Although the cost of solar energy has seen a steady decline, it is still a considerable investment for most homeowners. But luckily, in order to encourage the adoption of solar power, the federal, state, and local governments have come up with a few special programs. Taking the form of tax benefits, solar, or performance-based incentives, these offers can reduce the cost of going solar significantly. So, let’s see what solar energy rebates and incentives are available and which ones work best for your home!
Federal Investment Tax Credit
Generally speaking, the Federal Investment Tax Credit is by far the best incentive available at the moment. It involves giving back 30% of the amount you’ve already paid for your solar energy system in taxes. In other words, instead of a direct deduction, the ITC reduces your taxable income, offsetting the amount of taxes you have to pay. Therefore, depending on your taxes, you might even receive the said percentage as a refund from the IRS.
It’s important to note that the solar tax credit is set to expire in 2035. Additionally, the actual percentage of tax reduction will lower to 26% in 2033 and 22% in 2034, respectively. While that might seem like plenty of time to get solar panels, it’s always best to act fast to make the most of this amazing incentive.
State Tax Credits
More often than not, states offer additional tax credits to homeowners that want to install solar panels. They work just like the federal ITC, but the reduction applies to your state taxes. Just keep in mind that the amounts vary depending on your state. Yet, when paired with a federal ITC, the percentages quickly rise!
Some utility companies, states, and municipalities provide up-front rebates for solar panel installations. However, they are usually only available for a limited time and go away as soon as a certain number of homes switch to solar energy in the region. But, if you’re fast enough to apply for them, cash rebates can reduce your system’s cost by up to 20% or more.
Solar Renewable Energy Certificates
Renewable portfolio standards require utility companies to generate or procure a percentage of their electricity from renewable sources. If you live in a state with renewable portfolio standards, you’ll be able to create solar renewable energy certificates for the electricity your solar panels produce. Then, you can sell these SRECs to local utility companies, which can result in hundreds or thousands of dollars of extra income per year, depending on your area’s SREC market.
As the name suggests, performance-based incentives pay you a per-kilowatt-hour credit for the energy produced by your system. The difference between a PBI and an SREC is that the latter represents the eco-friendly attributes of solar generation, while the former provides incentives for energy producers. Unlike with SRECs, you don’t have to sell your PBIs through a market and the rates are determined during the solar system installation. And best of all, PBIs can also exist alongside net metering policies or replace them if needed.
To boost solar energy adoption rates, some states don’t include the value of your solar panel systems in the overall property tax assessment. As a result, even though solar systems increase your property’s value, the tax bill will remain the same as before. Not only that, but you might also be exempt from state sales taxes, resulting in further savings.
Lastly, states and non-governmental organizations such as utility companies can offer subsidized solar loans with reduced interest rates. These will finance your solar panel system purchase, making solar energy more accessible than ever. However, subsidized loans are usually only available for a limited time.
The Verdict — Which Rebate and Incentive Should You Aim for?
Overall, you shouldn’t just aim for a specific rebate or incentive. Our advice is to combine these financial programs to save money on your installation and recoup part of your investment. Just remember to regularly look up your state’s incentives and rebates, so you can make the most of them. And as always, Atlantic Key Energy is ready to help, whether you want to learn more about solar energy or go ahead with your first installation!
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