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Luckily for solar enthusiasts, the cost of solar has been declining steadily over the past decade. However, it still represents a sizable investment for the average homeowner or business owner. This is becoming less of a problem, though, largely thanks to incentives offered by local and state governments and the federal government, and some solar companies.

These incentives typically come in tax benefits and rebates, significantly reducing the costs involved with solar installation. They can lower the expenses tied to solar by up to 50%. However, bear in mind that renewable energy credits and other solar tax credits are only available to solar panel owners; those leasing their systems are not eligible.

Main Solar Incentives

We’ll outline a couple of the most significant solar incentives here:

  • Federal investment tax credit
  • State solar tax credit
  • Cash rebates
  • SRECs
  • Performance-based incentives

Federal Investment Tax Credit

This is one of the most popular solar credits in 2020 and beyond. It gives you back around 26% of the price you paid while buying solar panels through your taxes. Also, this isn’t a tax deduction — it doesn’t reduce your overall taxable income. Instead, this federal tax credit lowers the amount of money you owe in taxes by a quarter of the price of the panels.

State Solar Tax Credit

Apart from the Federal ITC, many states where solar panels are a feasible investment offer their own tax credits. These vary depending on your home state, but regardless of where you are — the state credit adds up to a hefty sum when paired with the federal one.

Cash Rebates

There are utility companies, municipalities, and states that provide up-front rebates for people installing solar panels in their homes. Usually, these are limited-time offers — disappearing when the percentage of solar installations in your area reaches a certain point. Still, these rebates can lower the costs of your system by up to 20%.


Many states have implemented renewable energy standards in the past couple of years — setting the desired level of electricity generated by renewable energy sources. Seeing as solar power is on that list, your panels will get you SRECs — or solar renewable energy certificates for the electricity amounts that your system produces.

Local utilities are likely to buy your SRECs to comply with renewable energy requirements set by states. Depending on the strength of the SREC market in your vicinity, this can mean hundreds or thousands of dollars in income every year.

Performance-based incentives

Finally, we’ve got performance-based incentives — credit that pays per the kilowatt-hour your system creates. While SRECs are designed as an incentive to switch to solar power, PBIs are an incentive for electricity production. And you don’t need to sell PBIs through any market — the rates for these incentives are determined upon the installation of the system.

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