According to predictions for 2022, going solar might save you over $90,000 on electric bills, equal to the solar panel’s lifespan. Still, many homeowners get discouraged by the initial costs of the solar system installation. What most people are not aware of is that the price of solar has halved since 2010, and today, it is roughly $20,000. However, recent global developments, such as trade instability and war in Ukraine, have led to price increases in the solar industry. So, if you are keen on installing solar, you might want to consider government solar programs to help you offset the initial costs.
Government Solar Incentives
To encourage more people to use renewable energy, the government has come up with several financial incentives, rebates, and tax credits. Depending on the state you live in, you can reduce the cost of solar panel installation from 30% to 50%. Furthermore, there are federal, state, and local tax breaks for qualified homeowners. In fact, many electric utilities and other organizations offer rebates and incentives as well.
The Federal Tax Credit for Solar Photovoltaics
The federal tax credit, sometimes referred to as the Investment Tax Credit (ITC), is a dollar-for-dollar reduction in the amount of income tax you would owe. For instance, if you claim a $1,000 federal tax credit, you reduce federal income taxes due by $1,000. ITC gives a 26% reduction against your federal income tax until the end of 2022. However, in 2023, it will go down to 22%.
To be eligible for ITC, you should have a PV system installed between January 1, 2006 and December 31, 2023. Also, you can only claim the tax for the systems in your primary or secondary residence in the US. You can claim the tax for your portion of a community solar project as well. Finally, the solar PV system has to be new or used for the first time.
The tax reduction includes the following:
- Solar panels and solar cells that power the attic fan (it doesn’t include the fan)
- Installation labor costs (including fees and inspection costs)
- Balance-of-system equipment
- Energy storage devices
- Some sales taxes
Solar Renewable Energy Credits (SRECs)
In some states, as a homeowner, you can earn and sell Solar Renewable Energy Credits for the electricity your system produces. You earn 1 SREC for every 1 000 kilowatt-hours (kWh) your PV system generates. Since many utility companies have to prove that a certain amount of their energy comes from renewables, you can sell the earned SRECs to them.
SRECs prices are not fixed, but they can go up to $300. It is somewhat of a stock market, and the more demand for these credits, the higher the prices. You are eligible to own SRECs only if you purchase your PV system in full. If you buy it via a lease plan, your solar provider will own them, but they will pass the value to you in the form of a lower electricity rate.
Solar Tax Exemptions
Some states, such as Texas and California, offer property tax exemptions. This means you can switch to renewable energy at a lower cost. For example, even if there is a jump in your property value, you can remove the added value for tax calculation purposes.
In certain states and local governments, you will be exempt from paying sales and use tax for buying a solar system. This will reduce the initial price of installation since it can include sales, storage, and the use of components for the PV system.
Another way to save money is by finding utility companies that offer cash rebates. Cash rebates can reduce the total cost of installing a solar system by up to 20%. In most cases, you will deduct the utility rebate before calculating the tax credit, which saves you even more cash.
In addition to utility rebates, there are also government rebates. But generally, these do not reduce your federal tax credit.
To Sum Up
If you believe the cost of switching to solar energy is over your budget, there are still options which can save you a nice sum. There are plenty of tax incentives and rebates that the government offers to make clean energy sources the future of energy supply. With some research, you can save both your money and the environment at an affordable price.
Extra Solar Benefits to Enjoy
Are There Tax Credits if I Go Solar?
Federal Solar Tax Credit Guide
Pros and Cons of Solar Power