Solar Tax Credit By State In 2024

As a homeowner, you’re likely looking for more sustainable options for your energy needs. From federal tax credits to state specific rebates, these incentives can help to reduce the staggering costs of solar installations and make them more accessible to anyone interested in making the switch.

What Are Solar Incentives and How Can They Benefit You?

Solar incentives help reduce the upfront costs for installing solar energy systems. They make switching to solar power more accessible to the average homeowner, and can be offered as tax credits, state and local rebates, property or sales tax exemptions, or grants. Reducing this financial barrier encourages homeowners to be more energy independent, reduce the nation’s dependence on fossil fuel, and increase the demand for renewable energy.

Understanding the Federal Solar Tax Credit

The federal solar tax credit, also called the investment tax credit (ITC) and the Residential Clean Energy Credit, is a non-refundable credit that allows U.S. residents and homeowners to claim up to 30% of their solar equipment costs on their federal tax return for that year. It can cover panel installation, labor costs, inspection costs, and additional equipment. The exact percentage you are eligible to claim depends on when your system was installed.

According to the Office of Energy Efficiency and Renewable Energy, solar-powered systems installed in 2022-21 are eligible for a 26% tax credit. Systems installed on or before 2019 and between 2022-32 are eligible for a 30% tax credit. This credit will return to 26% for systems installed in 2033, and the following year, the credit will drop to 22%.

The credit is currently set to expire in 2035, but Congress can always renew it between now and then.

If you meet the following requirements, you may be eligible for the ITC:

• Have a solar photovoltaic (PV) installed in your U.S. residence between Jan. 1, 2017 and Dec. 31, 2024
• Have a new system or one being used for the first time
• Either
  • Outright own your solar PV system (You’re neither leasing the system nor paying a solar company to purchase the energy it generates.)
  • Or bought a share of an off-site community solar project, if the electricity generated doesn’t exceed your home’s energy usage.

State-Specific Solar Incentives

State incentives are available as tax credits, rebates, tax exemptions, and net metering. They can be used alongside the federal ITC to further reduce the financial strain on purchasing solar energy systems. States like Maryland are pushing for its residents to transition to solar energy, and encouraging its counties to offer sizable tax credits.

State Tax Credits

These credits are only available to residents of a specific state, and the amount is often smaller than the federal ITC. However, when used together, the state and federal tax credits can help you save even more money on your solar energy system. Rather than having a fixed percentage, the amount awarded can range from $2,500 to $5,000.

For example, Prince George’s County Solar Tax credits can offer up to $5,000 to install or create solar energy devices in homes. Whereas the Harford County Solar Tax Credits can offer a property tax credit up to $2,500 for those using solar energy to heat and cool their homes, heat their water, and create electricity.

Net Metering

Even though net metering doesn’t offer upfront financial relief like a state or federal tax credit, it’s a great way for property owners to earn credit toward their future electric bills. Any excess electricity your solar energy system generates goes back to the grid, which can help continue to lower ongoing utility costs.

Rebates

Like the federal ITC, solar rebates can count toward the upfront solar energy system installation cost. These can be offered by state or local governments, utility companies, or specific solar programs. The amount of the rebate varies, but it can be a significant portion of the overall cost.

The Maryland Residential Clean Energy Rebate program offers $1,000 grants for homeowners with qualified clean energy systems. This program is available on a first-come, first-serve basis. Once the budget for the year has been spent, you’ll have to wait until the application opens again before you can apply.

How to Find and Apply for Solar Incentives in Your State

At Solar Energy World, we make it easy for you to explore solar incentive programs available in Maryland, Virginia, Washington D.C., New Jersey, Pennsylvania, Delaware, and Florida. Simply choose your state, select the award that interests you, and submit your application.

If you live outside of those states, start by using a reliable resource like the Database of State Incentives for Renewables and Efficiency (DSIRE) or the Department of Energy (DOE). On DSIRE’s website, select your home state, solar programs, and explore the available options. Make sure to check when the page was last updated to ensure you have the most recent information. If the page is outdated, visit the website linked on the page to learn more.

On the DOE’s website, visit their rebates page, select your state, then follow the link to your state’s energy office.

Another alternative is visiting your current electric company’s website and exploring their renewable energy programs. These sites often have a list of solar incentive programs to help you get started. You can also call your electric company to speak with someone directly about making the switch to solar power.

The specific information you need when applying to tax credit, rebate, or grant programs can vary. However, in general, you’ll need:

• Your tax forms
• The size of your system in kW and a breakdown of the equipment needed (solar panels, wiring, hardware, inverters, etc.)
• The installation date
• Installer, or contractor, information like the company’s name, contact information, certification, etc.
• Proof of purchase like bills or property tax statements
• Copies of local permits for installation and inspection approvals
• An estimate of annual energy production

Maximizing Benefits from Government Solar Programs

Besides the options listed above, there are many other programs at the state and local level that support solar adoption. These programs offer rebates, incentives, and financing options to reduce upfront costs, provide long term financial support, and make solar more accessible to all income levels.

Property Assessed Clean Energy (PACE) Financing

This program allows homeowners to finance solar installations through their property taxes, with payments spread over many years (often 10-20). PACE financing often has low interest rates and is available in states where local governments support the program.

Community Solar Programs

For homeowners who can’t install panels on their property, community solar programs allow you to access renewable energy by subscribing to a shared solar farm. Participants get credits on their utility bill based on the energy produced by their share of the solar array, so you get monthly savings without the need for physical installation.

Federal and State Grants for Low-Income Households

Programs like the Weatherization Assistance Program (WAP) and state specific programs offer grants or low cost financing for low and moderate income households, sometimes covering the entire cost of a solar installation.

Combining Programs for Maximum Savings

To make solar as affordable as possible, homeowners can combine different programs and incentives, since most programs are complementary. Start with the ITC as it covers 30% of the installation cost, and can be paired with most state and local programs.

After, apply for state and local rebates to reduce the upfront cost before calculating the federal tax credit, so you pay even less out of pocket. Enroll in net metering to offset your monthly utility bill with credits. If available, register the system to earn SRECs which can be sold for extra income.

Residential property assessed clean energy, called R-PACE or Residential PACE, financing and solar loans offer low interest financing options with flexible payment terms that match your energy savings.

Let’s say you’re a homeowner in New Jersey using SRECs, state rebates, and the federal ITC. If your system size is 6 kW and the total installation cost is $18,000. With the federal ITC, 30% of this is counted toward your tax credits.

• $18,000 x 30% = $5,400

With an SREC, you could earn around $100 per credit, and you plan to earn 10 SRECs every year for the next 5 years.

• Estimated annual income: 10 SRECs x $100 = $1,000 each year
• SREC Earnings: $1,000 yearly X 5 years = $5,000

If you qualify for the New Jersey Solar Rebate program, you can get a rebate of about $.50 per watt for the first 5 kW of your device’s total capacity. If you have 5,000 watts x $.50 that could be a return of $2,500. If you earn an estimated monthly savings of $150 every month from net metering, $150 x 12 months can save you $1,800 a year.

If you add your savings together, you’ll save $7,900 on your solar energy system.

What to Expect in the Future for Solar Incentives

As solar technology advances and policies continue to change, there will likely be more focus on performance-based or SREC options to build a store of excess solar energy. This can improve the value and reliability of solar energy systems. Slowly but surely, this can solidify the viability of solar energy in the public consciousness, and become a competitive alternative to fossil fuels.

This snowball effect can lead to even more incentives and rebates for solar energy systems, making it an even more attractive investment. Additionally, with the increasing urgency of addressing climate change, governments may increase subsidies and tax breaks for renewable energy sources such as solar.

Interested in making the switch to solar energy, but don’t know where to start? Schedule your FREE solar estimate with us today!