April 07, 2023
US Solar Incentives - A Guide to the Financial Benefits of Solar Energy Adoption
The goal of achieving a renewable energy future has been at the forefront for every nation in the past few decades. Power is an essential part of our lives – keeping our cities running, our homes warm, and our technology evolving. For too long, people have looked towards fossil fuels for the answer to the energy crisis and now our planet is suffering the brunt of those choices.
According to the UN, an average of US$ 423 billion of public funds is spent every year on fossil fuel subsidies. Despite international commitments, financing towards fossil fuels is not being phased out but is increasing. This needs to change and governments are slowly beginning to see the effects of their actions.
Renewable energy solutions have always been an option yet people remain skeptical of switching to clean energy. This is why governments began to offer incentives that benefit homeowners and businesses that choose to implement renewable energy solutions.
What Are US Solar Incentives?
The US government has set up several solar incentives to encourage people to take part in activities that will benefit society. In essence, these are a set of programs created to give homeowners and businesses a financial incentive to install solar panels or other renewable energy equipment in their homes or for their businesses.
While a solar incentive offers a certain benefit or payment for doing a specific action, a rebate allows you to get a refund on the amount spent achieving that action. Federal solar tax credits - officially called the Investment Tax Credit or ITC - allow homeowners to claim from their income taxes 30% of the cost of a solar energy system installed with no maximum. This tax credit is due to expire in 2035 unless renewed by Congress.
It is crucial to be aware of these solar tax credits and rebates in your area to fully benefit from them. Being educated about the financial incentive to switch to clean energy also pushes those around you to make the change and spread the word.
The Federal Tax Credit - or ITC - is a tax credit available to homeowners and businesses that install solar PV energy systems. Originally enacted in 2006, it has been extended several times and allows taxpayers to deduct a portion of the cost of installing a solar energy system from their federal taxes.
The Office of Energy Efficiency and Renewable Energy has provided a comprehensive guide to making use of the solar federal tax credit. According to the department, solar PV systems installed in 2020 and 2021 are eligible for a 26% tax credit. An extension was passed in August 2022 by Congress which raised it to 30% for the installation of PV equipment between 2022-2032.
Systems that have been installed on or before December 31 of 2019 were also eligible for a 30% tax credit. The tax credit decreases to 26% for systems installed in 2033 and to 22% for systems installed in 2034. The solar tax credit will expire in 2035 unless Congress decides to renew it.
Requirements for Investment Tax Credit
To be eligible for the federal solar tax credit, there are a few requirements that have to be met:
- Your solar PV system was installed between January 1, 2017, and December 31, 2034.
- The solar PV system is located at a residence of yours in the United States.
- Either you own the solar PV system - you purchased it with cash or through financing but you are neither leasing the system nor paying a solar company to purchase the electricity generated by the system.
Or you purchased an interest in an off-site community solar project, if the electricity generated is credited against, and does not exceed your home’s electricity consumption.
Note: the IRS issued a statement allowing a particular taxpayer to claim a tax credit for purchasing an interest in an off-site community solar project. However, this document, known as a private letter ruling or PLR, may not be relied on as a precedent by other taxpayers. Also, you would not qualify if you only purchased electricity from a community solar project.
- The solar PV system is new or being used for the first time. The credit can only be claimed on the “original installation” of the solar equipment.
How to Claim Your Investment Tax Credit
You can only claim the tax credit once for your installation, so first seek professional financial advice beforehand to ensure that you are eligible for the tax credit and the correct procedures to follow. Thereafter, complete and attach IRS Form 5695 to your federal tax return (Form 1040 or Form 1040NR). Forbes Home drew up the set of instructions to follow which should include:
- Filing IRS Form 5695 as part of your tax return
- Calculating the credit of the tax form in Part 1
- Filing your solar system as “qualified solar electric property costs”
- Entering your project’s total costs as written in your solar contract on line 1
- Completing the calculations on lines 6a and 6b
- On line 14, calculate any tax liability limitations using the IRS’s Residential Energy Efficient Property Credit Limit Worksheet
- Complete the calculations on lines 15 and 16
- On line 5, enter the exact figure from line 15 on your Schedule 3 (Form 1040)
You can also carry over any unused amount remaining on your tax credit that you could not claim in a single tax year.
USDA’s Rural Energy for America Program (REAP)
The Rural Energy for America Program was set up by the US Department of Agriculture to provide guaranteed loan financing and grant funding to agricultural producers and rural small businesses for renewable energy systems or to make energy efficiency improvements. Agricultural producers can also apply for new energy-efficient equipment and new system loans for agricultural production and processing.
Who Is Eligible?
- Small businesses in communities with populations of 50,000 or less and that are located in the prescribed areas set.
- Agricultural producers who earn at least 50% of gross income from farm operations.
- These agricultural producers and small businesses must have NO outstanding delinquent federal taxes, debt, judgment, or debarment.
How To Apply for REAP Funding
Applications are accepted year-round. Reach out to Rural State Energy Coordinator before attempting to fill out any forms. To complete an application for a grant from this program, you must be pre-registered with the System for Award Management (SAM) and also have a Unique Entity ID. Access all the relevant forms needed on this page and find more information.
While the Federal Tax Credit is beneficial, several states offer other forms of incentives to push people toward renewable energy. Forbes Home ranked the top best and worst states for solar energy in 2023. Some of the examples of these incentives on a state level are as follows:
State Tax Credits
Some states in the US offer tax credits that are similar to the ones from the federal government. These incentives can become a huge financial benefit when added to the ITC. There are only 10 states at the moment that provide solar tax credits with each state varying in the amount given.
Some examples of state-set tax credits include:
- South Carolina offers a solar tax credit that allows you to claim 25% of your total solar costs. The South Carolina Solar Energy Tax Credit is one of the largest state tax credits for solar in the country. The solar tax credit caps at a maximum of US$ 3,500 each year and can carry over for 10 years.
- New Mexico provides a solar tax credit of up to 10% for solar installations by homeowners, businesses, and farms. This credit was passed in 2020 and can reduce your state tax payments up to US$ 6,000.
- Massachusetts also has a state tax credit called the Residential Renewable Energy Income Tax Credit that offers up to 15% of your system costs or US$ 1,000 - whichever is less.
State Rebates and Grants
Solar rebates focus on giving homeowners and low-income solar contractors money directly to implement renewable energy solutions.
Some examples of rebate and grant programs offered are:
- California’s Disadvantaged Communities – Single-Family Solar Homes (DAC-SASH) provides qualifying low-income homeowners with up-front rebates for installing solar electric systems. The Californian state program provides $8.5 million in incentives annually to help homeowners in disadvantaged communities go solar after they meet a set of requirements. Learn more about the California solar incentives and rebates offered.
- New Hampshire has the Residential Renewable Electric Generation Rebate Program. The rebate program is for qualifying residents of the state who install photovoltaic (PV) or wind turbine electrical generation systems. It offers rebate levels that are $.20 per watt of panel-rated power up to US$ 1,000 or 30% of the total facility cost - whichever is less.
- The state of Oregon also has its own Oregon Solar + Storage Rebate Program offered by the Oregon Department of Energy (ODOE) for customers who install panels or panels coupled with solar batteries. The rebate for panels is up to US$ 5,000 and the additional rebate for adding a battery to the system is up to US$ 2,500.42.
Net Metering and Feed-In Tariffs
Net metering allows you to earn credits from your utility company for the electricity your solar panels produce. The excess energy created from your solar panels is fed back into the local grid and your utility company gives you credits that you can use against your monthly electric bill.
Some examples of state-specific net metering policies include:
- The South Carolina Public Service Commission mandates net metering for all power providers with over 100,000 customers. You can receive a credit if you produce more energy than you consume on systems 20 kW or less. Credits vary between utility providers and it’s best to research the utility provider in your community.
- Illinois mandated that net metering be offered to all solar customers - including those that are serviced by major providers. The policy also sets the net metering credit rate at the full retail value per kWh. This means that every kWh you send to the grid will offset one kWh you pull from the grid during times of under-production.
- The Washington Utilities & Transportation Commission (WUTC) ensures that net metering is offered to all residential solar customers. The credit rate is not set by the WUTC so your rates may vary based on your provider.
How To Maximize the Benefit of Solar Incentives with Mango Power E
It’s important to optimize the solar incentives available to you. Follow these steps to ensure that you get the best out of the options available to you:
- Research whichever available solar incentives are in your area. Most people are completely unaware of programs that will actively reward them for choosing renewable energy solutions.
- Work with a knowledgeable installer. Ensure that the solar panels and equipment you use come from a company that is fully aware of the potential financial benefits of installing their products.
- Keep track of deadlines and application processes. These programs all have very strict cut-off dates for applications and processes, make sure that you’re aware of all of them and keep yourself updated with your local state legislature.
- Make use of the Mango Power E solar generator. With impressive energy efficiency upgrades, the Mango Power E home backup and portable power station provides a massive 3.5 kWh capacity with a maximum output of 3000. Easily expand the Mango Power E up to a 14kWh capacity for heavy-duty usage. The ultra-durable CATL LFP battery cells make the device ideal for home backup energy, emergency use, RVs, and just regular off-grid applications.
Alternatively, the Mango Power Union is also a great way to integrate solar energy into your home. It comes with 2 built-in PV inverters that support 2 times the MPPT input (12V-250V). You can connect the Mango Power Union with both roof solar systems and portable solar panels. Mango Power allows you to use solar power exclusively with any device by simply choosing the backup power and economical modes on the Mango Power App.
Choose Solar Power. Choose Mango Power.
Mango Power is a brand focused on innovative technology that will make your life easier. Almost every solar incentive, rebate, and solar tax provided statewide across the country are eligible with the use of the Mango Power product line.
While these incentives offer great financial benefits, the choice to move to renewable energy is quickly becoming a need. Appreciate the full range of benefits of solar energy solutions with Mango Power and build towards a better future for us all.
Sustainable energy is the only way to ensure that we are not actively destroying the planet we live on. António Guterres, the UN’s Secretary-General, said it best when he warned that “we must end the merciless, relentless, senseless war on nature.”
Choose to invest in Mango Power solar generators for a variety of benefits and to improve your home’s energy supply - ensuring a sustainable lifestyle for you and your loved ones today. Learn more at mangopower.com.