Why South Carolina Is a Strong State for Rooftop Solar

South Carolina ranks among the Southeast's more favorable states for residential solar, thanks to a combination of abundant sunshine, a generous state tax credit, and a federal tax credit that covers nearly a third of system costs. Average residential solar systems in the state run between roughly $15,000 and $25,000 before incentives, and homeowners who stack available programs typically recover a significant share of that upfront cost over the first several years of ownership.

The incentives below apply to systems that are owned outright (either paid in cash or financed through a solar loan). Systems acquired through a third-party lease or power-purchase agreement do not qualify for the tax credits, because the homeowner is not the owner of the equipment.

South Carolina State Solar Tax Credit (25%)

South Carolina offers one of the most generous state-level solar tax credits in the country. Under S.C. Code Section 12-6-3587, homeowners who install a qualifying solar energy system on a residence in South Carolina may claim a nonrefundable state income tax credit equal to 25% of the installed cost.

Key rules to understand:

The credit cannot exceed $3,500 or 50% of the taxpayer's state tax liability in any single year, whichever is less.
Any unused portion of the credit can be carried forward for up to 10 years.
Eligible equipment includes solar photovoltaic (PV) systems and solar thermal (hot water) systems that meet state standards.
The credit is claimed on Form TC-38 filed with the South Carolina Department of Revenue.

For a $20,000 system, the state credit would be worth $5,000 on paper, but because of the $3,500 annual cap you would claim up to $3,500 in the first eligible year and carry the remaining $1,500 forward.

Federal Residential Clean Energy Credit (30%)

Layered on top of the state credit, the federal Residential Clean Energy Credit allows homeowners to claim 30% of the total cost of a qualifying solar PV system, including equipment, labor, permitting, inspection fees, and most sales taxes. The 30% rate applies to systems placed in service from 2022 through 2032, then steps down to 26% in 2033 and 22% in 2034 under current law.

Important points:

The credit is claimed on IRS Form 5695 for the tax year the system is placed in service.
There is no federal dollar cap on the credit amount for residential PV.
The credit is nonrefundable, but unused amounts can be carried forward to future tax years.
Battery storage with a capacity of at least 3 kWh, installed at a residence, also qualifies even if not paired with solar.

Combined, a homeowner can claim 30% federal plus 25% state on the same system. Because the credits are structured separately, they stack rather than cancel each other out, although the state credit's annual cap means larger projects may take multiple years to fully capture the state benefit.

Property Tax Exemption for Residential Solar

South Carolina exempts the added value of residential renewable energy systems from local property taxes under state law. When a solar system increases a home's market value, that increase is excluded from the property's assessed value for ad valorem tax purposes. Homeowners therefore do not pay higher property taxes simply because their home has solar panels, which preserves part of the long-term return on the investment.

This exemption applies to owner-occupied residential property. Homeowners generally do not need to file a separate application, but it is worth confirming with the county assessor that the solar system is coded correctly on the property record.

Net Metering with South Carolina Utilities

South Carolina's net metering and solar compensation rules are set by the Public Service Commission of South Carolina under the Energy Freedom Act (Act 62 of 2019). Major investor-owned utilities operating in the state, including Duke Energy Carolinas, Duke Energy Progress, and Dominion Energy South Carolina, offer net metering and solar choice tariffs for residential customers.

Under current programs:

Residential customers with rooftop solar receive credits for energy exported to the grid.
Compensation structures follow the solar choice tariff approved by the PSC, which uses time-of-use rates and monthly netting rather than the older 1:1 retail-rate net metering.
Legacy net metering customers who interconnected before certain program cutoffs continue under their original terms for the remainder of their grandfathered period.

Because rates, riders, and enrollment caps change, homeowners should check their specific utility's current solar tariff before signing a contract with an installer.

Santee Cooper and Electric Cooperative Programs

Santee Cooper, the state-owned utility, and several of South Carolina's electric cooperatives have offered their own solar programs and rebates in recent years. Availability, rebate amounts, and enrollment windows vary year to year and often have funding caps. Customers of Santee Cooper, Berkeley Electric Cooperative, Palmetto Electric Cooperative, and similar utilities should contact their provider directly to confirm what is currently available in their service territory.

Sales Tax on Solar Equipment

South Carolina does not currently offer a blanket sales tax exemption specifically for residential solar equipment. Standard state and local sales tax generally applies to the purchase of solar panels and related hardware. However, labor charges on a lump-sum installation contract are typically treated differently from materials, and installers handle the tax treatment as part of their bid.

How the Incentives Stack on a Typical System

Consider a $20,000 residential solar PV system installed and placed in service in South Carolina:

Federal Residential Clean Energy Credit at 30%: $6,000 tax credit.
South Carolina 25% solar credit: $5,000 potential credit, limited to $3,500 per year, with the remainder carried forward.
Property tax exemption: the added home value from the system is not taxed.
Net metering or solar choice credits: monthly bill savings on exported energy, over the life of the system.

On paper that is up to $11,000 in combined tax credits against a $20,000 project, before counting ongoing utility bill savings. Actual benefits depend on the homeowner's tax liability, the utility's current solar tariff, and site-specific factors such as roof orientation and shading.

Practical Steps Before You Sign a Contract

Get at least three itemized quotes from South Carolina-licensed solar installers and verify licensing and insurance.
Ask each installer to show the system specifications, estimated production in kWh per year, and full equipment warranties.
Confirm in writing whether the contract is a cash purchase, loan, lease, or power-purchase agreement; only cash or loan-financed ownership qualifies for the tax credits.
Review your most recent 12 months of electric bills and ask for a production estimate that matches your actual usage.
Confirm with a tax professional that you will have enough state and federal tax liability to use the credits, given the carryforward rules.
Verify your utility's current net metering or solar choice tariff and any interconnection fees before committing.

Sources and Where to Verify Current Rules

Because incentive programs change, homeowners should verify the latest rules directly from official sources before making financial decisions. The South Carolina Department of Revenue publishes Form TC-38 and instructions for the state solar credit. The South Carolina Energy Office and the Public Service Commission of South Carolina publish utility solar tariff information. The federal credit is administered by the IRS via Form 5695 and is summarized by the U.S. Department of Energy and Energy Star. The DSIRE database (dsireusa.org) maintained by the N.C. Clean Energy Technology Center tracks state and utility incentive details across South Carolina.

South Carolina Solar Incentives: Tax Breaks and Rebates for Homeowners