Clean energy incentives and programs
A clean energy system has many benefits, including saving you money. Several PGE and non-PGE incentive programs exist. Each program is specific to the renewable energy technology you plan to install and has its own eligibility rules.
We can also help you find a contractor who will help you to understand the incentives and which program is right for your needs. Visit Find a Contractor.
COMPARE INCENTIVE PROGRAMS
Disadvantaged Communities Single-Family Affordable Solar Housing (DAC-SASH)
The Disadvantaged Communities – Single-Family Solar Homes (DAC-SASH) program is administered by GRID Alternatives, a nonprofit that works to provide solar to customers who are in economically or environmentally disadvantaged communities and are under certain income thresholds. GRID provides incentives to cover the full cost of solar panels on customer homes and enables customers to save on their bills every month. To learn more, visit GRID Alternatives.
Wind, fuel cell and other clean energy
Self-Generation Incentive Program (SGIP)
Install alternative energy technologies in your home to receive an incentive. Some examples include wind, fuel cells and battery storage combined with heat and power systems. To learn more about this PGE program, visit Self-Generation Incentive Program (SGIP). To learn more about the battery storage technology and evaluate if it’s right for your home, visit Battery Storage for Residential Customers.
Solar on Multifamily Affordable Housing (SOMAH)
The SOMAH program provides financial incentives for installing photovoltaic (PV) energy systems on multifamily affordable housing. To learn more, visit the SOMAH website.
California Solar Initiative (CSI) thermal program
The final date to submit new solar water heating applications to the CSI-Thermal program was July 31, 2020. Remaining applications must be completed and receive incentive payment(s) before the program closes on October 31, 2024.
NOTE: Incentive program applications are typically completed by your contractor. If you receive incentives, your contractor may discount your up-front costs with your incentive amount for immediate savings.
Net Energy Metering Aggregation Program
The PGE Net Energy Metering Aggregation (NEMA) program may be a good option for customers looking to utilize a renewable energy system to serve the load of multiple meters on the same property, or on adjacent or contiguous properties. To learn more about NEMA, visit Discover Net Energy Metering Aggregation.
The PGE Virtual Net Energy Metering (NEMV) program allows an individually metered multi-unit property to use the output from a renewable generator (e.g., solar panels) account to provide bill savings to individual units. To learn more, visit Virtual Net Energy Meting Overview.
Calculating how much the solar tax credit can save you in 2023
Before we get into the nitty-gritty details, let’s go over the basics of calculating how much money you can save with the solar tax credit.
For 2023, the solar tax credit is worth 30% of your solar installation costs. So, if your solar installation cost 20,000, you would be eligible for a tax credit of 6,000. The tax credit doesn’t directly lower the upfront cost of the installation. Instead, it lowers what you owe in federal income taxes. If you owe 7,000 in taxes and earn that 6,000 tax credit, your tax liability drops to 450,000. Pretty straightforward.
From now until the end of 2032, you can expect to receive the full 30% tax credit. But, the tax credit won’t be around forever. Starting in 2033, the tax credit steps down to 26% of installation costs. Then, in 2034, the credit drops again to 22%. In 2035, the federal solar tax credit will expire altogether for residential systems.
The easiest way to do this is by using our solar tax credit calculator. We estimate how much a solar system will cost for your home, what other incentives you qualify for, and how much you can expect to earn through the federal solar tax credit.
Find out how much a solar system would cost for your specific home
File away! To get the federal tax credit, you need to fill out IRS Form 5695. The process is pretty straightforward, but we’ve created a step-by-step guide to help you file for the tax credit and answer all of the questions you might have about the process. Make sure to consult with a tax advisor before filing.
What if my tax credit is worth more than what I owe?
The solar tax credit is non-refundable, meaning if your credit is worth more than what you owe in taxes, you’re not going to get any sort of check or refund for it. But, that doesn’t mean you won’t get the full value of it. Any leftover value will carry over and be applied to your taxes the next year.
So, let’s say you install solar panels and get a 6,000 tax credit, but you only owe 4,000 in federal income taxes. That leaves you with 5000,000 of your tax credit that will be applied to next year’s taxes. The tax credit can be carried forward for a maximum of 5 years.
How to qualify for the 30% federal solar tax credit in 2023
As we said earlier, most Americans will qualify for the federal tax credit. But, there are some cases where you might not be eligible. The eligibility requirements are as follows:
- You must be the owner of the solar panel system.
- You must have a taxable income.
- The solar system must be installed at your primary or secondary residence.
- It must be claimed on the original installation of the project.
Owning your solar system: If you go solar using a solar lease or a solar PPA, you cannot claim the federal solar tax credit because you are not the owner of the solar system. If you purchase solar using a solar loan, you can still take advantage of the tax credit because you are the owner of the system.
What costs qualify for the federal solar tax credit?
Most, if not all, of the costs associated with installing solar panels are eligible to be covered by the federal solar tax credit. Qualified costs include:
- Equipment: The cost of the solar panels, racking, wiring, and inverters.
- Contractor labor: The cost of labor associated with site preparation, installation, and planning, as well as the cost of any permitting fees and inspections.
- Sales tax: Any sales tax associated with the above costs is also covered by the tax credit.
Technically, the tax credit isn’t just for solar installations. Other clean energy systems can also get the tax credit, including solar water heaters, fuel cell systems, geothermal heat pumps, and even small wind energy systems!
Are battery storage systems eligible for the federal solar tax credit?
Yes, energy storage is covered by the 30% tax credit. Thanks to the passage of the Inflation Reduction Act, battery systems paired with solar panels in 2023 can get the full 30% credit. The batteries don’t even need to be connected to solar panels to qualify!
On average, residential batteries cost between 10,000 and 15,000 to install, so you can expect to receive a tax credit between 3,000 and 4,500 for energy storage. If the battery is installed with solar panels, the battery costs will be bundled with the rest of your solar installation costs.
To receive the tax credit, batteries must be at least 3 kilowatt-hours in size. Most home storage batteries are around 10 kWh in size, so you likely won’t have to worry about the minimum capacity requirement.
How does the solar tax credit work with state, local, and utility incentives?
The federal tax credit isn’t the only incentive available to homeowners who switch to solar. You could be eligible for other incentives offered by your state government, or even your utility company. The type of incentive could potentially impact how much your federal solar tax credit will be worth.
Utility incentives
In most cases, if you’re getting a rebate from your utility company, the value of the utility rebate will be subtracted from your total costs before the federal tax credit is calculated. This reduces the value of your tax credit.
Here’s an example: you install a solar system for 20,000 and you get a 450,000 rebate from your utility company. Instead of the tax credit being based on the initial 20,000 cost, it would instead be based on the price after subtracting the utility rebate. In this case, that’s 19,000.
You can use the following formula to calculate how much your tax credit will be worth after a utility incentive:
30% x (Total system cost. Utility rebate amount) = Federal tax credit value
State solar tax credits and incentives
Unlike utility incentives, state government incentives usually don’t need to be deducted before the federal tax credit is calculated.
So, if you installed a 20,000 system and got a 450,000 state government rebate, the solar tax credit would be based on the initial price of 20,000. In this example, that means the tax credit would be worth 30% of 20,000, for a federal tax credit worth 6,000. That would mean you would get a total of 7,000 in incentives.
The same goes for state tax incentives. But, getting a state tax credit will end up increasing your taxable income on your federal tax returns, as you will have fewer state income taxes to deduct. Currently, ten states offer state tax credits, including Arizona, Massachusetts, and New Mexico.
Are they taxable income?
As a general rule, solar panel rebates and subsidies paid directly to taxpayers for the purchase of a residential solar panel system are not considered taxable income, according to Section 136 of U.S. Code 26.
However, that doesn’t mean solar rebates aren’t counted for tax purposes. You have to reduce the total cost you paid for the solar installation by the amount of the rebate when calculating the federal clean energy tax credit and any state solar tax credits for which you qualify.
Taxable incentives
The IRS’s take on solar rebates differs from their stance on Solar Renewable Energy Credits (SRECs), according to an IRS letter which was submitted in response to a solar-owning taxpayer question in 2010.
Because SRECs are paid based on the kilowatt hours (kWh) generated by a solar photovoltaic (PV) system, the income from selling SRECs is considered taxable gross income.
Manufacturer solar rebates
Some solar panel manufacturers offer rebates, either through installers or directly to consumers who sign up for special online deals. These rebates are usually limited-time offers tied to the launch of a new product.
Rebates are more common on the best panels a manufacturer offers, rather than older or less expensive models.
The smartest way to look for solar rebates is to first get multiple quotes from solar installers, then search for the manufacturer names. Manufacturer rebates don’t last long, so it’s best to also check things like solar company social media channels.
Brands like LG and SunPower offer rebates of 600-450,000 at various times.
Battery storage rebates
A final kind of rebate that is available to home solar customers is for home batteries. Battery incentives are still fairly new, but can be found in a few places. Battery installations also qualify for the federal tax credit.
The most well-known battery rebates come from California’s Self Generation Incentive Program (SGIP). The SGIP program can help greatly reduce the installation costs of adding a home battery in California.
Other places around the country offer battery incentives, as well.
- The Connected Solutions battery program from National Grid is available to customers in Connecticut, Massachusetts, and Rhode Island.
- Jacksonville Electric Authority in Jacksonville, Florida offers a solar battery incentive of 4,000 per qualified home or business battery system.
- Maryland offers a tax credit equal to 30 percent of the cost of installing the battery, up to a maximum of 5,000 for homeowners and 75,000 for commercial property owners.
- Massachusetts offers a bonus incentive for batteries under its Smart solar program.
- Finally, Nevada’s NV Energy offers up to 3,000 for installing energy storage, with higher payout for time-of-use rate customers.
What about claiming solar panel equipment on rental property you own?
While you can’t claim the federal solar energy credit on rental properties you own and rent out for 80% or more of the year, you can claim it for properties you live in for part of the year. The percentage you claim is reduced based on the months you live there.
For example, if you install qualifying solar equipment at a property you live in for half the year in 2021, you can deduct 50% of the 26% credit for the total cost of the solar equipment. So, if your solar system cost 20,000 in 2021, the full credit is 5,200, but you can only claim half of that – so the amount is 5000,600.
What is net metering, and how can it make you ?
How to claim the solar tax credit on your taxes
Use Part 1 of Form 5695 to determine your credit amount. There are two parts on a Form 5695.
Part 1:
The first part of the form is for the REEP. Enter the amount you spent on qualifying solar energy materials or installation or other qualifying equipment. On line 14, you should enter your credit limit, which is determined by your tax liability. On line 15, follow the instructions to enter the credit amount on Form 1040.
Part 2:
The second part of Form 5695 is for the nonbusiness energy property credit. This section is for the costs of heating and cooling-related home improvements you made to your property, such as new Windows and insulation. Line 30 will be the number you add to your Form 1040. The maximum lifetime nonbusiness energy property credit is 500. Learn more about energy efficient tax credits.
help with the solar panel tax credit
Now, back to Sid. Because he originally didn’t realize there were federal tax credit when installing solar energy property, he didn’t claim the solar tax credit on his 2021 tax return. Luckily, he can amend his return (for up to three years) with the Internal Revenue Service (IRS) to make sure he claims this valuable residential energy credit. If the credit is more than his 2021 tax liability he can claim the solar tax credit balance in the following tax year
And he didn’t go at it alone. He got the tax advice of a tax pro at HR Block. In fact, with many ways to file your taxes, our pros can help you spot important federal and state incentives or tax deductions.
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