Understanding Solar Tax Rebates and Incentives

In the previous section, we mentioned typical costs before and after incentives are applied. This distinction is essential.

Your total cost of solar installation may vary significantly depending on which solar tax credits and incentives are available in your area. It’s important to understand the different ways you can save in order to get the best solar system installation price and maximize your long-term savings.

By far the most important tax credit is the Investment Tax Credit (ITC), commonly known as the federal solar tax credit. This credit is offered by the federal government and it’s available to anyone who installs a residential or commercial solar energy system. The ITC provides a federal income tax credit equal to 30 percent of the price of your system.

Some states also make tax credits available to help offset the cost of solar installation. Similar to the federal ITC, state-level credits reduce your state tax burden when you purchase and install a solar panel system. Credit availability and amount of savings vary from state to state. In some cases, you may also be eligible to receive cash incentives. These rebates are typically offered for a short period of time by state or local governments, utility companies or other organizations in order to encourage the adoption of solar energy.

Exploring Your Solar Financing Options

The average cost of solar panels depends partly on the financing option you choose. How you finance your system is an important decision. It will determine how and when you pay for your solar energy, who will own the system and whether or not you’re eligible for tax credits and incentives to help defray the cost.

There are four main options available:

• solar loans: A solar loans are much the same as any other application-specific loan. A bank, credit union or solar energy company provides a loan for the cost of the system and you repay the balance in monthly installments. It requires no money down and allows you to take advantage of any available credits and incentives. You will own the system and be responsible for all maintenance and repairs.
• solar leases: There’s no down payment, but you’ll pay a monthly fee for the system. This fee typically increases once per year by a set percentage rate. Since you don’t own the system yourself, you aren’t eligible for rebates and incentives when you opt for a lease.
• solar power purchase agreements (PPAs): Solar power purchase agreements, also known as solar PPAs, are very similar to solar leases. The difference is that a PPA allows you to pay only for the energy your solar panels produce. This means you have a variable monthly payment rather than the set fees that come with leases. Like a lease, a PPA doesn’t grant ownership of the system and doesn’t allow you to take advantage of incentives.
• solar cash purchase:  A solar cash purchase is the most straightforward financing option available. You simply pay for the solar panel installation cost outright. This gives you immediate ownership of the system, allows you to qualify for all available incentives and eliminates the need for ongoing monthly payments. However, it does require a significant cash outlay.

Now that you have a better understanding of the factors involved, it’s time to answer the important questions.

How much does solar PV cost?

How much can you expect to save?

Is solar power the right option for your home?

The best way to find answers to all of these questions is to use a solar cost calculator. Solar panel calculators consider a variety of details in order to show you how much you can expect to save, how much you’ll pay up-front and what your monthly payments will be for each available financing option.

There are three types of solar panel calculators available.

1. One option is a calculator from a private company. These can be good sources, but be wary of any private calculator that requests personal information besides your address.
2. Another option is a calculator from a utility company. However, these calculators aren’t always the most accurate and are often limited only to current customers.
3. Finally, there are solar power calculators available through the National Renewable Energy Laboratory (NREL) and other government agencies. These are typically accurate, updated and reliable options.