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Top Solar Incentives in the United States in 2023

A survey by Forbes Homes revealed that 19% of Americans either have installed solar panels or are in the process of going solar.

A whopping 48% of Americans wanted to install solar panels in the future.

Among the respondents, however, 36% wanted to install a solar PV system, but the higher upfront costs of solar prevented them from going ahead with the installation. This makes sense, as some homeowners may find solar expensive.

But did you know that there are several solar incentives and rebates available on the Federal and state level you may be eligible for?

If you did not know, stay with us. In this article, we will discuss all the major solar incentives available across the United States.

Solar incentives you may be eligible for

Here is a list if some federal and state solar incentives you may claim. First, the one on the federal level that most Americans can claim. You guessed it right—we are talking about the Federal Income Tax Credit.

Federal Income Tax Credit

Formally known as the Residential Clean Energy Credit, the Federal Income Tax Credit (ITC) offers a flat 30% tax credit on solar installation. The eligible costs include the cost of solar panels, installation, batteries (if any), inverters, wiring, inspection, permitting fees, sales tax, and other eligible expenses. If you are an American taxpayer, who installs a system between January 1, 2017, and December 31, 2034, on their primary or secondary residence, you can claim the tax credit.

Federal Income Tax Credit is a dollar-for-dollar tax credit.

For example, if your solar system installation costs you $20,000, the ITC will put $6,000 back in your pocket.

30% Flat Tax Credit on Solar Installation

30% of $20,000 = (30/100) * 20000
=0.30 * 20000
=6000

If your tax liabilities are less than your credit, you can carry the ITC forward to next year until your liabilities and credit match. 

For more details and eligibility criteria, read our comprehensive article on the ITC here.

Net metering

Net metering is a billing arrangement in which homeowners export the excess electricity their solar systems generate to the grid. In return, they are given energy credits, which are adjusted in their electricity bills. At the end of the billing cycle, if you exported more electricity than you consumed, you will be paid in cash, or the credits will be rolled over to the next year.

Different states have different policies on net metering. While most states offer net metering benefits to homeowners, a few do not offer any kind of arrangement akin to net metering at all. In some cases, a state may not offer net metering, but some of their utility companies might do, as is the case with Texas and Idaho, where a few utilities offer net metering.

To know more about the net metering policies in different states, read state-wide policies on net metering. This detailed guide on net metering outlines allowed system capacities and rates of net excess generation across all the states.

State rebates

Solar rebates are partial refunds to homeowners after installing their systems. They are typically in cash and are offered by states, municipalities, or utility companies. Most often, they are available for a limited time and disappear once a state achieves the targeted capacity from renewable sources, including solar power.

They are usually capped at a certain amount. For example, in Maryland, the FY23 Residential Clean Energy Rebate Program gives a $1,000 rebate on above 1 kW solar systems. Similarly, if you are a Columbia Water & Light customer in Missouri, you can get up to a $625 rebate on up to 10 kW solar systems.  

Property tax exemption

Installing solar is like a home renovation project. It adds value to your home—as per research, it increases the value by about 4%. But to encourage solar adoption, most states exempt solar from property taxes. That is, the state and municipality will not count the value of your solar PV system in property tax assessments.

The value of your property is increased—but the tax remains the same as it was before solar installation. Many states, including Florida, North Carolina, Indiana, and Colorado, offer property tax exemption to solar homeowners.

Sales tax exemption

Some states exclude solar systems from sales taxes. Considering that sales taxes go up to 7.25 in certain states, this is an incredible incentive you can claim on the first day of your solar purchase.

There are 25 states that provide sales tax exemptions on solar energy. Examples include Arizona, Colorado, Minnesota, Vermont, etc.

Solar renewable energy certificates

Many states have regulations in place called Renewable Portfolio Standards (RPS). RPS stipulates that the participating states will have to generate or obtain by other means a certain percentage of their electricity from renewable resources. To meet the required quota, these states buy solar power from homeowners, against which they are given Solar Renewable Energy Certificates (SREC).

An SERC can be worth $5 or $40, depending on the state’s market. For example, if the shortfall in a state is high, the demand for SRECs will be high, resulting in higher costs and vice versa. If you live in one of those states, you could get hundreds or thousands of dollars only by selling SRECs. The good thing about SRECs is that you do not always have to export your electricity to the grid, as is the case with net metering. Only generating electricity for your own household could give you some dollars!

New Jersey, Ohio, Delaware, Massachusetts, Pennsylvania, Maryland, and Washington DC have SRECs mechanisms in place.

Did you know?

With solar incentives, the prices of solar have dropped by 50% in the last decade. An average-sized residential system has dropped from a pre-incentive price of $40,000 in 2010 to roughly $20,000 today.

Source: seia.org

Performance-based incentives

Performance-based incentives also make it to the list of solar incentives designed to encourage solar adoption. When your system generates electricity, it is measured by your net meter, for which you are paid, usually on a monthly basis. PBIs are a lot like SRECs. You are paid based on the per kilowatt-hour of energy your solar PV system produces.

But it is different from SRECs in that you do not have to sell the PBIs in the marketplace. Your meter automatically tracks and measures the amount of electricity your system generates. An example of PBI is California Solar Initiative, where homeowners are paid for the next five years monthly for the energy (kilo watt-hour) their systems generate.

State tax credit

It works like the federal income tax credit—it is a dollar-for-dollar tax break only against your state tax liabilities. But while the ITC doesn’t have a cap, state tax credits are often capped at a certain amount. For example, Residential Arizona State Tax Credit reimburses 25% or up to $1,000 of the solar system’s cost back to you against your state tax liabilities.

New Mexico has a comparatively better package in terms of the cap—you can claim as much as $6,000 on your solar installation in state tax credit. South Carolina also offers up to 25% state tax credit.

Combined with the ITC and other incentives, these solar incentives can significantly lower the cost of your solar panel system.

Low-interest loans

These are low-interest loans aimed at increasing solar capacity across the country. These loans are offered by the state government, utility company, or a non-government entity and are usually available for a limited time.

In Connecticut, you can borrow up to $40,000 through Smart E-Loan for a period of 5-12 years at a 4 to 7 percent interest rate. Louisiana, Michigan, Maine, and certain other states also offer solar loans at reduced interest rates.

These are some of the top solar incentives available in the United States. Read how much solar a solar system costs, deduct the solar incentives you may qualify for, and that will become the final cost of your solar system.

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