There is a federal investment tax credit (ITC) for solar energy systems in place until December 31st, 2023. Both residential and commercial customers can take advantage of this tax credit, and it applies to all three major types of solar technology; photovoltaic, solar heating & cooling, and concentrating solar technology.
In addition to the federal ITC, many states, counties, municipalities and utilities offer rebates or other incentives for solar energy technologies. Your installer will be able to provide the most up-to-date information on solar incentives. The Database of State Incentives for Renewables & Efficiency (DSIRE) has a comprehensive list of solar incentives by state, as well as more information and maps showing solar policies across the U.S. In addition, SEIA partner Solar-Estimate.org has a page that lets you search for local rebates and incentives that might be available to you.
The biggest rebates come from local governments or utility companies
Applying for local rebates can be tedious. It often includes submitting detailed information about your solar equipment and system design, performance expectations, project costs, and/or installation company. Usually, your installer will apply for these types of rebates on your behalf or assist you in the process. But if not, the application process is often well worth the effort. In some areas, solar rebates can provide over $5,000.
Rebates also sometimes come with requirements. You may only be able to select specific equipment, or there could be a maximum or minimum system size restriction. You might only be able to work with certain solar installers that the rebate program supports. For example, to claim the Megawatt Rebate incentive in New York, you must work with a pre-vetted, state-approved contractor. But if your system qualifies, you could earn $2,000.
Just keep in mind that sometimes you won’t earn the rebate directly. The program could provide it directly to your installation company, which should subtract the amount from what they charge you. But, some installers use the rebates as an opportunity to increase prices so they earn more money. We recommend comparing quotes with installers outside this type of rebate program to ensure you get the best deal.
Search for an installer offering rebates
Business can be slow for installers during dreary winters when people aren’t thinking about solar energy. Some installers offer seasonal rebates and other limited-time promotions to encourage more sales. If you run into this type of rebate, you usually don’t need to fill out a separate rebate application. You’ll simply sign the installation contract, and your installer will subtract the rebate amount from your total cost.
Get a few hundred dollars back by choosing rebate-eligible equipment
There are many different brands to choose from when it comes to solar panels, inverters, and batteries. To make their equipment stand out, some companies offer rebates or other promotions. Getting these types of rebates is usually simple–you can often apply directly through the company’s website. You’ll likely just need to provide proof of installation, such as a photo, signed contract, or verification from your utility company that your system is up and running.
Some equipment brands also partner with EnergySage to offer rebates to people who install their products after finding an installer through our platform. If you’re claiming an equipment rebate through EnergySage, you’ll work directly with us to receive the incentive once your system is up and running.
The Investment Tax Credit and other tax incentives
Even if you live in a state that seemingly could care less about clean energy, you’ll qualify for the best solar incentive if you have a big enough tax bill. The federal investment tax credit (ITC), now technically called the Residential Clean Energy Credit, provides 30% of your solar project costs as a credit towards your federal income taxes. All project costs qualify: The equipment, labor, permitting, and more.
As opposed to a deduction, which reduces your taxable income (as would happen with any charitable donations you make in a year), this tax credit directly offsets what you would otherwise owe in taxes. It can even come back to you as a refund from the IRS if you’ve overpaid your taxes during the year. It just won’t exceed your tax liability.
Don’t have a big enough tax bill? No problem. Your remaining tax credits will roll over every year until the ITC disappears.
Originally enacted in 2006, The ITC has shrunk and been close to disappearing, but right now, it’s at its maximum value. This won’t be the case forever, though. It will start to phase out in 2033 and officially end in 2035, giving you plenty of time to take advantage of it before then.
Here are the details:
- 2024 – 2032: Through 2032, you can earn a credit towards your tax bill worth 30% of your home solar panel installation cost.
- 2033: The credit value for home systems drops to 26%.
- 2034: The credit value for home systems drops to 22%.
- 2035: There’s no more federal credit for residential solar energy systems starting this year.
Net metering, net billing, and other solar buyback programs
Along with the ITC, net metering is one of the most important policies in home solar. It makes it so you benefit from having solar panels even when it’s dark outside.
When the sun’s shining, your solar panel system usually produces more electricity than your home needs. If your state or utility company offers net metering, you can essentially use the grid as an energy bank: You send excess electricity to the electric grid in exchange for credits. When you need to pull electricity from the grid when the sun isn’t shining, it will count against the credits you’ve banked over time.
Your utility will only bill you for your “net” energy consumption at the end of your billing cycle. Sometimes, your bills will even be $0 or show a credit balance if your utility allows you to roll credits over between billing cycles. The credits could be worth the same as what you pay for electricity (the retail rate), what your utility company pays for electricity (the wholesale rate), or nothing.
Some utilities don’t offer net metering, while others will offer other types of solar buyback programs, like net billing. With net billing, you still earn credits for sending electricity to the grid, but the credits are worth less than the retail rate. Usually, they’re based on the wholesale rate, also called the avoided cost rate, which is much lower.
Subsidized Loans and Grants make it easier to pay for Solar
With interest rates soaring, finding a way to affordably pay for solar without emptying your bank account can be tough. Some states, non-profits, and utility companies make it easier by offering grants or subsidized loans.
Grants are essentially free money that lower the cost of a solar installation. Usually, grants are awarded to lower-income individuals or to larger-scale solar projects that meet certain criteria. It’s rare to find grant programs open to anyone, but they do exist.
Subsidized loans, on the other hand, are often more widely available. They usually feature lower interest rates with longer repayment periods. Some subsidized loans require a certain credit score and debt-to-income ratio. Others are only available to lower-income households.
