As the US continues to work towards building a more sustainable future, states nationwide are offering tax credits and other financial incentives for those utilizing solar energy. Solar tax credits encourage residents and businesses to realize solar power’s environmental benefits while providing significant cost savings. Learn more about how solar tax credits can benefit you, your family, and your business directly.
The Benefits of Solar Tax Credits and Solar Energy
Financial Incentive
Solar tax credits offer a financial incentive to invest in solar energy systems, allowing taxpayers to subtract a percentage of the cost of installing solar PV systems from their taxes.
Cost Reduction
The tax credits help reduce the upfront cost of installing solar energy systems, making them more accessible to homeowners and businesses.
Energy Independence
By encouraging the adoption of green energy, solar tax credits contribute to reducing dependence on traditional fossil fuels, promoting energy independence and security.
Environmental Benefits
Solar power is a renewable and clean energy source, producing electricity without emitting greenhouse gases or other pollutants that contribute to climate change and air pollution.
Job Creation
The growth of the solar industry fueled by tax credits creates jobs in manufacturing, installation, maintenance, and related sectors, contributing to national economic growth and stability.
Technology Development
Increased demand for solar energy systems encourages technological innovation and advancements, leading to more efficient and affordable solar technologies over time.
Increased Property Value
Installing solar panels increases real estate property value, making it more attractive to potential buyers and potentially resulting in higher property values.
Energy Savings
Solar energy systems generate electricity from sunlight, allowing homeowners and businesses to reduce their reliance on grid electricity and potentially save money on energy bills over the long term.
Energy Resilience
Distributed solar energy systems, such as rooftop solar panels, can elevate the resilience of the electric grid by diversifying energy sources and reducing strain during peak demand periods or in times of unforeseen grid disruptions.
Long-Term Investment
Solar tax credits incentivize long-term investments in renewable energy infrastructure, contributing to a more sustainable energy future for future generations. Additionally, investing in solar energy now will enable you to reap the benefits of reduced energy bills for a lifetime.
Federal Tax Credits for Solar Power
Solar photovoltaic (PV) energy systems installed between 2020 and 2021 are qualified for a 26% federal tax credit. Solar PV systems installed between 2022 and 2032 are qualified for a 30% federal tax credit.
What Expenses Are Included?
The following expenses are included:
- Solar PV panels or PV cells (including those used to power an attic fan, but not the fan itself)
- Contractor labor costs for onsite preparation, assembly, or original installation, including permitting fees, inspection costs, and developer fees
- Balance-of-system equipment, including wiring, inverters, and mounting equipment
- Energy storage devices that have a capacity rating of 3 kilowatt-hours (kWh) or greater (for systems installed after December 31, 2022). If the storage is installed in a subsequent tax year to when the solar energy system is installed it is still eligible, however, the energy storage devices are still subject to the installation date requirements). Note: A private letter ruling may not be relied on as precedent by other taxpayers.
- Sales taxes on eligible expenses
Am I Eligible to Claim the Federal Solar Tax Credit?
You might be eligible for this tax credit if you meet the following criteria:
- 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 (i.e., you purchased it with cash or through financing but you are neither leasing the system nor 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.
- 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.
State Tax Credits for Solar Energy
Many states throughout the US offer solar tax credits, saving adaptors of this renewable energy even more money. As Harvest Power primarily provides solar energy solutions to New York and New Jersey residents, we will focus on solar tax credits for these two states.
New York State Tax Credits and Incentives for Solar Energy
New York State Sales Tax Exemption for Solar Energy Installations
All solar energy systems installed in New York are 100% exempt from New York State sales tax. Although the state sales tax is 4%, community members living in jurisdictions like Suffolk County on Long Island save 8.625%.
New York State Personal Tax Credit for Solar-Energy Systems
New York residents are eligible for a personal tax credit of 25% of the cost of their solar energy system. The maximum tax credit is $5,000.
Learn More: Solar Energy Savings for New York City Residents
The Rise of Solar Energy in New York State
New Jersey State Tax Incentives for Solar Energy
New Jersey State Sales Tax Exemption for Solar Energy Installations
All solar energy systems installed in New Jersey are 100% exempt from New Jersey State sales tax.
Other Solar Energy Incentives for New Jersey
New Jersey’s Successor Solar Incentive (SuSI) program provides significant financial incentives to solar generation facilities that distribute power to public utilities.
Learn More: The Benefits of Solar Energy for New Jersey Residents