Solar Rebates & Incentives
Rebates and incentives are a crucial way to encourage broader adoption of solar energy and full home electrification across the country.
These incentives will typically come from your utility, state government, or the federal government in the form of tax credits, property tax abatements, one-time rebates, or performance-based rebates.
Lowering the cost of going solar helps more people in your community go solar, which supports clean air, a more resilient energy grid, lower energy prices, and lower fossil fuel emissions.
Solar Incentives and Rebates Terms
The concept of solar incentives is simple: Reduce the cost of solar to make clean energy accessible to more people.
But solar incentives are a rat’s nest of acronyms and industry terms that can be difficult to untangle. We’re here to help with this handy-dandy cheat sheet.
First, some basic terms:
- Solar Incentives — Incentives provided to a homeowner or business installing solar by a government agency or utility in order to accelerate solar adoption.
- Rebates — A one-time incentive for solar installations offered by utilities and/or government agencies.
- Tax Credit — A direct dollar-for-dollar deduction off of your income taxes that you would normally pay to the federal government.
- Tax Deduction — Deduction of taxable income that can increase your refund or reduce how much tax you owe.
- Utility Rebates — Cash refunds utilities pay to homeowners to help promote the adoption of solar in order to meet their qualifications.
Solar Incentive and Rebate Programs
Federal Solar Investment Tax Credit (ITC)
The solar investment tax credit (ITC) is a tax credit available to all homeowners worth 30% of expenditures on solar and/or battery storage, with no maximum limit on the value of the credit.
So, if you spend $20,000 on a solar system, the credit is worth $6,000. If you spend $75,000 on a solar system with multiple batteries, the credit is worth $22,500.
The solar tax credit can be claimed on your federal tax return to reduce your tax liability. It is not a check that automatically comes in the mail when you go solar.
It’s also worth nothing that you need to have tax liability in order to use the credit. This can be tricky for retirees with limited taxable income. However, you don’t have enoug tax liability to use the full value of the credit in one year, it can be rolled into future tax years.
In August 2022, the Inflation Reduction Act increased the tax credit from 26% to 30% and extended it until 2032. It also renamed it the Residential Clean Energy Credit (although most people still call it the ITC or solar tax credit).
One-time incentives for homeowners installing solar, distributed through local jurisdictions such as a city or county.
Local solar rebate examples include:
- The city of Fort Collins, Colo. offers a local rebate of $250 per kW of solar installed up to $1,000
- The city of Sunset Valley, Texas offers a solar rebate of $1 per Watt up to 3,000 Watts ($3,000)
- The city of Philadelphia created a solar rebate program in 2019 offered rebates of $0.20 per Watt for residential projects. However, this program was suspended due to budget cuts related to COVID-19
- Energy Smart Colorado partners with communities and utilities to offer rebates for installing solar panels and other energy efficiency measures
Team up with an Energy Advisor to find rebates in your area.
Performance Based Incentive (PBI)
PBIs are incentives based on the energy production of a solar system. This compensation is based on the amount of energy (in kWh) a solar system produces over a given period of time.
Since the incentive is based on production, PBIs encourages installer and solar owners to prioritize performance and maintenance over time.
- The Solar Massachusetts Renewable Target (SMART) program offers performance-based incentives of up to $0.043 per kWh produced
- New Jersey’s Successor Solar Incentive Program (SuSI) awards one certificate worth $90 for every 1,000 kWh of solar electricity produced over 15 years.
Renewable Energy Certificates (RECs)
Renewable Energy Certificates (RECs) allow homeowners to sell renewable energy back to utilities who need a certain amount of renewable energy certificates to meet governmental regulations.
1 REC = 1-megawatt hour = 1,000-kilowatt hours of energy
A typical solar system earns between three to seven RECs per year, depending on the size, which solar owners can sell or trade on the market. This is another way to incentive solar adoption and production among homeowners.
Solar Renewable Energy Certificates (SRECs)
SRECs are nearly identical to RECs, except SRECs are specific to energy produced by solar photovoltaic systems (hence the name solar renewable energy certificates).
SRECs aren’t available in all states and the price of the certificates are constantly changing.
State Solar Rebate Programs
Several states offer rebate programs that cover some or all of the cost of purchasing a home solar system and/or battery storage. These rebates can work in addition with the federal tax credit to increase the savings of going solar.
- Oregon offers rebates of up to $5,000 for solar systems and $2,500 for battery storage sytems
- New York offers upfront rebates up to 40 cents per Watt of solar capacity installed
- Maryland offers a $1,000 rebate for solar photovoltaic and solar shingle installations above 1 kW.
- California offers rebates for up to $1,000 per kWh of capacity for qualifying homeowners.
State Solar Tax Credits
Some states offer solar tax credits that can be claimed in addition to the 30% federal solar tax credit.
- New York state has a 25% solar tax credit with a maximum value of $5,000
- Hawaii has a 35% state solar tax credit with a maximum value of $5,000
- Utah has a solar tax credit with a maximum value of $400 for 2023 installations
- South Carolina has a 25% state tax credit worth up to $35,000 or 50% of the taxpayer’s liability for the year (whichever is less)
- Massachusetts has a 15% state tax credit worth up to $1,000
Solar property tax exemptions and abatements
It’s well documented that solar systems increase property value, just a like updated a kitchen or installing new appliances does.
While that’s great during a home sale, higher property value also means higher property taxes.
Fortunately, most places offer either an exemption or abatement on the value added by home solar systems.
- Abatement: A reduction in property taxes over a certain period of time
- Exemption: A reduction in the taxable value of the property
In fact, more than 30 states have statewide or local solar property tax exemptions, show in purple below, and New York City has a solar property tax abatement worth up to 20% of the cost of the solar system.
Net Energy Metering
This is the billing system that some utilities use to compensate you for sending your generated solar energy back into the grid.
These credits can be used to offset the costs of electricity that you use when your solar panels are not able to generate any energy. Not all states use this billing system, but you can check to see if your’s does here.
The Bottom Line
Thanks to the 30% Residential Clean Energy Credit created by the Inflation Reduction Act, any homeowner in the US that wants to go solar is eligible an substantial incentive.
And many homeowner will be eligible for additional incentives through their state, city, or utility. It’s worth taking the time to research incentives in your area to maximize your savings with solar.
Better yet, connect with an Energy Advisor to explore the incentives available to you.