A Guide to Government Solar Incentives

Choosing to install solar panels is a major investment, but it allows homeowners to generate their own electricity instead of relying on utility companies. Solar panel incentives help reduce the total cost of going solar, making the transition more affordable and financially attractive. These programs can include solar panel subsidies, federal tax credits, and state or utility rebates.

Current solar incentives can cut the cost of a solar PV system by 30% to 50%, depending on where you live and which programs are available. The federal solar tax credit is one of the most valuable incentives, and many state programs offer additional rebates or performance-based payments. With political changes and ongoing discussions in Congress, there is growing concern about potential changes to these solar benefits.

Knowing which solar panel incentives are available at the local and federal levels is essential for anyone considering solar. For contractors and sales teams, offering accurate information about solar incentives and solar panel subsidies can build trust and help turn leads into customers.

Government Solar Incentives That Lower the Cost of Solar

There are a variety of solar panel incentives available for residential and commercial properties. These government solar incentives help reduce upfront costs and improve the return on investment for solar energy systems.

Federal Investment Tax Credit (ITC): A Key Solar Incentive

The Federal Investment Tax Credit (ITC), often called the federal solar tax credit, offers a dollar-for-dollar reduction in your federal income taxes. This is one of the most valuable solar incentives because it directly reduces the taxes owed, rather than just lowering taxable income. In some cases, it can even result in a tax refund.

To qualify for this solar panel subsidy, the taxpayer must have enough tax liability. Homeowners and businesses should consult a tax professional to confirm eligibility and understand how to claim the credit.

The ITC currently covers 30% of the total cost of a solar panel system, including both materials and labor, for projects installed through the end of 2032. This long-standing government solar incentive has played a major role in the expansion of clean energy across the United States.

The House recently passed a bill that would cause the residential solar tax incentive to cease at the end of 2025, which is ahead of schedule. The bill needs to pass the Senate to end this valuable solar incentive.

Example of Savings with the Federal Solar Tax Credit

If a homeowner installs a $15,000 solar panel system, they can receive a $4,500 tax credit. That reduces the net system cost to $10,500. To be eligible, the system must be owned by the taxpayer, and both grid-tied and off-grid systems with battery storage qualify.

With potential policy changes on the horizon, there is concern that this type of solar panel incentive may be revised or reduced. Acting now ensures your clients benefit from the full 30% credit before any changes take place.

State-Level Solar Panel Incentives and Subsidies

Many states offer additional solar panel incentives alongside the federal tax credit. These programs vary widely and can include rebates, state tax credits, or production-based payments. Some states have limited funding that is available on a first-come, first-served basis. Others focus on offering solar incentives to income-qualified households or require NABCEP-certified installers to participate.

Understanding which government solar incentives are available in your state is key to maximizing savings. The DSIRE database (Database of State Incentives for Renewables & Efficiency) is a valuable tool for finding up-to-date information on state and local solar panel subsidies.

California Solar Rebates

California’s Self-Generation Incentive Program (SGIP) encourages the use of solar batteries by offering rebates for households that install both solar panels and battery storage. The rebate amount varies based on the utility company and the capacity of the solar battery system.

New York Solar Incentives

The state offers a 25% income tax credit for residential solar systems on primary residences up to $5,000. To qualify for the credit, the homeowner must either purchase or lease solar energy equipment or enter into a Power Purchase Agreement for at least ten years.

NY Solar Tax Credit

Also, residential and small commercial installations may be eligible for the Sun MegaWatt Block program. Project funding varies depending on the solar system capacity and applies a dollar-per-watt ($/W) format until the program reaches its full capacity and the state phases it out.

NY-Sun Solar Incentive Program

The NY-Sun program offers additional solar incentives to make residential renewable energy more accessible. Through this program, residents can receive rebates that further reduce the upfront costs of solar installations. The exact rebate amount varies based on system size and location.

Property Tax Exemption

To encourage solar adoption without increasing property taxes, New York offers a property tax exemption for the added value of a solar energy system. This means that installing a solar system won't increase your property tax assessment, allowing clients to benefit from the energy savings without additional tax burdens.

Oregon Solar + Storage Rebate Program

This government incentive for solar panels is administered by the Oregon Department of Energy and offers rebates for solar electric systems and paired solar and storage systems for residential customers. Homeowners can receive up to a $5,000 solar panel rebate and an additional $2,500 solar battery. Low to moderate-income households qualify for $1.80 per watt of installed solar capacity, further enhancing the affordability of renewable energy solutions.

Solar Renewable Energy Certificates (SRECs)

Some states have renewable portfolio standards and must generate or procure a certain amount of renewable energy. Often, utilities purchase SRECs to comply with clean energy standards. For every 1,000 kilowatt-hour (kWh) of solar electricity generated, an SREC is issued. The exact SREC generation process varies by region and market. The SRECs are registered and tracked in an electronic registry, often administered by a regulatory body or a third-party organization.

SRECs can be bought and sold in a marketplace, typically through auctions or bilateral contracts. The value of this solar panel incentive can vary depending on factors like market demand, state regulations, and renewable energy goals. Because the solar renewable energy credit market varies by state, so does the price of the credits, and many states do not utilize this approach.

In some states, selling these certificates can bring in hundreds or even thousands of dollars in income each year, making it a popular solar panel incentive. Some of the leading states for SRECs are Illinois, Ohio, Pennsylvania, Virginia, Maryland, Massachusetts, and Delaware.

Performance-Based Solar Incentives

Performance-Based Incentives (PBIs) reward solar panel system owners based on how much energy their system produces. Instead of offering a one-time rebate or upfront solar panel subsidy, PBIs provide payments over time. These incentives pay a set amount for every kilowatt-hour (kWh) the system generates, making them one of the more production-focused solar incentives available.

Unlike Solar Renewable Energy Certificates (SRECs), PBIs do not involve market trading. Instead, the compensation rate is locked in at the time of installation, which gives homeowners and businesses predictable, long-term savings. PBIs are an important type of solar panel incentive in states that reward system performance and ongoing energy production.

Tax Exemption Solar Incentives

Numerous states have created solar panel incentive programs that offer sales tax or property tax exemptions. Some states even offer both types of tax exemptions as government incentives for solar panels.

Solar Property Tax Exemptions

Installing solar panels often increases a home’s value due to lower utility bills and long-term energy savings. However, 36 states offer solar panel subsidies in the form of property tax exemptions. These programs prevent the increased home value from raising a homeowner’s property tax bill. This form of solar panel incentive helps ensure that homeowners benefit from higher resale value and lower taxes at the same time.

The specifics of this solar incentive vary by state or even by municipality, so it's important to check local guidelines when quoting system benefits to customers.

Solar Sales Tax Exemption

In 25 U.S. states, homeowners and businesses can take advantage of solar panel incentives that eliminate or reduce sales tax on solar equipment purchases. A solar sales tax exemption reduces the upfront cost of installing a solar panel system, making renewable energy more financially accessible.

This solar panel subsidy often applies to both the materials and installation costs of solar energy systems. These exemptions vary by state but can significantly lower the total project price, especially for larger installations.

Net Metering & Solar Buyback Programs

Net metering and solar buyback programs are utility-run initiatives that allow customers with solar systems to sell excess energy back to the grid, usually in exchange for bill credits. While these programs are not direct government incentives for solar panels, they are often influenced by state policies or mandates encouraging renewable energy integration. By making solar installations more financially attractive, these utility programs play a key role in supporting clean energy adoption without direct government funding.

Programs like Direct Energy Solar Buyback, Green Mountain Energy Buyback, and Chariot Energy Solar Buyback offer customers the option to earn credits for excess solar energy sent back to the grid. However, programs like Direct Energy Solar Buyback, Green Mountain Energy Buyback, and Chariot Energy Solar Buyback are typically available in states with deregulated energy markets.

Government Solar Incentives For Businesses

Businesses that install solar panels have access to several valuable solar panel incentives. Like residential customers, they can claim the federal solar tax credit, which reduces the system cost by 30%. In addition to this, companies can take advantage of tax benefits through depreciation schedules, which further improve the project’s return on investment.

MACRS: Accelerated Depreciation as a Solar Panel Subsidy

The Modified Accelerated Cost-Recovery System, or MACRS allows businesses to recover their solar investment through depreciation deductions. This solar incentive lowers taxable income by deducting a portion of the system’s value each year. The value is calculated by multiplying the depreciation amount by the business's tax rate.

MACRS follows a 5-year schedule as outlined by the IRS. This solar panel subsidy is particularly useful for commercial projects looking to maximize their tax advantages over time.

Bonus Depreciation for Solar Projects

With bonus depreciation, businesses can deduct up to 100% depreciation of the cost of a solar PV system in the first year instead of spreading the deduction over several years. This type of solar panel incentive can drastically reduce tax liability in the year the system is installed, offering an immediate financial benefit.

FAQs on Government Solar Incentives

Solar shoppers often have important questions about how to reduce the cost of installation through solar panel incentives, rebates, and credits. Here are some of the most common questions contractors and sales teams should be ready to answer.

What types of government incentives for solar panels are available?

Homeowners and businesses may be eligible for various government incentives for solar panels. These include:

• Federal solar tax credit (ITC): A 30% tax credit on eligible system costs through 2032

• State and utility rebates: Direct discounts offered in some areas, often limited by funding

• Solar panel subsidies: Programs that reduce upfront costs through incentives or grants

• Performance-based incentives (PBIs): Payments based on how much energy your system produces

• Property and sales tax exemptions: Available in many states to lower the financial burden of solar adoption

To explore what’s available in your area, use the DSIRE database, a reliable source for local, state, and federal solar incentives.

How can clients qualify for solar incentives and rebates?

To qualify for the federal solar tax credit, residential customers must:

• Own the solar system (not lease it)

• Install it on their primary or secondary residence in the U.S.

• File IRS Form 5695 with their federal tax return

• Have enough tax liability to use the credit

  
  

For solar panel subsidies or state-level incentives, eligibility requirements vary. Some programs may require systems to be installed by licensed or NABCEP-certified contractors. Others may have income requirements or be limited to specific utilities.

It’s best to recommend that customers speak with a qualified tax advisor to confirm eligibility. Solar installers should avoid offering tax advice unless certified to do so.

How do clients apply for government solar incentives?

Because there are various solar incentives, how to apply for them varies by program. Federal tax incentives are offered through the IRS. Some local utility companies and states offer their own programs, so we recommend visiting your utility company’s website for more application details.

Government Solar Incentives Promote Renewable Energy Adoption

It’s essential to be familiar with the solar PV incentives in your area. Remember that the qualifications and availability of funds are often changing, so conducting timely research is the best way to stay current.

Closing on solar customers is not easy, so when you do, it’s imperative to move on the installation fast and seamlessly so you can get to other projects. Solar permitting is tedious and time-consuming if not done properly.

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