Incentives for Switching to Solar
To encourage continued expansion of solar alternatives, the federal government and individual state governments, utility companies, construction companies and others offer homeowners and many small businesses solar tax breaks and a host of other financial incentives.
Depending on what state you live in, you can reduce the net cost of installing a solar system by 30% to 50%.
Keep in mind that the financial benefits listed go to the owner of the solar panel system. Buying your system in cash or with a solar loan means that available tax credits, rebates, and SRECs go to you. If you lease a system, all the incentives go to the third-party owner.
Investment Tax Credit
Until 2020, the federal government is offering a solar tax credit, aka investment tax credit (ITC), which allows homeowners and businesses a federal tax credit equal to 30% of the cost of their system less any cash rebates.
In 2021 and 2022 the allowable percentage is 26%.
After 2022, the ITC ends.
State Tax Credits
More and more states are offering additional tax credits for solar system installation that allows for the deduction of a portion of the cost of your system from your state tax bill.
These credits vary widely from state to state.
Some states, municipalities, utility companies, and/or organizations offer cash rebates.
Generally, such rebates are limited-time offers.
Again, the rebates vary widely and are best in states that have commitments to alternative energy like Colorado and California.
Solar Renewable Energy Certificates (SRECs)
Various states have legislated that utility companies serving the state must source a percentage of their electricity from solar power. If you live in one of these states, utility companies will buy your SRECs to count your excess power towards meeting their requirements.
Again, income from this arrangement depends on the SREC market in your state.
The following incentives are offered by some states:
- Performance-Based Incentives (PBIs) – similar to SRECs except that PBI incentive rates are determined when the system is installed and do not have to be sold through a market.
- Accelerated Depreciation – allows eligible businesses to write off the value of their solar energy system over a five-year period.
- Subsidized Loans – for those who are eligible, you may obtain a subsidized solar loan at a reduced interest loan.
- Tax Exemptions – some states do not include the value of a solar panel system when assessing property values. Some states exempt solar systems from state sales taxes.
At SunLynk, we can help answer questions about your particular state. Say the word, and we’ll connect you with a qualified installer who knows what is available to you and will cost out the various options to help you make your decision.