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Solar energy can save you money in the long run, but the upfront installation costs can be steep. Although the price of solar has significantly decreased over the last decade, in 2024, it will still cost an average of $31,460 before incentives.
Fortunately, various government programs and some utility companies offer generous incentives to reduce that price and encourage more people to go solar. The most beneficial is the federal tax credit, which reimburses 30% of the cost, lowering the average expense to $22,000 for most homeowners. The additional savings you can achieve depend on your location and how much clean energy your local government aims to integrate into the electric grid.
In this guide, we’ll explain the different types of solar incentives available and help you understand how much you can save when installing a solar panel system at your home.
Solar Rebates: Quickest Way to Earn Free Money
Solar rebates directly reduce the cost of your solar installation, but they’re not available everywhere. Many rebate programs have reached capacity or are being phased out, and some now require adding a battery to your solar installation.
Where to Find Rebates
There are four main places to check for rebates:
1. State or Local Government
2. Utility Company
3. Installer
4. Equipment Manufacturer
The Biggest Rebates
The largest rebates typically come from local governments or utility companies. Applying for these rebates can be tedious, often requiring detailed information about your solar equipment, system design, performance expectations, project costs, and installation company. Usually, your installer will assist with the application process. In some areas, solar rebates can provide over $5,000.
Rebate Requirements
Rebates may come with specific requirements, such as selecting certain equipment or adhering to system size restrictions. You might need to work with specific, state-approved installers. For example, to claim New York’s Megawatt Rebate, you must work with a pre-vetted contractor, potentially earning $2,000 if your system qualifies.
Note that sometimes rebates are paid directly to your installation company, reducing your total cost. However, some installers might increase their prices to benefit from the rebates themselves. To ensure the best deal, compare quotes from installers outside the rebate program.
Seasonal and Equipment Rebates
Installers may offer seasonal rebates and promotions during slower periods. These typically do not require a separate application. Additionally, some equipment manufacturers offer rebates to make their products stand out. These rebates are usually simple to claim through the company’s website with proof of installation.
Federal and State Tax Incentives
The federal investment tax credit (ITC) provides 30% of your solar project costs as a credit toward your federal income taxes, covering equipment, labor, permitting, and more.
The credit is nonrefundable, meaning it cannot exceed the amount of tax you owe. However, you can carry forward any unused portion of the credit to reduce your tax liability in future years. Note that interest paid, including loan origination fees, should not be included.
There is no annual or lifetime dollar limit on this credit, except for limits on fuel cell property. You can claim the credit each year you install eligible property, continuing until the credit starts to phase out in 2033.
If you don’t have a sufficient tax bill to claim the entire credit, the remaining credits roll over to subsequent years until the ITC phases out in 2035. Some states also offer their own tax credits, which can add to your savings.
Sales and Property Tax Exemptions
Some states exempt solar installations from state sales taxes, potentially saving thousands of dollars. Property tax exemptions or exclusions mean you won’t be taxed on the increased value of your home due to solar panels, preventing higher property tax bills.
Business Incentives
Businesses can benefit from several federal incentives:
1. Federal Investment Tax Credit (ITC)
2. Production Tax Credit (PTC)
3. Modified Accelerated Cost Recovery System (MACRS)
4. Bonus Depreciation
Performance Incentives
In addition to upfront savings, performance incentives provide ongoing financial benefits based on your system’s electricity generation. Net metering allows you to send excess electricity to the grid for credits, reducing your energy bills.
Renewable Energy Certificates and Performance-Based Incentives
Some states offer solar renewable energy certificates (SRECs) and performance-based incentives (PBIs), providing additional income based on your system’s production. These programs are increasingly rare but still available in some areas.
Subsidized Loans and Grants
Subsidized loans and grants can make solar more affordable. Grants are typically available to lower-income individuals or large-scale projects, while subsidized loans often feature lower interest rates and longer repayment periods.
States like Maryland, New York, Rhode Island, South Carolina, and Washington D.C. offer significant incentives, making solar installations highly cost-effective. Low-income customers in certain states can even qualify for free or nearly free solar panels through specific programs.
Explore available incentives in your state to maximize your savings and make solar energy more accessible and affordable.
Disclaimer
The information provided herein is for informational purposes only and is accurate as of the time of publication. Please be aware that the solar energy landscape, including technology, regulations, incentives, and market conditions, changes frequently. Therefore, it is essential to consult with qualified experts and professionals before making any decisions regarding solar energy installations or investments. This will ensure that you receive the most current and applicable advice tailored to your specific circumstances.
