Solar Panels Incentives, Rebates, and Tax Breaks

Last Updated: 28 February, 2019 by Alexander Thomas

Solar Panels Incentives, Rebates, and Tax Breaks

Solar panels are a great addition to your home. They help you to reduce your reliance on expensive and polluting energy sources like coal or natural gas, and they last for decades. Solar panel rebates and tax credits can help make installing solar panels more affordable. But just what benefits and solar subsidies are available to homeowners who install solar panels?

We all understand that solar power is one of the ways forward in the future. Coal, natural gas, and other polluting and limited resources will only get more expensive as time goes on. And the damage that our reliance on fossil fuels has done to the planet is difficult to overstate. The time to invest and act is now. And that is why so many of us are looking to embrace solar energy in our homes.

But the installation of a solar power system in your home is expensive. Between purchasing the panels, installation, materials to integrate this system into your home’s power grid, and more, it can seem like a daunting investment.

That’s why so many government agencies and private companies have come together to offer solar programs that create significant financial benefits to those who go solar. If you are thinking of installing solar panels but have been put off by the cost, then this article will help you identify solar panel rebates and other solar programs that will help you to quickly recover the money spent in order to enjoy solar power.

We wanted to break down some of the opportunities available from government agencies, municipalities, and even private companies that help to put solar panel installation within reach.

Of course, please be advised that this advice shouldn’t take the place of a qualified tax preparer or advisor. But we want you to be aware of all the possibilities for solar panel rebates and other solar subsidy programs so that you can take follow up with all relevant agencies or companies.

Here are some of the most common ways to save on solar panel installation through tax incentives, cash rebates, energy incentives, and other common programs.

Solar Investment Tax Credit This federal tax credit  is probably the most well-known solar subsidy to those interested in solar power installation in their home. Because it is a federal program, it applies to all qualified residents to the United States who pay taxes and install solar panel arrays, no matter where you live within the country. This national solar rebate allows you to recover a significant portion of the costs from solar installation.

The Solar Investment Tax Credit (or Solar ITC) is a way to lower your overall tax burden when you install a solar panel array. You can deduct up to 30% of the cost of installation (less any cash rebates) from your taxes. This national solar rebate lowers your tax burden for the tax year in which you purchase your home’s solar energy system.

Another great benefit of this solar panels incentive is that If you don’t have tax liability equal to the full rebate amount in the first year you install your solar panels, the additional credit can be rolled over into future years.

For example, if your solar ITC amount is $5,000 but your tax liability in 2019 is only $4,000, this could bring your tax liability to zero for 2019, and lower your 2020 taxes by $1,000. If you owed $5,000 or more in taxes, you could just take the entire credit for this year.

A few things to keep in mind about this type of solar panels incentive. First, you must own, not lease, your solar panels. The tax rebate applies only to the solar panel owner, so if you are simply leasing the system from a third-party provider through a lease agreement, then you do not qualify for the federal ITC.

In fact, most solar programs are available only to the owner of the panels, so if you lease your panels, you don’t qualify for most solar panel rebates, grants or cash incentives.

Second, the current (2019) tax credit amount for this national solar rebate is 30% of the cost of the solar array, but that amount begins to go down next year, in 2020. It continues to lower and will eventually be phased out for residential installations in 2022, though a 10% tax credit will remain for commercial installers.

That means that if you want to take full advantage of the solar ITC, you’ll want to move towards installation as soon as you can. Systems have to be fully installed to qualify for the tax credit, but don’t need to be operational until 2023. So if you’ve been on the fence about solar installation, it is a good time to move forward.

The solar ITC doesn’t just apply to the cost of the panels themselves. It also includes many costs associated with the installation of solar panels including materials, installation and shipping costs, labor costs from installers, engineers, site preparers and other experts, even permitting fees.

Make sure that if you intend to take advantage of this or other similar solar programs, that you keep all the receipts and financial records associated with your solar panels. When you bring them to your tax preparer you can go over them together and make sure that you get the full solar panels incentive that you’re due.

State-Level Solar Subsidies

In addition to national solar rebates in the form of federal tax benefits, many states provide solar panel rebates. These programs can vary quite a bit from state to state, so it’s always a good idea to check for specific solar programs in place where you live.

Some states offer essentially no state solar subsidy or rebate. Others provide tax credits that are similar to the national solar rebate–a portion of the cost of your system can be deducted from your state income tax liability.

Still other states offer varying incentives and deductions for solar installation. In many states, the assessed value of your solar energy system is deducted from your home’s value when you pay property taxes.

In these programs, your home increases in value due to the installation of solar panels, but you don’t pay anything additional in property taxes. It’s a tax-sheltered upgrade to your home’s value. This type of property tax exemption for solar installation varies in length. Some states offering the exemption indefinitely, while others cap the exemption at 5 or 10 years.

Another type of state-level solar subsidy is the exclusion of products related to solar panel installation from state sales tax. This represents a savings of about 6-8% on the cost of installation materials in states that offer this incentive (including Maryland and New York)

SRECs

In some states, the current laws allow you to reap benefits from your utility company by converting to solar power. In such states you can receive something called Solar Renewable Energy Credits (SRECs) from your utility provider. These types of solar programs allow you to receive credit or income from your local utility for the clean energy you produce.

An SREC is an incentive given to you by the utility. In states with SRECs, utilities are required by state law to get a certain percentage of their energy from clean sources like wind or solar power.

When a utility customer purchases solar panels, some or all of their energy use begins to come from clean solar power instead of dirty fossil fuel or nuclear based power provided by the utility company.

Since you are still a customer of the utility, however, they can “take credit” for the amount of your energy that you get from clean sources. If enough of a utility company’s customers install solar, then the utility company may be able to meet the state’s clean energy standards without making significant investments of their own into commercial solar plants or wind farms.

To encourage customers to generate solar energy on their behalf, utility companies will offer SRECs which offer a ways for customers to get a check from their electric company, or to lower their bill. This gives consumers an even bigger incentive to invest in solar.

When SRECs work well, the utility saves money because it isn’t fined for using too much dirty energy, you save money on utilities and get a bonus from the electric company. And the vast conversion to solar power helps to lessen pressure on the energy grid and lower the amount of pollution created for power generation. Everyone wins!

Solar Panel Loan Programs

Many states offer loan programs that allow you to finance part of the cost of your solar panels at a special, low rate. These rates can vary, with some states specifying that their solar loan program have rates at 3% below market value, and some with fixed rates (4.9% seems most common).

States that offer solar loan programs help to finance homeowners who are installing these useful, but costly systems. If you live in a state with solar loan programs, this can help you to afford solar sooner, because you won’t need to have all the cash on hand to begin installing your solar panel array.

You can get part–or in some cases nearly all–of your solar costs financed, and pay over time using the savings generated from your solar subsidy savings or your savings from your lowered electricity costs.

These loans are often state-based, so they are not available in all areas. And rates of interest vary on market conditions, and on a location and credit basis. Check with your solar installer or your state government agency to see the specific options available to you if you want to finance part of the cost of solar power installation.

Cash Rebates for Solar Panels

Still other options include solar panel grants. Some of these one-time cash payments are available on a statewide level. You may also be able to receive this type of cash solar subsidy from your electric company or cooperative, or from a local or municipal government.

Solar panel grants or cash rebates are one-time-only payments from the government body or company that provides them designed to defray the cost of installation. You can typically apply for this type of solar subsidy when you have completed installation of your solar panel array.

However, check the terms and conditions for the types of solar panel grants available in your area, because some may be available before construction is completed, as long as you have a contract for installation with a qualified solar installer.

Solar Panel Rebates Put Going Solar Within Reach

From solar panel rebates in the form of a tax credit, to cash bonuses from your township, to ongoing payments from your electric company, there are many ways to quickly reap the financial benefits of solar installation.

While the cost of installing solar panels can initially seem daunting, both national and local agencies and companies understand how important it is to embrace clean energy for the future. That is why so many solar panel rebates and other solar subsidies are available from numerous groups and agencies.

Solar panel installation costs can be recovered in as few as five years, with a national average of eight years. And because solar panels keep generating clean, green energy for decades, everything after that break even point is pure profit from your standpoint as a solar panel owner.

And no matter how many or how few of these solar subsidies are available in your area, know that you’ll still be reaping financial benefits of lowered reliance on your utility company and smaller utility bills for decades to come. What’s more, you’ll reap benefits outside the financial, as you contribute to a more sustainable, cleaner, and healthier world.

Solar is the future, and that future is green–in more ways than one. If you are going solar, take advantage of the environmental and financial benefits of solar power through the many available solar programs and through years of clean energy generation. If you want to join in on all the benefits of solar power, talk to a qualified solar installer today.