Here’s How to Take Advantage of the Federal Government's Solar Tax Credits, Solar Rebates, and Solar Incentives

For years, in the U.S., solar energy was nearly impossible to get your hands on.

Whether it was a lack of solar companies in your area or high out-of-pocket solar costs, the government is paving the way to a more foreseeable renewable future by implementing an updated climate bill, solar tax credits, and offering government solar incentives. Solar is the power source of the future, and the government has made it easier than ever to jump on the solar bandwagon. Let's discuss how these bills and federal programs can work in your favor, what they do and how to see if you qualify.

How Has the Government's Climate Bill Increased Solar Energy Awareness, and What Does It Do?

Energy Security and Climate Change Investments in the Inflation Reduction Act of 2022: "This bill will provide a range of incentives to consumers to relieve the high costs of energy and decrease utility bills. This includes direct consumer incentives to buy energy efficient and electric appliances, clean vehicles, and rooftop-solar, and invest in home energy efficiency, with a significant portion of the funding going to lower-income households and disadvantaged communities."

What Are the Benefits of this Climate Bill?

This climate bill offers ten years of consumer tax credits to make homes energy efficient and run using clean energy, making heat pumps, rooftop solar, electric HVAC, and water heaters more affordable.

This climate bill offers $9 billion in consumer home energy rebate programs focused on low-income consumers to electrify home appliances and for energy-efficient retrofits.

This climate bill offers a $4,000 consumer tax credit for lower/middle-income individuals to buy used-clean vehicles and a $7,500 tax credit to purchase new clean cars.

And lastly, this climate bill offers a $1 billion grant program to make affordable housing more energy efficient.

Now that you have a better understanding of the new climate bill. Let's jump into the Federal Solar Tax Credit.

See if you qualify for government solar incentives.

What Is the Federal Government Solar Tax Credit?

The federal residential solar energy credit is a tax credit that can be claimed on federal income taxes for a percentage of the cost of a solar P.V. system paid for by the taxpayer. The solar system must be installed during the tax year.

Here's How to Determine Whether You're Eligible for the Solar Tax Credit

Solar installation date: Your solar P.V. system installation date must fall between January 1, 2017, and December 31, 2034. (Instillations must be new, not outdated, refurbished, or recycled solar panels.)

Location of the solar panels: The solar P.V. system is on your property in the United States or used for an off-site community project.

You've invested in new solar: The solar P.V. system is new or used for the first time. The credit can only be claimed on the "original installation" of the solar equipment.

You own your solar: Unfortunately, you can't claim this credit if you're currently leasing or financing your solar through a Power Purchase Agreement (PPA) Agreement. NOTE: What is a PPA?: A solar Power Purchase Agreement (PPA) is a financial agreement where a developer arranges the design, permitting, financing, and installation of a solar energy system on a customer's property at little to no cost.

Your income must be taxable.

See if you qualify for Solar Tax Credits.

Here's a Look at Everything the Federal Solar Tax Credit Will Cover

• Solar Panels: The Federal Solar Tax Credit will cover the cost of solar P.V. panels or P.V. solar cells.
• Equipment Needed: The Federal Solar Tax Credit will cover the cost of racking, inverters, wiring, mounting devices, and other solar system components.
• Batteries: The Federal Solar Tax Credit will cover the cost of solar batteries and storage devices purchased in a subsequent tax year when the solar energy system is installed.
• Labor and Contract Work: The Federal Solar Tax Credit will cover all costs relating to labor for preparation, solar installation, planning, and fees (permits/developer fees) or inspections.
• Sales tax: The Federal Solar Tax Credit will also cover sales tax.

Since you have a better idea of the federal solar tax credit qualifications, here's more information on how to claim the Federal Solar Tax Credit:

1. Download the IRS Form 5695 as part of your tax return.
2. Locate Part I of the tax form, and calculate the credit. You file your solar system as "qualified solar electric property costs." Then, on line 1, enter your project's total costs as written in your solar contract.
3. Complete the calculations on lines 6a and 6b.
4. Locate line 14 and calculate any tax liability limitations using the IRS's Residential Energy Efficient Property Credit Limit Worksheet.
5. Lastly, complete the calculations on lines 15 and 16. Be sure to enter the exact figure from line 15 on your Schedule 3 (Form 1040), line 5.

Still, trying to figure out if you've done it correctly? Reach out to a tax expert and your current solar provider to ensure you're claiming the ITC correctly.

Now, we're going to jump into Government Solar Incentives. These incentives will vary by state so they may differ for everyone looking into qualifications for incentives.

What Types of Solar Incentives Are Available?

There are many solar incentives, but they can vary depending on location. Here's a quick look at the incentives currently available.

Federal tax credits
A portion of your project costs can be deducted from your tax obligation, reducing your taxes when you file. In addition to the federal ITC available to all Americans, some states have their own solar tax credit.

Solar rebates
A partial refund will be returned to the owner after they buy their solar system. This usually involves purchasing from a solar vendor, then filing for a rebate with the utility company, local government, or other organization running the rebate program.

Low-interest solar loans
This qualifies for solar loans with lower rates for renewable energy projects. These loans are offered at a reduced interest rate to encourage people to invest in energy-efficient home improvements.

Property tax relief
In qualifying states, solar systems are exempt from property taxes, and the home is assessed as if it did not have a solar power system installed, reducing the homeowner's tax burden.

SRECs (Solar Renewable Energy Certificates)
In qualifying states, homeowners receive credits for the solar power they generate (SRECs-Solar Renewable Energy Certificates). Homeowners can sell these credits to utility companies. SRECs can average between $5 to $450, depending on supply and demand.

Solar Performance-Based Incentives (PBIs)
A performance-based incentive (PBI) is an incentive that awards a flat-rate payout for every kWh of solar energy generated. Net metering governs PBIs: Net metering works by selling any surplus power generated by your solar panels to the utility operator in exchange for credits.

Solar incentives come in many shapes and sizes. If you or someone you know doesn't qualify for the incentives or tax credits above, low-income incentives are available, varying by state. Here's some information:

Low-income Solar Incentives

Low-income solar incentives will vary by state. As of 2022, only a few states offer low-income solar incentives. Here is the list of states that qualify for low-income solar incentives, grants, and rebates.

California: California Single Family Affordable Homes Program (SASH)
California Disadvantaged Communities Single Family Solar Homes Program (DAC-SASH)

Colorado: Colorado Rooftop Low-Income Program

Connecticut: Connecticut Green Bank Low-Income Residential Solar Incentive Program

Hawaii: Hawaii Green Energy Market Securitization On-Bill Repayment Program (GEM)

Illinois: Illinois Solar for All Program

Massachusetts: Massachusetts Solar Renewable Target Program (SMART)
Massachusetts Solar Loan Support Program

Minnesota: Minnesota Xcel Energy's Solar Rewards Program

New York: New York Affordable Solar Program

Washington, D.C.: Washington D.C. Solar for All Program

Key Takeaways:

• Solar energy is now more affordable due to the Climate Bill.
• There are many different solar tax credits, solar rebates, and solar incentives.
• Interested in solar energy? Reach out to energybillcruncher and see how many ways you could save on solar installation in your state.