What Rebates, Tax Credits, and Incentives Are Available for Solar Energy Systems?
Last updated in April 2016
Below are the tax credits and other incentives we could identify at the time of publication. Check www.dsireusa.org for an up-to-date list. Note that if you lease rather than buy a system, incentives usually go to the leasing company, not you.
Federal tax credit
Uncle Sam will let you deduct 30 percent of what you paid for panels, equipment, installation, and permits from your tax bill. The current credit is in place through 2019; in 2020, the credit declines to 26 percent; then 22 percent in 2021; from 2022 on, it stabilizes at 10 percent. For more details on how to compute the credit, see the IRS's Q&A on Tax Credits for Sections 25C and 25D.
When your solar energy system produces electricity you don’t use, it’s pushed onto the grid, and your utility pays you for it in the form of a credit against the electricity you’ll buy when you need more power than your panels can produce. Keep in mind, however, that over the course of a year few solar energy systems in this area produce more total electricity than needed by their houses.
- Rebates—Unfortunately, the rebate programs offered by utility companies are so oversubscribed that applicants often sit on waitlists for years. Only customers of DEMEC Member Utilities in Newark can cash in immediately—they’re eligible for a rebate of 33.3 percent of system and installation costs, up to a max of $7,500.
- Solar renewable energy certificates (SRECs)—You can collect incentives from certificates for installing a solar energy system in one of three ways. The Green Grant Delaware program pays $450 per kilowatt in system size in exchange for the rights to 20 years of your certificates. One certificate equals one megawatt hour. Currently that’s only about $20 per certificate (the market is between $40 and $50), but it’s a guaranteed lump sum upfront. Many consumers take this option. Solar users can also sell their own SRECs at the market price but must either handle the administrative hassles on their own or pay a commission to brokers. Finally, the Delaware SREC Program requires customers to sign a contract to sell SRECs at the market price for 10 years, then at $35 each for the next 10 years. Under the right circumstances, this adds up to more money than the Green Grant Delaware program, but it’s somewhat riskier, and, of course, it means customers have to hang around for 20 years.
New Jersey incentives:
- Rebates—Up to several thousand dollars, but they’re available only to consumers who build a new house following federal Energy Star standards.
- Solar Renewable Energy Certificates (SRECs)—Payments fluctuate, but utilities are currently paying between $180 and $240 per megawatt hour. They’re due to decline slowly, reaching $100 to $150 by 2028. Most consumers in New Jersey with solar energy systems hire brokers to handle the paperwork and administrative hassles. Your installer can help you set this up.
- Property tax exemption: Any increase in your home’s value as a result of installing solar panels is exempt from property taxes.
- Grants and low-interest loans—The state’s High Performance Buildings Program offers either grants or low-interest loans to homeowners and small businesses that install solar energy systems. The grants, which are more popular with consumers, equal 10 percent of the project’s cost.
- Solar Renewable Energy Certificates (SRECs): Pennsylvania calls them Solar Alternative Energy Credits, and consumers get one credit for every megawatt hour of electricity their system produces. Prices vary, but currently range from $20 to $55, depending on the utility.