Making the transition to solar energy is an expensive venture, but the price has steadily dropped over the past decade. If you live in California, you may have even more access to savings. The Golden State has drastically increased its number of solar tax credits over the last few years.
This guide breaks down the solar tax credits currently available to California homeowners so you can cut down on costs for your solar energy system. To find the best solar company for your switch to renewable energy, read the This Old House Reviews Team’s guide.
California Solar Tax Credits, Incentives, and Rebates
California offers a selection of credits and incentives through state-level legislation and individual utility companies. Read through California’s solar tax credits below to check your eligibility.
California Solar Incentives
In addition to the incentives above, you can enroll in a local net-metering (sometimes called net energy metering, or NEM) program. Most solar power systems generate more energy than a home uses. Net-metering programs allow you to feed this excess energy back into your local power grid.
Not only does this lower the demand for grid-supplied electricity with clean energy in your neighborhood, it also allows you to maximize your savings. When you sell your surplus power back to a utility company, you receive solar renewable energy credits (SRECs) that can be applied to your future energy bills.
California currently offers statewide net-metering incentives for homeowners with solar panel systems. However, the exact credit value varies based on your utility company and power output.
Federal Solar Tax Credit
Another savings opportunity California residents can take advantage of is the federal solar tax credit, or the Investment Tax Credit (ITC). This credit gives you a 26% deduction on your federal taxes for the cost of installing a solar panel system. The only conditions are that you must own the system and install it during a qualifying tax year. Unfortunately, you can’t use the Solar Investment Tax Credit if you’re leasing your solar power system or are in a power purchase agreement (PPA).
Remember that the ITC is a tax credit and not a tax refund. The difference is that a tax refund is paid out to the taxpayer, while a tax credit reduces the amount of taxes you owe. If your annual taxes are less than the ITC, the IRS won’t refund you. Instead, the deduction will roll over to the next tax year and can be applied for up to five years until exhausted.
If you live in California, we encourage you to look further into these incentives to see which ones you qualify for. We also recommend checking which of your local utility providers offer net-metering for your home’s address.
If you’re just starting your solar journey, we suggest using our tool below to see what reputable solar installation companies service your address. These companies can also help you complete the paperwork to receive the California tax incentives discussed in this article.
Frequently Asked Questions
How many times can you claim the solar tax credit?
You can only claim a solar tax credit once when you first install your system. However, some tax credits roll over to the next year if the taxes you owed were less than the credit.
How long do solar panels take to pay for themselves?
The time it takes for solar panels to pay for themselves varies according to the amount of energy your system produces and how much tax incentives and rebates lower your initial cost. On average, solar panels take nine to 12 years to reach a payback period.
Does California have a free solar program?
California does not have a free solar installation program. No state currently has such a program. Instead, California offers various tax incentives and rebates to install solar panels. This makes going solar more affordable than in some other states, where the up-front cost remains higher.
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