Solar rebates and incentives guide: How much money can you save?
You'll likely save at least 30% on solar with the federal tax credit–maybe even more with local incentives.
Solar saves money, but the upfront cost of installation can be steep. While the cost of solar has dropped substantially over the last decade, it will still set you back an average of $31,460 before incentives in 2024.
Fortunately, governments and even some utilities offer generous incentives to bring down that price and encourage more people to go solar. The best one is the federal tax credit, which puts 30% of the cost back in your pocket—down to $22,022 for most homeowners. How much more you can save depends on where you live and how much clean energy your local government wants to add to your electric grid.
We'll explain all the different types of solar incentives you might encounter when determining what's available in your area. And we'll help you understand how much you can save when installing a solar panel system at your home.
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Solar rebates directly lower what you pay for solar, but they're not available everywhere. Many previous solar rebate programs have reached maximum capacity or are being phased out. Some rebate programs now require adding a battery to your solar installation.
There are four main places to check for rebates: Your state or local government, your utility company, your installer, and your equipment manufacturer.
The biggest rebates come from local governments or utility companies
Applying for local rebates can be tedious. It often includes submitting detailed information about your solar equipment and system design, performance expectations, project costs, and/or installation company. Usually, your installer will apply for these types of rebates on your behalf or assist you in the process. But if not, the application process is often well worth the effort. In some areas, solar rebates can provide over $5,000.
Rebates also sometimes come with requirements. You may only be able to select specific equipment, or there could be a maximum or minimum system size restriction. You might only be able to work with certain solar installers that the rebate program supports. For example, to claim the Megawatt Rebate incentive in New York, you must work with a pre-vetted, state-approved contractor. But if your system qualifies, you could earn $2,000.
Just keep in mind that sometimes you won't earn the rebate directly. The program could provide it directly to your installation company, which should subtract the amount from what they charge you. But, some installers use the rebates as an opportunity to increase prices so they earn more money. We recommend comparing quotes with installers outside this type of rebate program to ensure you get the best deal.
Search for an installer offering rebates
Business can be slow for installers during dreary winters when people aren't thinking about solar energy. Some installers offer seasonal rebates and other limited-time promotions to encourage more sales. If you run into this type of rebate, you usually don’t need to fill out a separate rebate application. You’ll simply sign the installation contract, and your installer will subtract the rebate amount from your total cost.
Get a few hundred dollars back by choosing rebate-eligible equipment
There are many different brands to choose from when it comes to solar panels, inverters, and batteries. To make their equipment stand out, some companies offer rebates or other promotions. Getting these types of rebates is usually simple–you can often apply directly through the company's website. You'll likely just need to provide proof of installation, such as a photo, signed contract, or verification from your utility company that your system is up and running.
Some equipment brands also partner with EnergySage to offer rebates to people who install their products after finding an installer through our platform. If you’re claiming an equipment rebate through EnergySage, you’ll work directly with us to receive the incentive once your system is up and running.
Even if you live in a state that seemingly could care less about clean energy, you'll qualify for the best solar incentive if you have a big enough tax bill. The federal investment tax credit (ITC), now technically called the Residential Clean Energy Credit, provides 30% of your solar project costs as a credit towards your federal income taxes. All project costs qualify: The equipment, labor, permitting, and more.
As opposed to a deduction, which reduces your taxable income (as would happen with any charitable donations you make in a year), this tax credit directly offsets what you would otherwise owe in taxes. It can even come back to you as a refund from the IRS if you've overpaid your taxes during the year. It just won't exceed your tax liability.
Don't have a big enough tax bill? No problem. Your remaining tax credits will roll over every year until the ITC disappears.
Originally enacted in 2006, The ITC has shrunk and been close to disappearing, but right now, it's at its maximum value. This won't be the case forever, though. It will start to phase out in 2033 and officially end in 2035, giving you plenty of time to take advantage of it before then.
Here are the details:
2024 – 2032: Through 2032, you can earn a credit towards your tax bill worth 30% of your home solar panel installation cost.
2033: The credit value for home systems drops to 26%.
2034: The credit value for home systems drops to 22%.
2035: There's no more federal credit for residential solar energy systems starting this year.
Here's an example of what the ITC looks like today in California: A 5kW solar system is around $11,505 before incentives. Factor in the ITC and you drop that price by 30%, down to $8,053.
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How to claim the Investment Tax Credit
Some states offer their own tax credits
In addition to the ITC for your federal tax bill, you can get a tax credit toward your state tax bill by installing solar if you live in a state like Massachusetts. How much you earn depends on the state–it could be anywhere from $0 to a few thousand dollars.
Just make sure to look at the details. Some states only allow it to apply to equipment, while in others, all installation costs qualify, like with the ITC. You may only be able to roll over any remaining credits for a few years, indefinitely, or not at all. Regardless, when paired with the federal ITC, state tax credits can add up!
Sales tax exemptions
Adding sales tax on top of the already high price of solar can be enough to dissuade someone from going solar. Some states remove this barrier by exempting solar installations from state sales taxes. If you live in a state with a high sales tax, this could mean thousands in savings.
Property tax exemptions and exclusions
Some states also offer property tax exemptions for solar, meaning you won't be taxed on the value that the solar panels adds to your house. In other states, like California, solar is excluded from tax assessments altogether, which results in the same outcome as a tax exemption: Your property tax bill won't increase as a result of going solar. Property tax incentives are often offered alongside sale tax exemptions, but they vary from state to state.
Solar tax deductions
This one is rare, but in Idaho, you can deduct a portion of your system's cost from your taxable income for four years after your installation is complete. The deduction is worth 40% of your system's cost for the first year and 20% for the other three years. Each year, it can be at most $5,000. Idaho is the only state we've come across that offers an incentive like this, but it's still worth noting as a tax incentive you may encounter.
Businesses can save even more with solar incentives
Getting money off your initial investment is great, but earning money over time can really make solar worthwhile. Here are some incentives to look out for that increase your savings with solar over time. The value of these depends directly on how much energy your system produces.
Net metering, net billing, and other solar buyback programs
Along with the ITC, net metering is one of the most important policies in home solar. It makes it so you benefit from having solar panels even when it's dark outside.
When the sun’s shining, your solar panel system usually produces more electricity than your home needs. If your state or utility company offers net metering, you can essentially use the grid as an energy bank: You send excess electricity to the electric grid in exchange for credits. When you need to pull electricity from the grid when the sun isn't shining, it will count against the credits you’ve banked over time.
Your utility will only bill you for your “net” energy consumption at the end of your billing cycle. Sometimes, your bills will even be $0 or show a credit balance if your utility allows you to roll credits over between billing cycles. The credits could be worth the same as what you pay for electricity (the retail rate), what your utility company pays for electricity (the wholesale rate), or nothing.
Some utilities don't offer net metering, while others will offer other types of solar buyback programs, like net billing. With net billing, you still earn credits for sending electricity to the grid, but the credits are worth less than the retail rate. Usually, they're based on the wholesale rate, also called the avoided cost rate, which is much lower.
Solar renewable energy certificates–they're disappearing fast
Many states now have renewable portfolio standards (RPS), which require utilities to buy or generate a certain percentage of their electricity from renewable sources like solar. Utilities subject to RPS requirements need to obtain renewable energy certificates (RECs) to meet their targets. One REC is equal to the environmental benefit of one megawatt-hour of renewable energy generation.
Some states with RPS mandates also have solar carve-outs, which require a certain amount of renewable energy to come from solar specifically. In these states, you can sometimes sell the environmental benefit associated with your solar panel system through solar renewable energy certificate (SREC) markets.
Selling SRECs can result in hundreds (or even thousands) of extra dollars in annual income. However, only a handful of states still have active SREC markets–most states have caps on their SREC programs, and many of these caps have already been met. If you live in one of them, you probably want to install solar and enroll as soon as possible.
Performance-based incentives: Electricity over environment
While SRECs represent the environmental attributes of solar energy, PBI programs focus on the electricity generation itself. In performance-based incentive (PBI) programs, you'll earn money per kilowatt-hour your system produces.
You might earn payments monthly, annually, or at some other interval. And they can exist instead of or alongside net metering or other solar buyback programs. The best part about PBIs is that you don't need to sell them through a market, like with SRECs. Also, the incentive rates are usually determined when the system is installed and don't fluctuate with the market.
Most PBI programs have now been phased out, but a handful of utilities still offer them.
With interest rates soaring, finding a way to affordably pay for solar without emptying your bank account can be tough. Some states, non-profits, and utility companies make it easier by offering grants or subsidized loans.
Grants are essentially free money that lower the cost of a solar installation. Usually, grants are awarded to lower-income individuals or to larger-scale solar projects that meet certain criteria. It's rare to find grant programs open to anyone, but they do exist.
Subsidized loans, on the other hand, are often more widely available. They usually feature lower interest rates with longer repayment periods. Some subsidized loans require a certain credit score and debt-to-income ratio. Others are only available to lower-income households.
Are you eligible for solar incentives if you don't own your system?
Odds are you can find at least one solar incentive through your state, local government, or utility company. But, some states go above and beyond to encourage homeowners to go solar.
We're tracking incentives in the states where the EnergySage Marketplace is open–click on yours to learn how much you can save.
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