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Solar Panel Incentives, Tax Credits & Rebates

Updated: Apr 29


solar panel incentives

The decision to go solar requires a significant upfront investment. Instead of utility customers renting their energy (and paying for it monthly), households with solar power essentially own their energy-generating capabilities. Various federal, state, and regional solar panel incentives reduce the upfront cost.


These government incentives for solar panels commonly take the form of solar tax credits, rebates, and performance-based renewable energy incentives. In fact, they can reduce the total cost of a solar PV system by 30% to 50%. Understanding the local and federal solar panel incentives available to your potential customers can be invaluable during the sale process. Thus, providing accurate information can help turn leads into sales.


Government Incentives for Solar Panels

There are a variety of solar panel incentive programs for residential and commercial projects.


Federal Investment Tax Credit (ITC) / Federal Solar Tax Credit

This is a dollar-for-dollar tax credit for federal income taxes owed to the federal government, and it can even come back in the form of a tax refund. Tax credits can be more valuable to the taxpayer than a tax dedication because instead of merely reducing the taxable income by a certain amount, they offset the amount owed. To qualify for the solar energy tax credit, the homeowner or business must have an adequate tax liability or appetite. Recommend customers speak with a tax expert to ensure they can utilize the tax credit.


The tax credit is 30% of the total system cost, including labor and materials, through the end of 2032. This government incentive for solar panels has help promote growth across the PV industry.


To calculate the solar tax credit, multiply the total system cost by the credit percentage. Thus, a $15,000 solar energy system is eligible for a $4,500 tax credit ($15,000 x .30 = $4,500). This lowers the total system cost to $10,500.


To qualify, the taxpayer must own the solar system. Thus, leased solar systems do not qualify. Off-grid and grid-tied solar power systems with batteries are also eligible. The home can either be a primary residence or a vacation property.


State-Level Solar Panel Incentives

State incentive programs vary considerably and are nonexistent in many states. In many cases, utility or state rebates are available on a first-come, first-served basis, while funds last. In other states, the incentive is in the form of a tax credit, like the federal solar tax credit, except the amount varies by state. Some states or utilities may have incentives that are specifically intended for low-income residents.


It is essential to know if there are state-level rebates in your area and understand how your customer could qualify. Sometimes, the solar installer will need NABCEP certification to participate. The DSIRE database of state incentives is a great place to learn about local government incentives for solar panels. In addition, most states offer net metering, allowing customers to get credits on their utility bills for excess power they supply to the utility grid.


Let’s explore a couple of the state-specific solar incentive programs.


California Solar Rebates

To increase the deployment of solar batteries, California’s Self-Generation Incentive Program (SGIP) rewards households with solar panels and battery storage together. The exact incentive varies by the utility company and the solar battery capacity.


New York Solar Panel Incentives

The state offers a 25% income tax credit for residential solar systems on primary residences up to $5,000. To qualify for the credit, the homeowner must either purchase or lease solar energy equipment or enter into a Power Purchase Agreement for at least ten years. Also, residential and small commercial installations may be eligible for the Sun MegaWatt Block program. Project funding varies depending on the solar system capacity and applies a dollar-per-watt ($/W) format until the program reaches its full capacity and the state phases it out.

solar panel incentives

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 rebate for a solar system and an additional $2,500 rebate for solar batteries. 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-hours (kWh) of electricity generated from solar, 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, Pennslyvania, Virginia, Maryland, New Jersey, Massachusetts, and Delaware.


Performance-Based Incentives (PBIs)

These incentives compensate solar system owners for a fixed price per kilowatt-hour produced. Therefore, the incentive is tied to the production of the solar panel system. PBIs work differently than SRECs because they aren’t sold through a market, and the compensation rates are determined when the solar electric system is installed.


Solar Tax Exemptions

Numerous states have created solar panel incentive programs for either sales tax or poperty tax exemptions. Some state even have both types of solar tax exemptions.


Solar Property Tax Exemptions

Installing solar panels on a home will likely raise its property value because homes with dramatically lower utility bills are attractive to home shoppers. However, 36 states states have created property tax exemptions from the added home value the solar panels provide. However, the details of this solar panel incentive vary by the state or even municipality.


Solar Sales Tax Exemption

A solar sales tax exemption is a benefit offered by 25 states in the US, excluding or reducing state sales tax on the purchase of solar energy systems. This incentive aims to lower the upfront costs of installing solar energy systems, making renewable energy more financially accessible for individuals and businesses. The exemption varies by state and may apply to the retail sale and installation of solar energy devices, ultimately promoting the adoption of solar power.


Incentives And Credits For Businesses With Solar Panels

Many businesses that install solar panels can benefit from a variety of solar incentives. Like residential solar, companies can take advantage of the federal tax credit. In addition, companies can also get a tax write-off (Modified Accelerated Cost-Recovery System, or MACRS) or bonus depreciation for solar equipment.


With MACRS, the value of the depreciation is calculated by taking the depreciation amount multiplied by the business tax rate. Refer to the 5-year MACRS depreciation schedule by the IRS to determine the portion of the solar system that can be deducted in a given year. With bonus depreciation, businesses can apply 100% depreciation for the cost of a solar PV system in year one, instead of spreading it out over 6 years.


FAQs About Solar Panel Incentives

Many solar shoppers will have questions related to the solar incentives and rebates.


How can clients qualify for solar panel incentives and rebates?

Your residential customers should complete and submit IRS Form 5695 with their federal tax return to apply for the federal solar tax credit. It is critical for homeowners and businesses to have an adequate tax appetite to take advantage of the credit and fulfill all the requirements.


Recommend that your solar clients speak with a tax expert to ensure they qualify. It is critical that solar companies don’t give financial or tax advice.


How Do Clients Apply For Solar Rebates And Credits?

Because there are a variety of 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.


Solar Panel Incentives Promote Renewable Energy Adoption

It’s essential to be familiar with the solar PV incentives in your area. Keep in mind 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. Use GreenLancer’s network of on demand providers to get permits, engineering, site surveys and more on one simple platform with speed and streamlined communication.


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