Solar Rebates & Tax Incentives: What You Need to Know

Solar rebates and tax incentives help make solar more affordable for the average homeowner, which helps more people make the switch to renewable energy. These rebates and incentives include a federal tax credit, state rebates, and state and local credits, loans, tax exemptions, and grants that can help cut the cost of going solar by at least 30%. 

Depending on where you live and the kind of solar equipment you choose, you may also be able to access rebates from utilities and manufacturers. All in, these solar rebates and incentives could cut the cost of installing solar at home by half!

We look at the federal solar investment tax credit in more detail here, with information on how the ITC works and how to apply. Otherwise, read on for information on the different types of solar rebates and incentives and how these can help make going solar more affordable for you.

Types of solar rebates and incentives

Federal, state, and local governments typically want to encourage homeowners and businesses to switch to renewable energy sources. This helps meet climate targets and can create green jobs while also reducing demands on the main energy grid. To make things more affordable, solar enthusiasts can access major rebates and incentives such as:

• The federal solar Investment Tax Credit (ITC)
• State rebates
• State tax credits
• Cash rebates from manufacturers and utilities
• Solar renewable energy credits (SRECs)
• Subsidized, low-cost or interest-free loans
• Solar and energy storage grants
• Sales and property tax exemptions.

Businesses may also be able to access certain incentives, including tax breaks, for going solar. In some places, homeowners and businesses may be able to offset the cost of going solar and reduce the payback period through net metering and performance-based initiatives.

Solar rebates

Solar rebates are available from some states and municipalities, as well as from some utility companies and manufacturers. These are up-front cash incentives for installing home solar. Typically, once you have installed and paid for your solar electrical system, you can submit invoices to these programs and get a check for a few hundred or even thousands of dollars.

State and utility solar rebates are usually time-limited or capped to a certain number of installations in a given region, meaning early adopters get the spoils. Not everyone who installs solar gets a rebate and most rebates vary in size. Some governments or utilities offer fixed rebate amounts, but most rebates depend on the size or capacity of your solar installation. This is usually set as a dollar per kilowatt (kW) of installed capacity. Rebates also vary for homeowners and commercial systems, and some rebates depend on household income.

These types of state, local, and utility rebates can help cut the cost of installing solar by an additional 10-20%.

For some homeowners, it may be worth switching to a different utility provider in advance of installing solar. That’s because different utilities can offer different rebates and net metering programs. You may need to be with the utility for a certain amount of time (typically six months to a year) before qualifying, however, so be sure to read any small print.

Battery storage rebates and incentives

While most rebates and other incentives focus on solar panels and shingles, an increasing number of programs target energy storage systems. Indeed, after years of being excluded from the program, you can now include your battery storage system as part of your federal solar ITC claim, as long as you only charge the batteries using solar power.

Other notable battery storage rebate and incentive programs include:

• California’s Self Generation Incentive Program (SGIP) – homeowners can claim an up-front rebate for installing a battery storage system powered by solar or another renewable energy source. The SGIP is a step-down program, though, so act now to get the biggest rebate. Depending on your utility, SGIP could net you a rebate of $200 per kilowatt-hour (kWh) of stored energy capacity. This would amount to a rebate of around $2,700 for the Tesla Powerwall 2. For low-income households, the SGIP offers $850 or $1,000 per kWh, which effectively makes the average energy storage system free.
• Jacksonville Electric Authority in Florida – a battery rebate of up to $2,000 for homes or businesses installing solar energy storage systems.
• The Smart Export program from Hawaiian Electric is for customers with installed battery capacity and gives credits to customers who charge their batteries during the day and export energy to the grid from 4 p.m. to 9 a.m. The Customer Grid-Supply Plus (CGS Plus) program doesn’t require battery storage and pays a lower rate for energy exported during daylight hours.
• Hawaiian Electric Battery Bonus – solar customers in Oahu and Maui who add a solar battery to new or existing rooftop solar systems may be eligible for an incentive up to $850 per kW.
• Orlando Utilities Commission offers residential electrical solar PV customers a rebate of $2,000 for a solar battery with capacity of at least 8 kWh and at least a 10-year defect warranty.
• Maryland’s Energy Storage Income Tax Credit – a 30% tax credit available to residential and commercial taxpayers until the end of 2022, or earlier if the funds run out, on a first come, first served basis. 
• National Grid’s Connected Solutions battery program – In Connecticut, Massachusetts, and Rhode Island, customers can take part in a program where they receive an incentive every summer based on the performance of their battery system. This rate is locked in for 5 years at $275 per kW performed per summer. Connected Solutions also offers eligible customers a zero-interest HEAT Loan for the equipment and labor costs associated with installing a battery storage system. 
• Massachusetts’ SMART solar program – the energy storage ‘adder’ can increase the incentive customers get from this pro-solar state program.
• Nevada’s NV Energy Residential Energy Storage Incentives – customers installing battery storage systems can receive incentives up to $3,000, with the highest rate of return for time-of-use rate customers.
• The Oregon Solar + Storage Rebate Program gives rebates for solar electric systems and paired solar and storage systems. The rebate is issued to contractors, who pass on the savings to residential customers and low-income service providers. Homeowners can receive a rebate of up to $5,000 for a solar electric system and up to $2,500 for an energy storage s​ystem.​​​
• Massachusetts Connected Solutions battery program offers zero-interest HEAT Loans to National Grid customers installing a solar battery storage system. 

As more states begin to appreciate the benefits of solar energy storage systems (such as less pressure on the grid), more of these sorts of incentives are proposed and adopted into law. If your state or utility doesn’t offer a storage incentive yet, ask your local representative to look into the idea.

Manufacturer rebates

Even in states where net metering isn’t mandated and there are no solar rebates or other incentives, you may still get some cash back when going solar. How? Through manufacturer rebates.

Many of these programs are time-sensitive, however, with a cap on the number of rebates issued and the cash amount. Manufacturer rebates are often linked to the launch of new solar panels or other solar products. This means that rebates are most common on the highest-efficiency panels, instead of on older, less expensive models. Some of the best solar panel brands, including LG and SunPower, have offered rebates of $600-$1,000 over the last few years. 

If you’re not in a rush to choose your equipment, you might want to follow solar panel manufacturers on social media and sign up for their newsletters. That way, you’ll get notices when or if they launch new products and offer rebates. It’s also a good idea to get several quotes from local solar installers and ask about rebates. You can also use the quotes to search for the manufacturers’ names and see if your installer has missed any potential rebates.

Your solar installer or contractor should, however, be able to help you claim any available manufacturer rebates. These rebates could run to hundreds or thousands of dollars depending on the size of your array and the type of equipment.

Solar renewable energy certificates (SRECs)

Several states require utilities to meet certain production levels for renewable energy as part of a responsible portfolio standard (RPS). If utilities don’t make enough electricity from renewables, they can buy renewable energy certificates (RECs) from those who do. 

In around a dozen states, utility companies not only have to satisfy RPS laws, they also have to produce or buy a certain amount of electricity from solar. This has created a market for solar renewable energy credits or certificates (SRECs). Think of these as a kind of carbon offset specific to solar energy.

SRECs are only available in some states, however, and the price of SRECs varies significantly between states and fluctuates according to supply and demand. In Ohio, for instance, SRECs are worth just a few dollars, while SRECs are worth hundreds of dollars in Washington, D.C. Depending on where you live and the productivity of your home solar electrical system, SRECs can be worth hundreds or even thousands of dollars each year. In Washington, D.C., for instance, a 10 kW solar array could bring in SREC income of over $4,000 per year. 

How SRECs work

Owners of solar electrical systems are awarded SRECs based on how much electricity their system produces. A system with 10 kilowatt (kW) capacity will typically produce around 10-13 MWh or electricity annually, providing the homeowner with 10 to 13 SRECs they can sell. 

While utilities are the end buyer of SRECs, you won’t typically sell your SRECs directly to the utility. Instead, most homeowners trade their SRECs through an aggregator or broker such as SRECTrade or SolSystems. 

SRECs help reduce your solar payback period and provide a useful source of additional income. Depending on the platform through which you sell your SRECs, you may get paid quarterly, annually, or as a single upfront payment based on an estimate of your system’s production. 

In D.C., homeowners working through SolSystems can currently access a one-time upfront payment of $1,325 per kW for 15 years’ production. If you have a 10 kW system, this works out to a payment of $13,250. Combined with the federal ITC and other rebates and incentives, this could reduce your solar payback period to just a few years. 

In contrast, Virginia’s lower SREC market price means SolSystems offers just $100 per kW capacity, so a single upfront payment of $1,000 for the same 10 kW system. Given the Virginia SREC market is relatively new, it may be advantageous to go with regular payments instead. 

Performance-based incentives (PBIs)

Production or performance-based initiatives (PBIs) are another way to offset the cost of going solar. These are offered by some states and individual utilities and compensate owners of solar electrical systems for electricity produced, as a per-kilowatt hour credit.

While SRECs are intended as a representation of emissions reductions, to help utilities meet their renewable energy goals, PBIs are an incentive for the actual electricity produced. PBIs aren’t sold on the open market and are instead paid at a set price by states of utilities. 

PBIs are similar to net metering in that they’re tied to how much electricity your solar array produces. They can be run alongside net metering or replace that approach to compensating homeowners and businesses.

Solar loans and grants for rural and low-income households and businesses

Solar loans and grants are excellent options for low- and moderate-income families and businesses to go solar. Loans are typically low-cost or interest-free, unsecured, and easily accessible even to folks without a good credit rating. Grants are even better as they don’t have to be paid back at all! 

Both loans and grants are usually provided through partnerships between the federal government and non-profit organizations, schools, tribes, and farms. Some utilities and credit unions also offer loans and grants, often in exchange for homeowners’ SRECs for a set period of time.

The best place to find out if you’re eligible for a solar grant is the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy. You can also sign up to receive an email whenever new grants are released. For rural homeowners, communities, and agricultural businesses you can also find information on renewable energy and electricity production loans and grants through the U.S. Department of Agriculture’s Rural Development website.

Some of the notable solar and renewable energy grant programs include:

• REAP Grants – Providing up to $20,000, the USDA’s Rural Energy for America Program helps farmers and small rural businesses install solar and other renewable energy systems. 
• High Energy Cost Grants – These USDA grants help rural communities in areas with abnormally high energy costs improve access to renewable energy.
• Renewable Energy Grants – The U.S. Department of the Treasury offers the 1603 Program to reimburse applicants who install a solar electrical system.
• Colorado’s Weatherization Assistance Program (WAP) – Offers financial help for residents with high energy burdens to install rooftop solar PV.
• Washington D.C.’s Sustainable Energy Utility (DCSEU) Solar for All – this program hires local solar contractors to design and install solar photovoltaic (PV) systems at no cost to income-qualified homeowners. The systems can offset homeowners’ electricity costs by up to $500 per year. The program also funds community solar projects to increase access to solar for condo owners, renters, and others who can’t install rooftop solar themselves.
• The Illinois Solar for All program – helps low-income households install solar panels with no upfront costs. Qualifying households pay a reduced monthly fee for power produced, up to a maximum of 50% of the value of the energy produced.
• Louisiana’s Solar For All NOLA program – Offers solar leasing options for homeowners in New Orleans. Qualifying homeowners can install solar panels with no money down and with no loan. 

Subsidized, low-cost solar loans

It’s almost always better to buy your home solar system outright, rather than to lease equipment. This way, you’re eligible for more tax credits and other financial incentives. 

Fronting the full cost of a solar array is a challenge for many homeowners and businesses, though. Tax credits and rebates can take a few weeks or months to come through, while the full cost usually has to be paid right away. 

To help homeowners and businesses go solar, some utility companies, states, solar installers, and even advocacy organizations and non-profits offer low-cost or interest-free loans. These are usually available for a limited time only and have certain qualification requirements.

• Delaware’s Energize Delaware Solar Loan program – offers low-interest loans to credit-qualified residents wanting to install home solar.
• Hawaii’s Green Energy Money Saver (GEMS) Program – the state offers low-cost solar loans to low-income homeowners. Monthly payments are built into customers’ utility bills after system installation.
• The City and County of Honolulu solar loan program – offers low-cost, or even 0% interest loans up to a 20-year payment term for eligible low-income homeowners. 
• Idaho solar loans – Eligible residents can access state-funded low-interest loans to install renewable energy system. Five-year loans are available up to $15,000 for residential and $100,000 for commercial solar installations with interest rates capped at 4%.
• Maine’s Home Energy Loan program – Homeowners installing solar can borrow up to $15,000 for up to 15 years at a low interest rate.
• Massachusetts Connected Solutions battery program – Customers served by the National Grid can access a zero-interest HEAT Loan for the equipment and labor costs associated with installing a solar battery storage system. 

Tax exemptions

Solar rebates, SRECs, and tax credits are just some of the ways solar helps pay for itself. Solar installations may also be exempt from sales and property taxes in some states, which could reduce your solar payback period substantially.

As for sales tax exemptions, some states offer a generous exemption including all sales and use tax associated with residential solar equipment and installation. Others only offer a tax exemption for certain parts of a solar installation, such as the panels or shingles. You may still have to pay tax on racks or mounts, batteries, inverters, labor, and so forth.

Sales tax exemptions are usually included in quotes from solar installers, meaning you don’t have to worry about claiming the exemption or filling out more paperwork. If you think your system is exempt from sales taxes but you see it included in a quote, ask the installer to take another look!

Solar incentives for businesses: accelerated and bonus depreciation

Some solar rebates and incentives are only available to businesses. One such incentive is an accelerated depreciation process that can reduce the amount of tax business pay in the first five years after installing solar. 

Known as MACRS, the Modified Accelerated Cost Recovery System (MACRS) allows businesses to claim a higher amount of depreciation in the first year or five than usual on certain newly acquired assets (in this case, solar equipment). Because businesses include depreciation as a deductible on their tax returns, this reduces net income and the overall amount of tax the business pays. 

Under the 2017 Tax Cuts and Jobs Act, businesses that install solar energy systems before 2023 also qualify for bonus depreciation. This allows the business to allocate 100% of the depreciable value of the asset in year one. This kind of program can reduce the net cost of a solar photovoltaic energy system by as much as 30%. Pair it with the federal solar ITC and this could amount to nearly 50% off the upfront cost of installing solar. Better yet, if a business is based in California or another state with its own accelerated recovery system, that business may be able to reduce the cost of going solar by up to 75 cents on the dollar.

State solar rebates and incentives

For most homeowners, the federal solar investment tax credit (ITC) is by far the biggest single tax incentive for going solar. However, several states also offer tax credits for installing solar equipment at home, and some of these are actually more generous than the 30% tax credit offered by the federal government. 

Idaho, for example, offers a 40% personal income tax credit in the first year after you install solar. Hawaii also offers a generous tax credit of 35%. Both of these are capped, however, so the federal ITC may still provide a bigger tax break overall for bigger systems.

Tax credits aren’t the only financial incentives states offer to promote the adoption of green energy. Many states also mandate net metering, offer low-cost or interest-free loans for solar installations, or even provide grants, property tax exemptions, and sales tax exemptions to make it cheaper to go solar at home.

State rebates are also available in some places and tend to range from $1,000 to $6,000 dollars for a home solar installation. Additional rebates are available in some states for renewable energy storage systems (batteries).

Many of these programs are in the midst of change, however, with new legislators modifying, scrapping, or introducing new policies that promote or thwart greater adoption of renewable energy. It is essential, then, to do your own research before signing a contract with a solar installer, especially if you’re relying on state solar rebates and other incentives to make solar financially feasible.