Fortunately, there are various programs available to homeowners interested in saving money on solar — before, after and even on an ongoing basis. You can even combine many available incentives. Here are eight of the most popular solar incentives and rebates currently available.
Federal Solar Tax Credit
The federal solar tax credit, also known as the solar investment tax credit (ITC), incentivizes homeowners to purchase a solar power system by reducing the amount of federal taxes owed. Currently, you can claim 30% of your total solar PV system cost as a tax credit. Anyone who files federal taxes is eligible for this credit, and there is no maximum dollar amount.
You can claim the federal tax credit once for the year you turn your solar power system on — not the year it was installed or purchased. Under the Inflation Reduction Act, the tax credit will decrease to 26% in 2033, then 22% in 2034 and phase out completely in 2035 unless renewed by Congress.
Because the federal solar tax credit is not a tax exemption or tax refund, you will not receive a check in the mail if the credit is larger than your taxes owed. However, the remainder is applied to next year’s taxes and can roll over for up to five years.
State Tax Credit
In addition to the federal tax credit, many states offer their own solar tax credit to further reduce costs for homeowners. For example, South Carolina offers a tax credit worth 25% of the total cost of a solar system (including installation), and you can roll over any extra credits for up to 10 years.
Performance-Based Incentives (PBIs)
Rather than a one-time cash rebate, a performance-based incentive (PBI) pays homeowners for solar energy produced and sent to the electric grid over time. The PBI is based on fixed energy rates (kilowatt-hours) over a contracted period, and you can combine it with other incentives.
One type of PBI is a feed-in tariff (FIT), which only a handful of states offer. These guarantee a payment higher than the grid’s market price for electricity over the length of a contract, typically 15 to 20 years.
Solar Renewable Energy Certificates (SRECs)
Another PBI is a Solar Renewable Energy Certificate (SREC), a tradable certificate or credit representing electricity generated from solar energy. Homeowners and businesses can earn and sell SRECs to bring in additional revenue on top of electricity savings. One megawatt-hour of electricity generated by a solar system produces one SREC, though market supply and demand determine the monetary value of SRECs.
Utility companies purchase SRECs to meet renewable energy mandates, such as Renewable Portfolio Standards, which require a percentage of electricity produced from solar and other renewables. Currently, SRECs are only available in a few states.
A utility rebate is offered by electric utility companies to encourage homeowners to install solar panels or other solar energy technologies on their properties. Companies typically offer rebates as upfront incentives you can receive directly from your utility provider.
Rebates can take various forms. They may provide a direct cash payment based on eligibility criteria, such as system size, installation requirements or customer type. Alternatively, they may come with a per-watt or per-kilowatt-hour incentive, where the rebate amount is calculated based on the solar system’s energy output.
To obtain a rebate, homeowners typically must submit an application and provide documentation to verify their solar installation. The availability and amount of utility rebates can vary depending on the utility company and location.
Homeowners who install a solar system may also be eligible for property and sales tax exemptions. Specific tax exemptions and incentives vary by state.
Property Tax Exemption
With a property tax exemption, homeowners or businesses with solar panels do not have to pay additional property taxes based on their increased property value after installing solar. This exemption ensures your property tax burden remains unaffected by the presence of a solar power system, and is available in 36 states.
Sales Tax Exemption
A solar sales tax exemption eliminates or reduces sales tax when you purchase solar energy equipment. The exemption can include solar panels, inverters, mounting racks, and other equipment and may also apply to labor and installation costs. Currently, 25 states offer sales tax exemptions.
Net Energy Metering
Net energy metering (often called “net metering”) allows solar panel owners to receive billing credits for extra electricity generated and sent back to the grid. When solar panels produce more electricity than you can use, the excess gets sent back to the grid, spinning the electric meter backward and earning credits.
These credits can offset grid consumption when solar panels are not generating enough energy, such as at night or on cloudy days.
Grants and Subsidized Loans
Some homeowners may be eligible for grants or low-cost loans to help with the costs of purchasing and installing solar energy. Grants are basically “free money” awarded based on specified criteria (like income limits or property requirements).
Subsidized loans are typically provided as a subsidy or incentive and feature lower interest rates with favorable repayment terms, such as longer repayment periods, smaller monthly payments or deferred payment options. This type of loan gives borrowers greater financial flexibility and can help make an investment in solar energy more manageable.
The following government agencies offer financial assistance to help homeowners install solar systems and achieve lower energy costs:
- U.S. Department of Energy
- U.S. Department of Health and Human Services
- U.S. Department of Housing and Urban Development
- U.S. Department of Treasury
- U.S. Department of Agriculture
- U.S. Department of Transportation