Over the last decade, the price of solar energy has plummeted by a whopping 89%. In fact, in 2019, solar photovoltaic (PV) panels produced the lowest priced electricity. That year, the cost of solar was $40 per megawatt-hour (MWh), while it was $41 for onshore wind and $175 for gas (peaking plants).
That’s a good enough reason to consider investing in your own solar PV system.
However, don’t forget that numerous solar panel incentives are also available. Qualifying for even just one of these can bring down your solar installation costs.
So, if you’re ready to go green with solar and save money along the way, be sure to check out the list of incentives below.
1. Federal Solar Investment Tax Credit (ITC)
The solar ITC is part of the Renewable Energy Tax Credit established under The Energy Policy Act of 2005. This law allows taxpayers to claim a reduction on their owed federal income taxes. Because it’s a federal ruling, it applies to any taxpayer regardless of the state they live in.
Like other tax credits, the solar ITC is a dollar-for-dollar deduction on income taxes owed. For example, suppose you claim a $2,000 federal tax credit. Once validated, you’d pay $2,000 less on the total federal income taxes you otherwise owe.
What’s more, there’s no cap to the federal tax credits that you can claim. However, there’s a 26% ITC limit on eligible solar panels for home and office systems. Moreover, the 26% credit only applies to installations completed from 2020 to 2022.
If you complete your solar panel installation by 2023, you can only claim a 22% federal ITC. After this, the ITC for residential solar panel installations expires in 2024. By contrast, commercial systems would still be eligible for a 10% ITC from 2024 onwards.
2. State Tax Credit
To encourage residents to go solar, a few states also offer their own income tax credits on top of the federal ITC.
One example is New York, which enables Empire State residents to file a 25% tax credit. However, the maximum allowable credit is $5,000.
Iowa also offers tax credits for residential solar electric property owners. So, if you’re a Hawkeye State homeowner, you can claim a tax credit of 11% on your solar system cost this 2021. Act fast, though, as this program ends this 2021.
3. State Tax Deductions
Some states also offer tax deductions for solar panel investments. Tax deductions differ from credits in that the former reduces your taxable income.
Let’s use Idaho’s 40% deduction for alternative energy device investments as an example. Let’s also say that your total eligible solar panel cost amounts to $12,500.
To find out how much of a deduction you can claim, multiply 40% by $12,500. That means you can deduct $5,000 from your taxable income.
Now, for the tax year 2021, The Gem State’s graduated income tax rates range from 1% to 6.5%. If you belong in the 6.5% bracket, that $6,000 deduction can save you $390.
What’s more, Idaho allows you to file a tax deduction of 20% for the next three years. However, keep in mind that the maximum deduction is set at $5,000 for any single taxable year.
4. Property Tax Exemptions
Thirty-six states offer solar device property tax exemptions for home and business owners. New Jersey, Rhode Island, Connecticut, Maryland, and New Mexico are just to name a few.
If you live in one of those 36 states, you don’t have to include the value of your solar system in your home’s taxable value. This can be a huge relief, as solar PV systems add thousands of dollars to property values. How much you can save depends on where you live, as property taxes in the US range from 0.28% to 2.49%.
5. Sales Tax Exemptions
Sales tax exemptions let you skip taxes on purchases normally subjected to sales tax. These taxes are crucial to economies, as states use them as a source of income for state activities. Most states enforce sales taxes, except for five: AK, DE, MT, NH, and OR.
In states that with sales tax, many offer exclusions for solar energy investments. If you live in one of these states and invest in a solar PV system, you don’t have to pay your state’s sales tax.
6. State and Municipal Rebates
Solar rebates credit back a certain amount of money to people who purchase solar PV panels. These incentives can come from state and local governments.
An example is Maryland, which offers the Residential Clean Energy Rebate Program. Under this program, Free State residents can get a $1,000 rebate when they install a new solar PV panel system. Their other option is a $1,000 rebate for installing solar roof shingles.
As for city rebates, California’s San Francisco Public Utilities Commission is one example. The department offers what it calls the GoSolarSF program. Eligible residents, including home and business owners, can get solar rebates of up to $2,000.
7. Rebates from Utility Companies
Utility companies, including electricity, water, and solar installers, also offer solar rebates. For instance, Austin Energy in Austin, TX, offers a rebate of $2,500 to qualified homeowners. The utility company will mail you a check for your $2,500 rebate if you meet the requirements.
8. Solar Renewable Energy Credits (SRECs)
An SREC proves the production of a certain amount of electricity using solar power. These certificates are part of state regulations called renewable portfolio standards (RPS). The RPS, in turn, requires utility companies to generate electricity from renewable sources.
How much electricity utilities should produce using renewable energy depends on state laws. Either way, to meet these requirements, they buy renewable energy certificates (RECs).
Those RECs can take the form of SRECs that utilities purchase from solar PV system owners. As such, if you own a solar PV system, you may qualify for SREC earnings.
In most cases, one SREC is equivalent to one MWh or 1,000 kilowatt-hours (kWh) of solar power. So, to qualify for an SREC, your solar PV system should generate that amount of solar energy.
You can then sell the SRECs you earn to your utility company. The price depends on where you live; if you’re in DC, lucky you, because you can sell your SRECs for over $400 a pop. If you can generate 10 SRECs, you can make at least $4,000 on top of all your solar savings.
9. Net Metering
Net metering is a credit-based billing mechanism for electricity consumers. You can take advantage of this if you make excess electricity with your solar PV system.
Best of all, as of 2020, 46 states, plus DC, took some form of net metering policy action. Hopefully, you live in one of these states where you can get credits for the excess solar energy you produce.
Net metering can save you money as it offsets some of the non-solar electricity you may end up using. This can happen during cloudy or rainy days, as your panels would have reduced output.
In such cases, you can rely on the excess energy your panels produced during sunnier days. In doing this, your net meter will run backward, causing a drop in your energy usage reading. As a result, your electricity bill may still be lower, thanks to your net metering credits.
For example, suppose your panels generate 30 kWh of energy each day, but your daily use is only 28 kWh. The excess 2 kWh gets sent back to the grid, so your meter will run backward, decreasing the reading by 2 kWh each day. So, by the end of the month, you’d have sent back 60 kWh of electricity to the grid.
Your utility company would then give you credits for that 60 kWh of excess energy. If your next month’s grid usage exceeds what your panels generate, you can use your credits. In this case, your utility company will deduct what you put onto the grid (and your credits) from what you took off it.
10. Low-Cost Solar Financing Programs
Keep in mind that one of the qualifying factors for most solar incentives is ownership. This means that you must be the named owner of the solar PV system to qualify. For the same reasons, leasing panels would likely disqualify you, as you won’t own them.
The great news is that lenders offer low-cost loans specifically for solar panels. They also offer competitive loan rates and don’t require collateral. GoodLeap, SunRun, and SunPower are some examples of such financing institutions.
Most importantly, these loans allow you to purchase PV panels instead of leasing them. As a result, you’ll own the solar system, thereby qualifying you for most incentives.
Make Going Green Easier With These Solar Panel Incentives
Keep in mind that many of the solar panel incentives available today have deadlines. As such, it’s best to start installing your PV system as soon as possible to maximize your savings. Besides, the sooner you get your panels installed, the sooner you can rely less on the grid.
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