The installation of a solar power system can be a challenging process, particularly in regards to the financial side of things. It is a significant investment to add a solar power system to the home given that solar panels cost an average of around $16,000. However the upside to this is of course that over the long term a significant amount of money can be saved by a home solar power system.
There are a number of tax credits and rebates that can incentivize homeowners to make the move and start producing renewable energy. There are numerous benefits at the local, state and federal level in the United States that can earn home owners money back in the event they install an eligible solar power system.
What are tax credits?
Tax credits are a strong device that can help homeowners to cut down on their taxable income and have a strong impact on their annual tax bill. Tax credits can increase tax refunds or just reduce owed tax. With a Federal Solar Tax Credit, the installation of solar panels earns the homeowner a federal tax credit, meaning they will receive a credit that results in their income tax bill being lowered.
This tax credit was enacted back in 2006, helping the US solar industry to expand exponentially. Homeowners can qualify for this credit if solar panels are installed and generate electricity for a US home.
Other incentives
There are a number of states offering other incentives as well as the federal ITC to give homeowners even more reasons to install a solar power system. There are different incentives that are in place in every state, but a few of the most common include the likes of rebates, renewable energy certificates and additional tax credits.
Some states such as California, Minnesota, New York and Texas have a particularly high number of solar incentives. There can be significant variations in these incentives between states, and different solar financial incentives will be offered by different agencies.
State tax credits work similarly to the federal ITC but with state taxes. The amount will again be different depending on the state, and they usually do not have any effect on federal tax credits.
State government rebates
Upfront rebates for the installation of a solar power system are offered by a number of states. These are generally available while funds are available and thus for a limited time, so it is a good idea to do your research and get in before the time runs out. Solar costs can be reduced by anything from 10 to 20% by state government rebates.
Solar Renewable Energy Certificates
An SREC is another solar incentive offered at the state level. After a solar power system has been installed and registered with state authorities, the energy production of a system will be tracked and SRECs offered as a periodic benefit.
Further incentives include local utility rebates, subsidized loans and tax exemptions. The bottom line is that a combination of these credits and incentives saves homeowners money on their solar power installation and greatly reduces the overall cost of the system.
