We’re living in the gold rush of renewable energy tax incentives.
That might sound like hyperbole, but it’s not: There has never been more money available than there is now to help make your home more sustainable — especially if you want to put solar panels on your roof.
The generous new federal tax credits in the Inflation Reduction Act have soaked up a lot of attention, and rightfully so, but there are plenty of state-level incentives out there, too. Taking advantage of these programs can shave thousands of dollars off the cost of a new solar array, depending where you live.
Here’s your guide to the top seven states for solar tax incentives and how you can make the most of them.
How do solar tax credits work?
While the incentives behind solar right now are indeed generous, they’re not going to come in the form of cash or check. Instead, these rebates offset the taxes you owe to the state or federal government.
“So very basically, if you put solar on your house, and you own the solar system, you qualify for a tax credit. So that’s a credit on the cash you would otherwise pay on your taxes the following year,” said Greg Fasullo, CEO of Elevation, an Arizona-based residential energy technology and solar company.
You’re eligible for the tax credit for the year that you installed the solar panels. This type of rebate — which takes a chunk out of your tax bill — is just one of many. Some states also offer sales tax exemptions on the cost of the solar system, and others exempt homeowners from property tax increases that could arise from a higher home value post-solar installation.
Read more: Your House Can Give You Extra Money Back on Your Taxes. Here’s How
How does the federal solar tax credit work?
The US government offers some of the best tax incentives for solar panels. As of 2022, you can now qualify for up to 30% of the total cost of your solar system as a tax credit.
Virtually any solar installation completed between 2017 and 2034 is eligible, but you can read detailed guidelines here. There are no income limits for the program, but because this incentive will come as a tax rebate, you do need to have taxable income to benefit from the credit, Fasullo said.
The total cost of the solar panel system, for the purposes of this program, includes not just the panels themselves, but also labor, installation and energy storage equipment.
What states have the best solar incentives?
Each state has a different mix of tax credits, rebates and net-metering policies that can offset the cost of a solar installation.
“The economics, even without the tax credit, makes sense,” Fasullo said of installing solar on your home. But these programs can sweeten the pot even more.
Here are the top seven states for solar incentives.
1. New York
Residents in New York can access a few different incentives. On the tax credit side, customers qualify for 25% of the solar system cost, up to $5,000. They can also qualify for sales tax exemptions, and if your solar panels generate excess power, net metering will pay you about $0.69 to $1.09 per kilowatt per month.
2. Idaho
Homeowners in Idaho can qualify for some significant rebates. The state offers a tax deduction of 40% of the cost of a solar system applied the year of installation, then a 20% deduction the following three years. Net metering policies will vary by utility, but the state also offers low-interest loans to help fund solar installations.
3. Illinois
Illinois is another state where, if you fall into the income requirements, you could qualify for a free solar installation. Other incentives include renewable energy credits that could cover about a third of the cost of a system, and property tax adjustments to lower your tax bill.
4. Maryland
Maryland residents have a few solar tax incentive options. Lower income customers can have the total cost of a solar installation covered by grants. The state also offers exemptions from sales tax and property tax increases. Net metering and solar renewable energy certificates in the state allow homeowners to gain extra income from the energy their panels generate, too.
5. Oregon
In Oregon, the incentives you can expect depend somewhat on your utility provider. Anyone in the state can access up to $5,000 off the cost of qualifying solar systems. But utility companies also offer rebates of as much as $1,500, as well as net-metering opportunities. Customers building new homes can also get an incentive to throw solar on the roof.
6. South Carolina
The South Carolina Solar Tax Credit is one of the most generous out there. It offers a tax credit of 25% of the cost of a solar panel system, up to $35,000 or 50% of the taxpayer’s tax liability for the year. The state also offers some property tax exemptions and net metering programs. Plus, Santee Cooper customers can qualify for another $5,700 rebate.
7. Texas
The state of Texas has a big range of solar incentives that depend a lot on where you live and who your energy provider is (the state’s energy system is deregulated, meaning customers can choose their utility). Some of the available rebates include a $2,500 credit for customers in Austin, as well as net metering programs that vary by utility.
Why are some states more solar-friendly than others?
The solar tax credits that are available in your state depend largely on the utility companies.
Solar panels, because they allow you to generate your own electricity and rely less on the grid, have forced utilities to reshuffle their decades-old business model of building power plants and sending energy to households, Fasullo said. Not to mention the fact that, if your solar panels generate excess electricity, the utility has to start paying you.
“All the utilities are scrambling because their business model is under attack,” he explained. “The less progressive utilities view [solar panels] as a threat.”
So, in the states where utilities are still resisting solar panels, the incentives are likely to be less generous — or just totally nonexistent. And in states where utilities have embraced solar, the rebates will be a lot stronger, Fasullo said.
“Educate yourself on your utility,” he advised. That could translate to rebates at the hyper-local, municipal level, too. If your state doesn’t offer rebates, sometimes your town or city might step up to fill the gap.
More on solar panels
These 7 States Have the Best Tax Incentives for Solar Panels – CNET
Source: Media Star Philippines
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