Solar Incentives and Rebates by State |

Solar Incentives and Rebates by State

home with solar panels on the roof

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The cost of solar panels has decreased by 90% between 2010 and 2020. While the cost has increased a bit since 2020 due to the supply chain issues stemming from the global COVID-19 pandemic, solar panels are still much cheaper than a decade ago. But buying a solar system is still a big purchase. State solar incentives and rebates help make solar panels more affordable for consumers.

Many state and local governments offer solar incentive programs to encourage consumers to adopt solar power. These incentives include tax credits, rebates, and additional perks like net metering programs. Consumers interested in solar panels need to proactively apply for most incentives because, typically, there is no automatic enrollment available for such programs. So, if you take advantage of solar incentives, you will pay less for the upfront cost of solar.

State solar incentives and rebates

Solar incentives differ by state and can even vary by city. In some states, the solar incentives and rebates can help cut the upfront cost of solar panels dramatically. 

Arizona, for example, offers the Residential Arizona Solar Tax Credit, which credits back 25% of the cost of a home solar system. Texas, on the other hand, doesn’t have any statewide solar credits, the state does offer a renewable energy property tax exemption. This means that even if your solar panels increase your property value, you will not have an increase in property taxes.

Several states also offer net metering programs, which allow you to send excess energy generated by your solar system back to the power grid in exchange for credits to your electricity bill. Many consumers who invest in solar panels consider net metering an important incentive in their state because it allows them to save thousands of dollars over the lifespan of their solar panels.

Find your state on the map below or visit your state’s solar page to learn more about the solar incentives and rebates in your area.

Federal solar incentive tax credit

Regardless of state solar incentives, if you purchase a solar system, you are eligible for the Residential Clean Energy Credit, formerly known as the Investment Tax Credit (ITC). The federal solar tax credit offers buyers 30% of the total cost of their solar panels back on their federal tax return on systems purchased through 2032. The credit can be retroactively applied to systems from the beginning of 2022.

For a detailed explanation of the Residential Clean Energy Credit, visit our solar tax credit guide.

Types of solar incentives and rebates

There are several types of state solar incentives and rebates available across the country. Here is an explanation of the most common types:

  • Rebates – An amount of money refunded to the consumer who purchases solar panels after they buy the system.
  • Tax credits – An amount of money that is deducted from the amount you pay in income taxes in a year. The federal Residential Clean Energy Credit, for example, decreases your tax burden by 30% of the cost of your solar system.
  • Net metering – A very popular solar incentive in many states, allows the solar consumer to send extra electricity generated back to the grid. In turn, you receive a credit for the excess  power not used.
  • Property tax exemption programs – Some states exempt solar systems from property taxes. While solar systems normally increase your property value, you will not have to pay higher property taxes.
  • Solar Renewable Energy Certificates – Often referred to as SRECs, these certificates are credits for the electricity that your solar panels generate. Consumers can sell SRECs to utility companies in some areas.
  • Performance-based incentives – In states that offer performance-based incentives (PBIs), consumers can claim a flat-rate payout for every kilowatt-hour (kWh) that the solar system produces. 
  • Low-interest loans – To help make solar systems more affordable, some states offer consumers loans with lower interest rates that apply specifically to purchasing a solar system.
  • Business solar incentives – Solar credits and rebates aimed at incentivizing a switch to solar. The Modified Accelerated Cost Recovery System (MACRS) lowers the amount a business pays in taxes for five years after it purchases a commercial solar system. There are also a variety of state solar incentives for businesses.

Are you eligible for solar incentives?

In March 2022,® surveyed American homeowners about their familiarity with solar costs and incentives and found that most respondents did not know about existing solar incentive programs. Almost half (45%) of the surveyed overestimated or had no idea about the average cost of solar panels. According to the poll, 57% of American homeowners have heard of solar incentives, but they do not have a good understanding of them. More than a third (36%) of Americans were aware of solar incentives, but they did not know how incentives impact the final cost of solar panels.

The lack of knowledge about incentives can deter consumers wanting to go solar. The use of federal and state incentives and rebates can significantly reduce the overall cost of solar panels. This guide will walk you through solar incentives by state and how much they could help you save on solar panels.

Each state’s solar incentives come with its own criteria for eligibility. However, there are some common criteria that many incentives require:

  • Your solar system must be installed on your primary or secondary place of residence.
  • The solar system must be installed before a certain date. For example, the Residential Clean Energy Credit will only apply to systems installed by the end of 2035
  • You own the solar system and do not lease it or have a solar power purchase agreement (PPA).
  • The system must be new. This means if you purchase a house with solar panels already installed, you may not qualify for some state solar programs.
  • Some solar incentives require you live in a specific service area or are enrolled in an energy plan with a certain electricity provider.

The criteria above are some of the most common factors, but they will not be a requirement for every state solar incentive. You should thoroughly research which state solar incentives and rebates you are eligible for in your area so you know how much a solar system will cost after you factor in potential savings. Visit your state page to find details about solar incentives and rebates near you.

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