Solar Power Incentives
Although the price of solar panels has dropped significantly in the past decade, it remains a substantial investment for homeowners and businesses looking to reduce their electricity bills. The federal government, states, and local governments offer incentives to make solar more affordable. These incentives can be in the form of tax benefits, solar rebates, or performance-based incentives and can lower the cost of solar by anywhere from 26 to 50%! Many solar companies in AZ have different rates but they have to pay the same incentives. Before starting your solar business do check out the best solar in Nevada.
What are the Expenses Included?
These expenses are included in the price:
- An attic fan can be powered by solar PV panels or PV cells, but not the fan.
- Costs of labor for contractor preparation, assembly, or original installation. This includes inspection fees, permit fees, and developer fees.
- Balance-of-system equipment includes wiring, inverters, and mounting equipment
- The associated solar PV panels charge energy storage devices. However, storage devices can still be charged by them in the tax year following installation.
- Sales taxes for eligible expenses
Major Solar Rebates and Incentives
- Credits for investment tax
- State tax credits
- Cash rebates
- SRECs are solar renewable energy credits
- Performance-based initiatives
- Business Incentives
- Solar tax credit: Investment tax credit
- Solar tax credit: Step down
The federal investment credit (ITC), is the most powerful solar incentive. The ITC returns 26 percent of the amount you paid for solar to your taxes. A tax credit offsets the amount you would otherwise owe in taxes and replaces a deduction that reduces your taxable income. The federal ITC, which offsets your actual tax liability, is not a deduction that reduces your taxable income. It can even be returned to you as a refund.
Certain states, municipalities, or utility companies offer upfront rebates for solar panel systems. The solar rebates are typically only available for a brief period and then disappear after a certain number of solar panels have been installed in your local area. These solar rebates will typically reduce your system costs by 10% to 20%.
Certificates of solar renewable energy (SRECs).
Many states have adopted renewable portfolio standards that require utilities to generate or procure a certain percentage of their electricity using renewable resources. If your solar panels are located in these states, they will issue solar renewable energy certificates (SRECs), which show the amount of electricity your panels produce. Because each SREC represents your solar generation's environmental attributes, utilities will purchase your SRECs to ensure compliance with state-level requirements for renewable energy. Your SRECs may bring you hundreds, or even thousands of dollars more in annual income depending on your state's SREC market.
Another form of solar incentive is called the performance-based incentive, or PBI. It pays you per kilowatt-hour credit for the electricity produced by your system. PBI programs are different than SREC programs in that they pay for electricity generated. PBIs can't be sold in a market like SRECs. The incentive rates for the system are set at installation. PBIs can be used to complement or replace net metering policies.
Business incentives with solar energy: bonus and accelerated depreciation
If you are a business owner who wants to put solar on your roof, this incentive may be for you. Businesses can deduct the value of solar energy systems through accelerated amortization. This system reduces taxes and accelerates the return on investment. The cost recovery period for qualified solar energy equipment is five years. An additional 30 percent can be saved by using accelerated depreciation.