Federal Solar Tax Credit
The Federal Solar Tax Credit, also known as the Investment Tax Credit (ITC), is one of the most significant government incentives for solar panel installation. Under this program, homeowners and businesses can claim a tax credit equal to a percentage of the total cost of their solar panel system installation. The current tax credit rate is 26% for systems installed in 2020 and 2021. However, the rate is scheduled to decrease to 22% in 2023 and will expire for residential systems after 2023. Businesses, on the other hand, will be able to claim a 10% tax credit starting in 2024. It's important to note that the Federal Solar Tax Credit is a dollar-for-dollar reduction in taxes owed rather than a deduction.
State and Local Incentive Programs
In addition to the Federal Solar Tax Credit, many states and local governments offer their own incentive programs to promote solar panel installation. These programs can take the form of cash rebates, tax credits, performance-based incentives, or property tax exemptions. Each state may have different programs and eligibility criteria, so it's important to research the specific incentives available in your area.
Net Metering
Net metering is another incentive that benefits solar panel owners. Net metering allows homeowners and businesses with solar panels to sell any excess electricity they generate back to the grid. By offsetting their electricity bills with the credits earned through net metering, solar panel owners can further reduce their energy costs. Not all states have mandatory net metering policies, so it's important to check if your state has such a program in place.
Renewable Portfolio Standards
Some states have implemented Renewable Portfolio Standards (RPS) that require utilities to obtain a certain percentage of their energy from renewable sources. This creates a demand for solar energy and incentivizes the installation of solar panels. As a result, utilities may offer solar-specific incentives or buy excess electricity from solar panel owners at a premium rate. Renewable Portfolio Standards vary by state, so it's important to learn about the specific requirements and incentives in your area.