-2-127, C.R.S.; HB23-1137 (2023) Official source →
Xcel Energy Solar*Rewards Program
Solar*Rewards is Xcel Energy's incentive program for customer-sited solar in its Colorado service territory, operated under its PUC-approved renewable energy plans. Participating customers receive performance-based payments for solar production, with separate income-qualified offerings. Incentive rates are set per program cycle and have declined over time; current rates and enrollment availability must be confirmed on Xcel's program page.
| Amount | Performance-based payments set under Xcel's PUC-approved renewable energy compliance plans; rates vary by program cycle and customer tier (standard vs. income-qualified). See program page for current rates. |
|---|---|
| Who qualifies | Xcel Energy Colorado electric customers installing eligible on-site solar systems; separate income-qualified track. |
| Administered by | Xcel Energy (Public Service Company of Colorado) |
Source: program page Official source →
Black Hills Energy Colorado Solar Program (Net Metering)
Black Hills Energy offers a solar program for its southern Colorado electric customers. Participants receive a production meter and a net meter; excess energy produced by the solar system is returned to the grid and added to the customer's banked energy for use in future months. Systems must be sized to supply no more than 200 percent of the customer's reasonable and expected annual electricity consumption at the site, and equipment must meet UL 1741 and IEEE standards.
| Amount | Excess generation is banked as energy credits for use in future months. |
|---|---|
| Who qualifies | Active Black Hills Energy electric customers in southern Colorado; system sized at no more than 200% of expected annual consumption; equipment meeting UL 1741 and IEEE standards. |
| Administered by | Black Hills Energy |
Source: program page Official source →
Verification note. Some official source pages for this state block automated access from our servers, so one or more figures here rest on the underlying statute or an official search result pending a final browser check. The cited official source is authoritative — confirm current terms there before you rely on a figure.
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Programs verified as of June 2026 against official state and federal sources (each cited above); refreshed quarterly as legislatures and utility rate cases change the rules. How we verify this data. This page is informational only — not tax or legal advice.