Purchasing solar panels and setting up a solar power system for a home or business can sometimes seem overwhelming. In addition, even though there are often large long-term savings, there tend to be a lot of upfront costs associated to this kind of project. Some of these costs can make people feel like the long-term investment just isn’t worth the effort.
The good news is that this way of thinking, especially when it comes to installing solar panels, isn’t true thanks to all of the latest developments in solar technology. In addition, the government (at state, federal, and local levels) has implemented different credits, rebates and exemptions in order to help renewable powered energy take hold in America.
Federal Solar Investment Tax Credit (ITC)
This tax credit is a federal policy which was extended in 2015. This policy is the government’s attempt to help make better use of solar generated energy throughout America. Since its inception, the ITC has helped to generate more jobs and create exponential growth within the solar power industry.
Across the United States, commercial and residential solar panel owners are eligible to receive tax credits. The amount of this credit can be up to 30% of the property that has had a solar powered system developed or constructed onsite. This amount will decrease over time, starting in 2020 where the credit drops to 26%, and then in 2021 with a drop to 21%. The opportunity for residential tax credits will no longer exist after this time, however commercial will continue to give exemptions up to 10%.
Solar Credits Available By State
The complete list of credits, exemptions and rebates that are available in the United States is extremely extensive. There are different types of credits based on federal, state and even city levels in which the business or homeowner lives. The following only provides an insight into five states and the exemptions, credits or rebates available to the residents living and working there. Names of other programs and initiatives for more of the energy deregulated states follow after.
Texas Solar Tax Credits
The following tax credits are available to residents in Texas. There are a wide range of credits in this state, many of which apply to residents and businesses of varying industries and sizes.
Solar and Wind Energy Device Franchise Tax Deduction:
Residents of Texas can take advantage of this property tax exemption by filling out a form: 50-123. Eligibility for this tax credit depends on the value of the resident’s property that is used for the distribution and production of electrical, thermal or mechanical energy. This applies whether or not the energy is used on site, or for equipment that is used to store the energy. Applying for this tax exemption means that the resident is only taxed on the original value of the property prior to the installation of solar panels and a solar power system. So, if the initial value of the business or home was $200,000 and the owner installed a solar power system for $20,000, they will only be taxed on the initial property value amount.
This tax exemption is applicable to residential, commercial and industrial sectors.
Solar Energy Devices Business Franchise Tax Exemption
This tax exemption applies to commercial and industrial sectors in Texas. Companies that manufacture, install or sell solar power equipment and/or particular parts of the equipment might be eligible to receive a tax exemption. The key to this particular exemption is that all of the company’s business must be dedicated to the manufacturing, installation or sales of solar power equipment — even if that business is conducted outside the state of Texas.
Renewable Energy Systems Property Tax Exemption
This is a property tax exemption that is available to commercial, industrial and residential sectors within the state of Texas. Eligible applicants can receive a 100% exemption from any increase in property value due to the installation of a solar power system.
Other Solar Power Related Credits and Rebates in Texas
In addition to tax credits, businesses and homeowners in Texas are also eligible for rebates and other savings. It is important to note that many of these credits or rebates only apply to certain cities within the state of Texas.
Some of these include:
- Renewable Energy Requirement
- Austin Energy — Net Metering
- Texas Gas Service — Commercial Energy Efficiency Rebate Program
- CPS Energy — Solar PV Rebate Program
- City of Houston — Green Building Policy for Municipal Buildings
Pennsylvania Solar Tax Credits
Pennsylvania does not have as many solar power specific tax credits, savings or rebates as Texas. However, this doesn’t mean that there aren’t several ways in which residents can reduce costs when it comes to their solar power system.
Alternative Energy Portfolio Standard
The Pennsylvania Alternative Energy Credit Program spearheads this rebate opportunity. The rebates that are available to residents in these groups are based on the requirement that 18% of an electric distribution and electric generation supplier company’s energy supply must come from alternative energy resources. Credits are then provided to complying companies.
This program is grant that is available to a wide range of sectors including,
- State Government
- Local Government
- Non Profit
- Federal Government
This program is similar to the above, Alternative Energy Portfolio Standard in that it is organized and run by the Public Utility Commission (PUC) of Pennsylvania. For successful applicants, grants are awarded in the form of Alternative Energy Credits (AECs). The program required the PUC to comply with new interconnection standards for solar power systems (amongst others). This in turn required many other organizations to upgrade their systems as well. In order to help with the cost of these upgraded regulations, the PUC offers grants and AECs.
Other Pennsylvania Solar Power System Credits and Rebates
- City of Philadelphia — Green Power Purchasing
- West Penn Power SEF Grant Program
- Solar Energy Loan Program
New York – Solar Credits
There are many tax credits available to residents that invest in solar power systems and panels. Some of these rebates are only available to commercial and industrial sectors, however there are a few that residential homeowners and other sectors might be eligible for.
Residential Solar Tax Credit
This tax credit is available to multi-family residential and residential sectors in New York. Eligible applicants include the purchase of solar power equipment in addition to entering a written agreement for a lease of related equipment. The lease agreement length however, must be for a minimum of 10 years. The total amount of the rebate is a maximum of $5000 or 25% of the amount spent on the solar power system. This tax credit is offered by the state of New York and requires the completion of the following form: Form IT-255.
Solar, Wind & Biomass Energy Systems Exemption
There are a few sectors that are eligible for this exemption including, residential, industrial, agriculture and commercial. It is a property tax exemption that can be claimed for 15 years (unless the jurisdiction has opted out of the program). Eligibility depends on whether or not the property has a solar power system that increases the property’s value over time. The system must also be approved by the State Energy Research and Development Authority.
Other Credits and Rebates for Solar Power Systems in New York
There are many credits, exemptions and rebates for residents of New York. Some of these include,
- Solar Sales Tax Exemption
- Energy Conservation Improvements Property Tax Exemption
- Local Option – Solar Sales Tax Exemption
- NY-Sun Loan Program
- NY-Sun Commercial/Industrial Incentive Program
Ohio Solar Tax Credits
Ohio benefits from some tax rebates that are available at the federal level, but also from city specific solar related credits.
Air Quality Improvement Tax Incentives
In the state of Ohio, new air quality projects for small and large companies might find themselves eligible for assistance from the Ohio Air Quality Development Authority (OAQDA). The organization provides tax exemptions on many different elements of a clean air project including,
- Personal Property Tax
- Real Property Tax
- Sales Tax
- Use Tax
Exemptions can reach as high as 100% on any of the above mentioned taxes.
City of Cleveland — Residential Property Tax Abatement for Green Buildings
This tax exemption provides residents living in the City of Cleveland with an increase in property value over the course of 10 – 15 years. People owning real-estate have the ability to receive a 100% tax exemption on any increase in property value, provided that standards for the city’s green building program are met. Elements of this program can and might include any energy generated by a solar power system.
Additional Solar Power System Credits, etc.
Other credits, rebates and exemptions available for residents of Ohio include,
- Qualified Energy Property Tax Exemptions for Projects 250 kW or Less
- Qualified Energy Property Tax Exemptions for Projects Over 250 kW (payment in lieu)
- Solar Renewable Energy Certificates Program
Massachusetts Solar Tax Credits
Similar to the above mentioned states, Massachusetts benefits from many federal tax credits, rebates and exemptions. Other credits include,
Residential Renewable Energy Income Tax Credit
This personal tax credit is applicable for applicants that have a renewable energy system (like solar). It includes up to $1,000 in credit or 15% against the net amount spent on the system constructed on a primary home or residence. If the credit exceeds the allowed amount, the individual is allowed to carry that amount over for the next few taxable periods.
Other Solar Related Rebates
- Renewable Energy Sales Tax Exemption
- Renewable Energy Property Tax Exemption
- Alternative Energy and Energy Conservation Patent Income Tax Deduction (Personal)
- Holyoke Gas & Electric — Residential Energy Conservation Loan Program
- Marblehead Municipal Light Department — Solar Rebate Program
- Concord Municipal Light Plant — Solar Photovoltaic Rebate Program
- Hudson Light & Power — Photovoltaic Incentive Program
Oregon – Solar Credits
- State Energy Loan Program
- City of Ashland — Solar Rights Ordinance
- Ashland Electric Utility — Photovoltaic Rebate Program
Illinois Solar Tax Credits
- City of Chicago — Green Power Purchasing
- Solar and Wind Energy Rebate Program
- City Water Light and Power — Solar Rewards Program
Washington DC Solar Tax Credits
- Solar Renewable Energy Credits
New Jersey Solar Tax Credits
- Solar Energy Sales Tax Exemption
- Residential Solar Rights
- Property Tax Exemption for Renewable Energy Systems
- NJ Clean Energy — Residential New Construction Program
New Hampshire Solar Tax Credits
- Enterprise Energy Fund Loan
- Residential Small Renewable Energy Rebate Program
- Commercial & Industrial Solar Rebate Program
Michigan Solar Tax Credits
- Refundable Payroll Tax Credit
- DTE Energy Solar Currents Program
Maine Solar Tax Credits
- Green Power Purchasing
- Solar Rights
- Maine Green Power Program
Maryland Solar Tax Credits
- Clean Energy Production Credit (Corporate)
- Energy Conservation in State Buildings
- Hartford County Property Tax Credit for Solar and Geothermal Devices
Delaware Solar Tax Credits
- Delmarva — Green Energy Fund
- Delaware Electric Cooperative — Green Energy Fund
- Solar Renewable Energy Credits Spot Market Program
Connecticut Solar Credits
- Property Tax Exemption for Renewable Energy Systems
- Sales and Use Tax Exemptions for Solar and Geothermal Systems
With or without tax credits, we suspect the popular of solar panels for smaller residential and commercial use will continue to grow over the next several years.