Solar power systems don’t just benefit you; they benefit everyone around you, too. Because solar power systems deliver positive environmental impacts, contribute to our nation’s energy independence, and create a significant number of jobs, governments, utilities and other organizations are motivated to encourage homeowners, businesses and non-profits to install solar power systems. They do this by offering tax breaks and other incentives that reduce the cost of going solar.
The federal government provides tax credits that allow homeowners and businesses to subtract a portion of the cost of a solar energy system from the amount they owe in taxes. A tax credit is significantly better than a tax deduction because it is a dollar for dollar reduction in your tax bill whereas a tax deduction only reduces your taxable income. As a homeowner or a business, you will qualify for a federal tax credit equal to 30% of the net cost of your solar panel system. The net cost is what you actually pay for your system after deducting any cash rebates. For example, if the cost of your solar panel system is $10,000 after cash rebates, you will be able to deduct $3,000 from the amount you owe to the IRS (Federal taxes).
Some states offer tax credits for installing a solar panel system. As a homeowner or a business, you will be able to deduct a portion of the cost of your solar panel system from your state tax bill. These amounts vary significantly by state.
You may qualify to receive cash rebates offered to encourage you to install a solar panel system. Rebates may be available from your state, municipality, utility company, and/or other non-government organizations that want to promote solar energy system installations. Rebates are generally available for a limited time. After you install your solar energy system, you submit your rebate for which you will receive cash. This can help to further reduce your system costs by 10%–20%. Most installers will handle the paperwork involved with rebates for you. They’ll reduce the amount you owe them by the rebate amount and then submit and collect the rebate themselves, making it much more convenient for you.
In some states, utilities are required to produce a certain percentage of clean energy. In these states you can earn Solar Renewable Energy certificates (SRECs) for the amount of electricity produced by your solar panel systems. These certificates can be sold to the utilities through online exchanges. Essentially, they pay you so that they can take credit for the energy produced by your system. It doesn’t matter if you actually use all of the electricity your system produces because they utility is only interested in taking credit for producing it. This is an additional financial benefit (above and beyond the free electricity your system generate) that can mean hundreds (or thousands) of dollars more per year for you.
You will directly benefit from these incentives and rebates if you decide to buy a solar panel system. In case you decide to sign a solar lease or PPA, the solar leasing company will directly benefit from these rebates, tax credits and incentives. Though the cost of a solar lease and PPA will be lower than it would be if these incentives were not available.
Certain Federal tax mandates allow businesses to write-off the value of their solar energy system over a shorter period of time, effectively reducing their immediate tax burden. This is a valuable benefit that can reduce the cost of your system by an additional 30%.
Grants are funds given to qualified parties for the purpose of installing an alternative energy system. Grants are usually offered to schools, towns or other government or non-profit entities.
DSIRE (www.dsireusa.org), a site developed by North Carolina State University, is a great information source for all of the rebates and incentives that may be available to you. It’s well worth taking the time and effort needed to research what’s available to you since in most cases, homeowners and businesses will qualify for multiple incentives.
Net metering allows you to use the grid to “store” any excess electricity you produce so you can use it at a later time or date. For example, your system typically will produce more electricity during a summer day than you will need. When this happens, your electricity meter will run backwards and you will receive a full credit for the electricity you sent to the grid. At night you will use electricity supplied by the grid (utility company) and your meter will run forward, using the credit that you accumulated earlier. Your system can be designed to ensure you can generate enough power to meet your total need for a year. Net metering smooths out the ups and downs in your production. You will build up extra credits during the summer months so that you can use them at night and during the winter months when you need them.
You may be eligible to finance your solar panel system purchase with a subsidized loan. These loans may be made available by your state, a non-government organization or your utility company and feature significantly reduced interest rates. Generally, subsidized loans are available only in a few areas and usually only for a limited time.
Some states and municipalities do not include the value of solar panel systems in property taxes assessments. This means that, even though the value of your property has increased by the addition of a solar power system, your property tax bill won’t increase--it will remain the same.
Some states exempt solar panels from state sales taxes. Which means that you will not pay sales taxes on the cost of your solar power system.
All of these incentives really add up to significant savings above and beyond the money you will save on your electric bills over the next 20-40 years. They can reduce the total cost of your solar energy system, increase the returns you receive from your system, and increase your property value.
Your solar installer will help you understand the specific rebates, state tax credits, and SRECs programs available to you. In most cases, they also will complete all the necessary paperwork for you, too.