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Solar is a big investment that can often feel intimidating, especially for your wallet. However, it can save you a lot of money in the long run.
To help ease the shock of the initial investment, tax dollars have been set aside to encourage more homeowners to produce their own renewable energy. These benefits come at federal, state, and local levels.
Federal tax credit 101:
In 2006, the federal government enacted the solar Investment Tax Credit (ITC). “In the years since [ITC was founded], the U.S. solar industry has grown by more than 10,000% with an average annual growth of 50% over the last 10 years. The industry has created hundreds of thousands of jobs and invested billions of dollars in the U.S. economy” -Forbes
The Investment Tax Credit has sparked a lot of growth in the solar industry and now offers a 26% tax credit for systems installed between 2020 and 2022, and 22% for systems installed in 2023. You can qualify for the ITC for the tax year that your panels started generating electricity.
What does it take to qualify for the federal tax credit?
“You can qualify for the ITC as long as your solar system is new or being used for the first time between January 1, 2006 and December 31, 2023. Unless Congress renews the ITC, it expires in 2024.” - Forbes
Other requirements include:
- You must own the system outright (not lease it)
- The system must be located in the United States
- The system must be located at your primary or secondary U.S. residence or for an off-site community solar project
State tax credits 101:
Similar to ITC federal taxes, just at a state level, state tax credit amounts vary significantly from state to state. Bonus: they generally don’t reduce your federal tax credits.
Several states (and Puerto Rico) offer solar incentives on top of the federal ITC to encourage homeowners to install solar. Each state has different incentives but some common forms of these incentives are tax credits, rebates, and renewable energy certificates. California, Texas, Minnesota, and New York, all have high incentive amounts.
State Government Rebates
“Some states offer upfront rebates for installing a solar power system. They are typically only available for a limited time while funds are available, so research rebates in your state to get in on the incentive before it runs out. A state government rebate can reduce your solar costs by 10% to 20%.” - Forbes
Local Utility Rebates
Local utilities often provide some financial incentives in addition to state and federal incentives. To encourage more production and use of renewable energy, some offer rebates on energy bills based on how much energy the system produces, while others provide one-time subsidies to install a solar power system.
Tax Exemptions
Adding solar to your home will increase your property value, which should increase your property tax. However, Many states and municipalities will not include your solar system in your property tax. Meaning your bill stays the same while your property value increases.
Some states also have programs to ensure all solar system purchases are exempt from state sales taxes, which could save you hundreds of dollars during your install.
What if I’m leasing?
If you’re leasing your system, don’t worry! SunRun will apply the ITC credits they receive to the price of your system. It will lower the price tag and you won’t have to do the leg work of applying for the credits.
How to start:
If you’re ready to invest in solar or want to talk more about your options, our experts are here for you. Get started by contacting us today.
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