How Homeowners Benefit From Federal and State Tax Credits, Solar Rebates, and Tax Exemptions

The world is becoming increasingly aware of the need for sustainable and renewable energy sources. In this quest for a greener future, solar power has emerged as one of the most promising solutions. Besides being environmentally friendly, solar energy can also lead to substantial financial savings for homeowners. Thanks to a range of solar incentives, including federal and state tax credits, solar rebates, and sales and property tax exemptions, homeowners now have even more reasons to invest in solar panels for their homes. In this blog, we will explore the benefits that these incentives offer and how homeowners can take advantage of them.

FEDERAL TAX CREDIT FOR SOLAR PHOTOVOLTAICS:

President Biden signed the Inflation Reduction Act into law in 2022, the act accomplishes (amongst many other things) the expansion of the Federal Tax Credit for Solar Photovoltaics, also known as the Investment Tax Credit (ITC). This credit can be claimed on federal income taxes for a percentage of the cost of a solar photovoltaic (PV) system. There are two big changes for Americans who install rooftop solar:

• The ITC increased in amount and its timeline has been extended: By installing a PV system between 2022 and 2032, you’ll receive a 30% tax credit. That will decrease to 26% for systems installed in 2033, and to 22% for systems installed in 2034. If you already installed a system in 2022, your tax credit has increased from 22% to 30%.

• Equipment expenses included in the ITC have expanded: Energy storage devices that have a capacity rating of 3kW (kilowatt) hours or greater are included. Consider pairing stand-alone storage with solar.

These benefits will cut the cost of installing rooftop solar for an average system on a home by 30%, and unlock additional savings on electricity bills for families over the lifetime of the system. Combine these tax incentives with use of zero dealer fee financing and savings for the average homeowner can reach nearly $20,000!

STATE TAX CREDITS AND REBATES:

In addition to federal incentives, many states offer their own tax credits and rebates for solar installations. These incentives vary by state, and the amount of financial assistance can differ significantly. Some states offer direct cash rebates that reduce the upfront costs of installing solar panels, while others provide tax credits that can be deducted from state income taxes. It's crucial for homeowners to research and understand the incentives available in their respective states. State energy offices or local solar installation companies can provide guidance and detailed information about the specific incentives available in a particular area. Read about state tax credits and rebates available in Florida here.

SOLAR REBATES:

Apart from tax credits, solar rebates can further enhance the financial benefits of going solar. Rebate programs, often offered by utility companies, provide cash incentives to homeowners who install solar systems. These programs aim to encourage homeowners to adopt solar energy, reduce strain on the grid, and promote renewable energy generation. Rebates can help offset the upfront costs of installing solar panels, making the investment more affordable and appealing to homeowners. Like state incentives, solar rebate programs vary by location, so homeowners should explore the offerings from their local utility providers or renewable energy organizations. Read more about Florida specific rebates here, and act quickly, many funds have already been exhausted for 2023.

SALES AND PROPERTY TAX EXEMPTIONS:

In many states, solar panels are exempt from sales tax, reducing the overall cost of purchasing and installing a solar system. This exemption can translate into substantial savings, as sales tax rates can range from a few to several percentage points. Additionally, some states also offer property tax exemptions for solar installations. In the case of Florida, both exemptions apply. These exemptions protect homeowners from increased property tax assessments resulting from the addition of solar panels. By excluding solar systems from property tax calculations, homeowners can enjoy the benefits of solar energy without incurring higher property tax bills.

CALCULATE YOUR FEDERAL SOLAR TAX CREDIT:

Figuring out your federal solar tax credit is a breeze! Simply take the total amount you spent to install your new solar system and multiply it by 0.3. That's because the current solar tax credit rate is 30%.

For example, let's say your shiny new solar panels cost you $18,000 total. In that case, you'd multiply $18,000 by 0.3. That gives you $6,000 as your federal tax credit amount!

Now, what if you already owe $16,000 in federal taxes when you claim the credit? No problem! That $6,000 credit will lower what you owe to $10,000. And if you only owe $4,000 in federal tax, your tax bill goes down to $0 and you've got $2,000 left over. Here's the important part - that leftover credit can be used to reduce what you'll owe in taxes next year!

However, if you don't owe any federal tax, you likely won't get the tax credit. Consult a tax pro to understand your specific situation.

CONCLUSION:

Solar incentives, including federal and state tax credits, solar rebates, and sales and property tax exemptions, significantly enhance the financial appeal of going solar for homeowners. These incentives not only promote the adoption of renewable energy but also offer an opportunity for homeowners to reduce their carbon footprint and lower their energy costs. It is important for homeowners to stay updated on the latest regulations and incentives available in their region, as they can play a crucial role in maximizing the financial benefits of solar power. By harnessing the power of solar incentives, homeowners can contribute to a sustainable future while reaping the rewards of renewable energy on both their wallets and the environment.