What Solar Incentives Do I Qualify For?
There are a number of tax credit programs and other incentives that residential solar users can take advantage of to lower costs associated with using solar energy systems.
Eligibility requirements vary for these federal, state, municipal, and utility-based programs, but owning your solar energy system rather than leasing is an essential upfront requirement.
Federal Investment Tax Credit
Investment Tax Credit (ITC). The ITC allows you to deduct 30% of the install costs of your solar energy systems from your federal taxes. The process for claiming the tax credit is straightforward, requiring the completion of the 2-page IRS Form 5965.
- Eligibility: So long as you own your solar energy system, you are eligible for the ITC.
- Future of the program: Presently, the ITC will be available in some form to residential users through 2021. The tax credit rate from 2017-2019 is 30%, and it falls to 26% in 2020, and 22% in 2021. Unless Congress acts to extend the program, 2021 will be the last year for residential users to take advantage of the ITC.
State and Local Programs
Many states, counties, and utilities offer additional incentives. Your solar contractor can provide you with up-to-date information on the incentives you qualify for.
State tax credits and abatements. Several states offer tax credit programs similar to the federal ITC. These credits are often able to be claimed in combination with the ITC, offering a sizable tax break for qualifying solar homeowners.
In addition to traditional tax credits, many states also offer tax abatements for residential solar homeowners in the form of property tax exemptions and sales tax exemptions. Some municipalities offer the same kinds of tax abatements, further compounding the cost savings potential for solar homeowners.
In addition to tax credits and abatements, other state, municipal, and utility-provided programs exist that can further lower costs associated with owning residential solar energy systems. Prominent examples include:
Cash rebates: These work like any other rebate program, and can be used to offset solar installation costs by a set amount based on your PV system’s output. They typically are available only for a limited time.
Solar renewable energy certificates (SRECs): Some states require utilities to produce a certain percentage of their energy from solar. In these states, residential solar energy systems produce SRECs that utilities will buy from a marketplace in order to count towards state-mandated renewable energy requirements. In some cases, solar homeowners who sell their SRECs on the marketplace can pocket thousands of dollars in income annually, depending on SREC rates in their state.
Performance based-incentives: These are incentives offered by some states and utilities that pay a solar homeowner (typically in the form of bill credits) on a per kWh basis for solar electricity produced. Feed-in tariffs are a popular form of performance based-incentives.
Solar Power Rocks has developed the following helpful graphic that gives a better sense of the competitiveness of your state’s solar incentives offerings:
Photo Source: SolarPowerRocks.com
The following resources can help you get a better sense of what solar incentives are available in your state:
- Database of State Incentives for Renewables & Efficiency (DSIRE): As the name implies, this website gives a comprehensive state-by-state overview of financial incentives and regulatory policies for renewable energy sources, including solar.
- 2017 Solar Power Rankings: This website gives a good visual representation of which states have the friendliest solar policies (including financial incentives) for residential users of solar energy systems.
Choosing the Right Solar Company
Our list of the Top 10 Solar Companies in the U.S. is a great place to start. Here you can compare prices, customer reviews, and offerings.
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