There's Never Been a Better Time to Go Solar in the USA
State and Federal Solar Tax Credit
The Solar Investment Tax Credit (ITC) is a federal US tax incentive program aimed at encouraging the growth and adoption of solar energy. Under this program, established by the 2005 Energy Policy Act, both residential and commercial customers are eligible for a federal solar tax credit of up to 26%.
Currently, this tax credit percentage amount is due to begin decreasing after 2022.
How Does the Federal Solar Tax Credit Work?
The program has separate sections for residential and commercial solar installations. Under Section 25D, homeowners may apply the credit against their federal income tax return. This applies when the homeowner owns the solar equipment (but not if they lease it) and when the installation is done at a personal residence that they also own.
For business customers, Section 48 allows the credit to be applied against their federal business taxes. Businesses can claim the credit when they install solar power at their business premises or finance a business or residential solar installation.
Are There Government Rebates for Solar Panels?
While the ITC is a federal government program, some state and even local governments have their own incentive programs. Solar tax incentives by state, solar rebates by state, and solar tax credits by state are covered below.
State Solar Tax Credit
Which States Have Solar Incentives?
The situation varies widely and changes fast at the state government level. The latest information is usually available from leading solar equipment companies like Greenshine New Energy. These state incentives may apply to solar systems, solar fixtures, or solar panels. They may apply to residential or commercial projects.
For example, New York currently has the State Solar Energy System Equipment Tax Credit. This offers New York residents up to $5,000 of state tax credit when they purchase a solar system for their home. Other states with incentive programs currently in place include Arizona, Massachusetts, and South Carolina.
Which State Has the Best Solar Incentives?
Unfortunately, solar panel incentives vary by state and any state tax credit for solar panels can vary depending on your situation (i.e., whether you are a business owner or homeowner). So, the best state for you might not be the best state for someone else. That said, California is currently considered one of the best states overall for solar incentives.
Solar Incentives by State
While tax credits are the most common type of solar incentive, these are not the only programs that can benefit you at the state level. Other incentives, depending on where you live, your income, and your tax situation, can include loans, rebates, and subsidies.
Also, your county, city, or utility company may have additional incentives. California is a good example of solar incentives by state. The California Department of Tax and Fee Administration has the Manufacturing and Research & Development Equipment Exemption program. Under this program, which is just one of many available in California, eligible businesses can be partially exempt from equipment use and sales tax.
Solar Energy Industries Association: “Solar Investment Tax Credit (ITC).”
The California Department of Tax and Fee Administration: “Tax Guide for Manufacturing and Research & Development Equipment Exemption.”