The federal government provides a solar tax credit, known as the investment tax credit (ITC), that allow homeowners and businesses to deduct a portion of their solar costs from their taxes. Both homeowners and businesses qualify for a federal tax credit equal to 30 percent of the cost of their solar panel system minus any cash rebates. Learn more about the federal solar tax credit, including the timeline for the eventual end of the ITC in 2022.
Some states offer additional tax credits for installing a solar panel system. With a state solar tax credit, you can deduct a portion of the cost of your solar panel system from your state tax bill, similar to the federal ITC. These amounts vary significantly by state.
It is sometimes possible to receive a cash rebate from your state, municipality, utility company, or other organization that wants to promote solar energy. Rebates are generally available for a limited time and end once a certain amount of solar has been installed. Rebates can help to further reduce your system costs by 10 to 20 percent.
The Database of State Incentives for Renewables & Efficiency (DSIRE®), developed by North Carolina State University with funding from the Department of Energy, is an all-encompassing source of information about the rebates and incentives that may be available to you. Taking the time and effort needed to research incentives in your state is the best way to ensure that you are aware of all of the incentives for which you qualify.
Some states and municipalities do not include the value of solar panel systems in property taxes assessments. This means that, even though the value of your property has increased by the addition of a solar power system, your property tax bill won’t increase – it will remain the same.
In addition, your solar panel system may be exempted from state sales taxes, which can result in significant additional savings depending on your state’s sales tax rate.