One of the biggest benefits of installing solar panels and using solar energy is that the primary fuel source – the sun – is unlimited and free. Of course, the equipment required to harness all that free energy comes with a price tag. Leasing solar panels and solar power purchase agreements (PPA) can drastically reduce or eliminate upfront costs when installing solar on your home. But what if you prefer to buy your solar panels? Luckily, there are local incentives and rebates available for homeowners who purchase solar panels. Home solar rebates could help offset the costs of a solar panel installation.
About Solar Panel Rebates and Incentives
Upgrading your home with solar panels may also increase your property value, which could affect how much property tax you owe. Considering these expenses, will your solar panels actually save you money?
Luckily, there are numerous financial incentives, such as state and federal tax credits and solar rebates, designed to cut some of these costs and encourage the use of residential solar power. These incentives vary widely by state, and are especially plentiful in “prime states” for solar, like California, Texas, Colorado and New York. You may want to speak to solar installers near you to find out if there are incentives in your area.
Whether your solar panels are purchased or leased, you may be surprised just how many options there are. Understanding which incentives, credits and solar rebates are available to you can be intimidating and take some time. However, it is well worth the effort. If you take full advantage of government solar rebates and tax credits, you may find that solar power can be even less expensive than the utility power you are already paying.
How to Find Solar Panel Rebates
When exploring which financial rebates and other incentives are available to you, here are some things to consider:
- What state and region is your home located?
- When will the solar panel installation be completed and approved for operation by your utility?
- Are your solar panels leased or purchased?
- Are the panels installed by a contractor or by you, the owner?
- Does this equipment carry a warranty, and if so, for how long?
- Will your system be connected to the grid? (Most likely, it will).
- What’s the system size and expected output?
- Are you apt to produce more energy than you will typically use?
- How will your solar project impact your property value and taxes?
- Are there additional project-related expenses for equipment, city permits, etc.?
It’s best to work with an experienced solar installer, who will be familiar with the incentives in your state and region, as well as the process and paperwork required to get them. Ask your solar professional to assist you in identifying and applying for them. Many will even take care of all this paperwork as part of their service package. Tax credits and solar rebates are often directed to the owner of a residential solar system. So, if you’re leasing your panels, you can expect the professional contractor to file and collect these incentives.
If you are purchasing or installing solar panels independent of a solar installation company, remember to collect all of the documentation related to your project’s expenses. Do your research, and consider consulting with a tax professional before you file.
What Solar Panel Rebates Does Your State Offer?
If you’re wondering what financial incentives apply to your project and are available in your area of the United States, check out the Database of State Incentives for Renewable Energy (DSIRE).
Operated by the North Carolina Clean Energy Technology Center and funded by the U.S. Department of Energy, DSIRE provides an extensive, searchable summary of renewable energy and energy efficiency incentives. Click on your state, then filter results to explore and zero-in on financial incentives like solar rebates and personal tax exemptions. Use the “Technology” and “Renewable Energy” filters to find offers related to solar technology.
Common Solar Panel Rebate Incentives
Financial incentives for residential solar installation projects vary greatly depending on the state where your property is located and the year in which your system is placed in service. Here is an overview of the general types of incentives available to U.S. homeowners.
Solar loan programs
These loan programs are offered at the federal and state level to purchase solar panel systems and equipment. State programs, for example, may offer a low or zero interest rate, typically for a term of ten years or less.
Personal solar tax incentives
Incentives such as tax credits and deductions reduce the upfront cost of purchasing and installing a residential solar panel system if you decide to buy. Eligibility requirements, such as which types of equipment qualify for the credit and the maximum amount you can deduct, vary by state.
Property solar tax incentives
Adding a solar panel system to your property may increase the value of your home, which could mean higher property taxes. Solar property tax incentives exclude or reduce this added value for taxation purposes. This incentive keeps you from being penalized for adding renewable energy systems to your house.
Solar rebate programs
Rebate programs for solar panels are available from states, local governments and utilities in varying amounts. For example, your state may offer a cash incentive when you install qualified equipment like solar panels.
Your local utility company may also offer you a credit if your grid-connected system produces more energy than you use. You can actually sell that extra energy back to the grid. This is called net metering or net excess generation (NEG).
Federal Solar Incentives: the Solar Investment Tax Credit (ITC)
If you decide to purchase – not lease – your solar panels, either through cash or financing, you can currently deduct 30% of that cost through the Federal Residential Renewable Energy Tax Credit. This investment tax credit (ITC) is a dollar-for-dollar reduction in the amount of federal income tax you pay. When calculating your ITC, you can include expenses such as:
- Solar PV panels or cells
- Contractor labor costs for installation
- Permitting and inspection
- System equipment, like wiring and solar inverter installations
- Sales tax on eligible expenses
Remember, you must own your solar panel system to claim the ITC. In addition, your system must be “placed in service” – that is, construction completed and utility approved for operation – for the first time between January 1, 2006 and December 31, 2019. After that, the rate goes down to 26% for the next two years, and then 22% for two years afterward.
If you don’t expect to owe taxes in the year of installation, or if your credit exceeds the income tax due for that year, under current law you can carry it over to the following tax year. Homeowners can claim the ITC, even if the home where your solar equipment is installed is not your primary residence (as long as it’s within the U.S.).
Renters and rental properties, however, are not eligible. It’s a good idea to consult with a tax professional familiar with residential energy credits before filing. More information is available at irs.gov and on IRS form 5695.
Spotlight on Solar Prime States
Residential solar power is gaining momentum in many U.S. states where sunshine is plentiful and local governments are focused on promoting renewable energy. For instance, Xcel Energy, which services several states including Colorado, Texas and Santa Fe, New Mexico, offers a Solar*Rewards® for Residences program with incentives and solar rebates for installation of photovoltaic (PV) solar panels.
DSIREusa.org provides up to date information on the numerous personal tax credits and solar rebate programs offered at the state and local level. Here are some examples from prime states.
California Solar Initiative (CSI) offers a rebate for excess energy generated by a residential solar panel system. The amount is based on either the expected or actual output of the system. It is distributed as either a one time payment or in monthly installments. Think of yourself as a lottery winner: would you like the lump sum up front, or multiple payments over time?
- An Expected Performance-Based Buydown (EPBB) is like the lump sum. You will receive a one-time incentive payment when the system is installed. The amount is based on how much energy your system is expected to produce in the future.
- A Performance Based Incentive (PBI), on the other hand, breaks your incentive payment into monthly installments over the course of about five years. The amount is based on the actual metered output of your system.
The Energy Smart Colorado Renewable Energy Rebate Program offers cash rebates to off set solar project costs. You can find reliable solar installers in Colorado with Modernize.
The Residential Solar Sales Tax Exemption exempts eligible residential solar energy systems equipment and services from sales tax. See also: NY-Sun Incentive and NY State tax credit. Installing solar panels in New York has become very popular as of recently.
The SMART Source Solar PV Rebate Program offers rebates to any customer for home photovoltaic (PV) systems at a flat rate of $1.05 per watt (W)-DC for residential customers. Solar panel installation in Austin, TX has skyrocketed over the years and increases Texas home value in highly desired real estate areas.
Many states, and certainly the federal government, are encouraging solar energy. They want you to give it a try and are willing to help you pay for it. So don’t let the initial sticker price deter you from solar. Do a little research — you may be surprised by what’s available in the form of rebates and other incentives.