Guide To Solar Incentives By State
When it comes to buying solar panels for your home,weve got good news and better news: the cost of solarpower has fallen over 70 percent in the last 10 years,and there are still great solar rebates and incentivesout there to reduce the cost even further.
The first and most important solar incentive to knowabout is the federal solar tax credit, which can earnsolar owners 26% of the cost to install solar panels backon their income taxes in the year after installation.
States and utility companies also offer several types of solarincentives, and whether you qualify to claim them depends onwhere you live and other factors like your tax status.
On this page, you can learn about the different types of solarincentives available to homeowners. You can also choose yourlocation below to discover the exact mix of solar incentivesoffered by your state and utility companies in your area.
Utility Bill Rate Design
Good electricity rate design allows you to save money when you save energy. This might sound intuitive but not all provinces are same. Superior designs have low fixed monthly fees and tiered electricity rates. Inferior designs have high fixed fees and flat electricity rates.
Ontario scores near the front of the pack when it comes to these factors having time-of-use rates and fixed monthly fees of $26 .
For example, reducing your electricity bill from 1,500 to 750 kWh per month will save you 54% on your electricity bill in British Columbia, 48% in , but only 43% in Ontario!
Note that fixed monthly fees dont disappear even if you switch to solar youll pay them as long as you remain connected to the grid. But this isnt a bad thing $26/mo is a small price to pay for using the grid as your back-up energy source!
The only way to completely remove your fixed costs is to go off the grid, something most homeowners in Ontario dont do because of high battery costs.
Disconnecting from the grid also means that you wont be able to participate in your utilitys net metering program.
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My Utility Company Offers A Solar Energy Rebate Do I Still Qualify For The Federal Credit
Many utilities offer one-time incentives or ongoing rebates to residents who install solar panels. The performance-based incentive, or PBI, for example, pays you a credit per kilowatt-hour for the electricity that your system generates.
You can still claim the federal solar tax credit but, typically, any utility rebate is deducted first.
Let’s say your utility company gave you a one-time $1,000 rebate on the $20,000 solar photovoltaic system you bought and installed in 2018. You’d qualify for a 30% credit, but it would be off of $19,000 — and your tax credit would be $5,700.
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What Expenses Are Included
The following expenses are included:
- Solar PV panels or PV cells used to power an attic fan
- Contractor labor costs for onsite preparation, assembly, or original installation, including permitting fees, inspection costs, and developer fees
- Balance-of-system equipment, including wiring, inverters, and mounting equipment
- Energy storage devices that are charged exclusively by the associated solar PV panels, even if the storage is placed in service in a subsequent tax year to when the solar energy system is installed
- Sales taxes on eligible expenses
History Of The Solar Investment Tax Credit
In the early days of solar energy, residential systems were far more expensive than they are now. By many homeowner standards, however, theyre still expensive today. For example, in 2009, it cost $8.50 per watt to install solar panels the current cost per watt, as of publishing, is about $2.40 to $3.22.
The solar investment tax credit was established by the Energy Policy Act of 2005, which established standards for renewable fuels, mandated an increase in the use of biofuels and established renewable energy-related tax incentives.
Under this law, the original policy was set to expire at the end of 2007. However, the solar ITC has been so popular that its expiration date has been extended multiple times.
Solar panel costs have decreased dramatically in the last 20 years, but the ITC can still save individuals and businesses a great deal on their federal taxes.
Today, solar systems are far less expensive due to changes in the industry and the manufacturing of certain parts that make up the solar system. Solar panels, lithium batteries and inverters are all far less expensive to make and buy now than they were in those early days.
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Who Can Qualify For Solar Incentives
Whether you can qualify for a solar incentive program depends on a few factors, including:
- Incentive availability in your state
- Whether you have tax liability
- Your annual income
Yes, its true: some states dont offer incentives for solar. In these places,solar can still make financial sense, but not because of anything the statelegislature is doing to help homeowners go solar.
The good news is everyone can qualify for the federal tax credit – as long as they have enough income to owe taxes.Tax liability is a fancy way of saying the amount that you pay in taxes.
Your annual income determines how much you owe, and if you make enough, youll be able to claim bothfederal and state solar tax credits. In many cases, you can claim thesecredits over multiple years if your tax liability is less than the totalamount of the credits.
Low-income solar incentives
Your annual income can also help you qualify for incentives in theopposite direction. If you make below the area median income inseveral states, you may qualify for low-income grants and rebatesthat can greatly reduce the cost to go solar – even making solarbasically free in some places.
Learn more:Low-income solar incentives by state
Do solar leases and PPAs qualify you for incentives?
The good news is that people who choose a solar lease or PPA in a statethat offers incentives will likely find the per-kWh electricity pricefrom the solar installer lower than people in states without incentives.
The Irs Is Still Offering Incentives For Switching To Solar Heres How Much You Could Save On Your Taxes And Electricity Bill
Solar-panel companies are aggressively marketing their products this season.
In my own neighborhood in a New York City suburb, door-to-door salespeople have been making the rounds. Reps from two different solar companies have stopped by, and thats in addition to multiple mailings Ive received.
Their pitch: Hurry if I want a big federal tax credit for a new solar-panel system, because itll be gone at year-end.
“Residential solar installers are notorious for using deadlines like this to create a sense of urgency with customers, and that’s definitely been the case this year,” says Michelle Davis, a solar-industry analyst with the market research company Wood Mackenzie.
If youve heard the same hard sell, dont believe it. The federal credit is still available next year, both for existing homes and new construction. Its just slightly smaller: 26 percent of purchase and installation costs vs. 30 percent for 2019. For 2021, the credit will be worth 22 percent.
After that, it really does expire for individuals.
The Residential Renewable Energy Tax Credit, as the IRS calls it, can be an attractive way to save on the significant cost of installing solar panels or roofing. An average-sized residential solar systemabout 400 square feet of solar panelscosts $18,000, according to the Solar Energy Industries Association, an industry group. The tax break reduces the cost by $4,680, to $13,320.
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Are Solar Batteries Covered By The Solar Investment Tax Credit
The Internal Revenue Service specifies that battery installations for which all energy that is used to charge the battery can be effectively assured to come from the Solar Energy System are eligible for the full solar tax credit.
This means that if you install a battery with a new solar system, you will save 26% on the total combined cost.
Solar Panels Are A Good Investment
Solar panels are a good investment. With the cost and availability of traditional energy sources on the rise, solar power is quickly becoming more popular in homes across America as an alternative to high-priced energy bills.
The average solar panel cost to power a house is $30,000 and installation takes about four days to complete. This may be an expensive option for some but its well worth it in the long run.
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How Do I Apply For A Government Solar Rebate
There is no need to apply for a solar rebate. This is something that the installer does on your behalf and is priced into the system cost.
So a typical 5kWh solar system might cost $7000 fully installed, but the installer will only advertise the system to cost $3500.
Basically what he is doing is collecting your half off you, then collecting the other half from the government.
There is no need for you to actually apply for the rebate yourself.
Solar rebates are not to be confused with solar Feed-in Tariffs. Once you have your solar system hooked up to the grid, you will need to speak to your energy company about how much money they will pay you to feed your excess power back into the grid.
Additional Opportunities For Residential Installations
- Federal Tax Credit: The Residential Renewable Energy Tax Credit of 30% of the total project cost is available for a variety of renewable energy projects, including solar PV. This credit was extended through 2020. Systems must be powered on by the expiration date to qualify.
- Property Tax Exemption: Texas law allows a property tax exemption for solar installations so while solar increases the value of your property to a prospective buyer, your property taxes wont increase!
- Additional Utility Incentives:
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Claiming The Solar Credit For Rental Property You Own
You cant claim the residential solar credit for installing solar power at rental properties you own. But you can claim it if you also live in the house for part of the year and use it as a rental when youre away.
- Youll have to reduce the credit for a vacation home, rental or otherwise, to reflect the time youre not there.
- If you live there for three months a year, for instance, you can only claim 25% of the credit. If the system cost $10,000, the 26% credit would be $2,600, and you could claim 25% of that, or $650.
- $10,000 system cost x 0.26 = $2,600 credit amount
- $2,600 credit amount x 0.25 = $650 credit amount
What Is A Solar Panel Rebate And How Does It Work
A solar panel rebate is a process in which homeowners are reimbursed for the cost of installing their own rooftop panels. This type of incentive can be used to help offset some installation costs, but its primary purpose is to make it easier and more affordable for consumers who want access to renewable energy sources such as solar power on their property.
The Australian government offers a rebate for solar power systems. Consumers can save up to $1,500 in rebates through the Clean Energy Council by purchasing an energy-efficient home system or installing rooftop panels on their property. The program also helps reduce emissions and increases jobs within the cleantech industry!
The available rebates vary depending on the state, but they typically cover 30% 50% off installation costs. They also help with any permit fees or inspection expenses that may be required in order to connect utilities like electricity service providers, gas companies and water suppliers.
It is important to note that the rebate may not cover all of your purchase. The best way to make sure you get a good deal while still getting some incentives for going green is to have an energy assessment done on your home by professionals who can tell how much it will cost and what improvements are needed in order to optimise usage!
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Solar Battery Storage Rebate
Rebates for solar batteries are either a grant or subsidy given by the government to help pay the upfront cost of the solar battery.
Solar installers/companies will be the easiest way to claim the rebate. Homeowners can also apply online at the relevant state rebate website.
You can claim this solar rebate with the purchase of any solar battery, like Teslas Powerwall 2. However, you will have to choose between the solar panel rebate or solar battery rebate.
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When Does The Federal Solar Tax Credit Expire
The federal solar tax credit is set to expire at the end of 2023. There is hope that the tax credit may be extended once again. The Biden Administration has plans to include a 10-year extension of the tax credit in future legislation. But, theres no guarantee that this will be approved by Congress and it may be at a lower rate.
Because of that, our best advice is to try and add solar panels as soon as possible so youre guaranteed to get the 26% credit.
The best time to go solar is now because the 26% ITC will decrease to 22% in 2023 before becoming unavailable for residential solar systems installed in 2024 and beyond.
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Investment Tax Credit For Solar
The federal investment tax credit is far and away the best solar incentive. The ITC gives back 26 percent of what you paid for solar on your taxes. Instead of a deduction, which reduces your taxable income , a tax credit directly offsets what you would otherwise owe in taxes. In other words, instead of just being taxed on a lower income, the federal ITC offsets what you actually owe in taxes, and can even come back to you as a refund.
Solar Rebates Available In Western Australia
The Western Australia government says that solar power rebates should be abolished. Currently, there are no rebates for a solar set up in WA. Citizens interested in the rebates can apply for the rebates offered by the Federal government. Approximately 250,000 households in Western Australia have installed the solar PV panels already.
In Western Australia, you can apply for the federal government solar rebate. The more large scale your power system, the more power it produces, hence more rebates.
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Other Frequently Asked Questions
If the tax credit exceeds my tax liability, will I get a refund?
This is a nonrefundable tax credit, which means you will not get a tax refund for the amount of the tax credit that exceeds your tax liability. Homeowners may get a tax refund at the end of the year due to the tax credit, if the reduction in tax liability means there was overpayment during the year. This can often occur when employers deduct taxes for employees over the course of the year. However, such refund is still limited by the taxpayers total tax liability. However, you can carry over any unused amount of tax credit to the next tax year.
Can I use the tax credit against the alternative minimum tax?
Yes. The tax credit can be used against either the federal income tax or the alternative minimum tax.
I bought a new house that was constructed in 2020 but I did not move in until 2021.
May I claim a tax credit if it came with solar PV already installed?
Yes. Generally, you can claim a tax credit on the expenses related to the new solar PV system that already came installed on the house for the year in which you moved into the house in other words, you may claim the credit in 2021. For example, you can ask the builder to make a reasonable allocation for these costs for purposes of calculating your tax credit.
How do I claim the federal solar tax credit?
Solar Rebates And Incentives
While the cost of solar has declined significantly over the last decade, it is still a significant investment for home and business owners looking to lower their electricity bills. In order to encourage the greater adoption of solar, the federal government, state and local governments, and even some utilities offer incentives to help make solar more affordable and accessible. These incentives typically take the form of solar rebates, tax benefits and/or performance based incentives, and can reduce the cost you pay for solar from anywhere to 26 to 50 percent!
All of the financial benefits listed below accrue to the owner of the solar panel system. If you buy your system upfront or with a solar loan, youre eligible to receive the tax credits, solar rebates, and SRECs for the system. However, if you lease your system, the third-party owner will receive all of the solar incentives.
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