When it comes to adopting solar power, the financial benefits go beyond just lowering your monthly energy bills. Across the United States, many states offer enticing local tax incentives to encourage homeowners and businesses to invest in renewable energy. These programs can significantly reduce the upfront cost of solar panels and battery storage systems, making clean energy more accessible and affordable.
Even better, these local tax credits can often be combined with the federal solar Investment Tax Credit (ITC), allowing you to stack your savings and maximize your return on investment. In this guide, we’ll break down the states with the most attractive local tax incentives, explain how they work, and share calculations to help you see the potential financial impact. Whether you’re considering solar for your home or business, understanding these programs is key to unlocking the full financial potential of renewable energy.
1. Arizona
- Tax Credit: Residential Solar Energy Tax Credit
- Details: 25% of the system cost, up to $1,000, applied against personal income tax.
2. Hawaii
- Tax Credit: Renewable Energy Technologies Income Tax Credit
- Details: 35% of the system cost, with caps of $5,000 per system for single-family homes.
3. Iowa
- Tax Credit: Solar Energy System Tax Credit
- Details: 15% of the federal tax credit amount, with a maximum of $5,000 for residential systems.
4. Louisiana
- Tax Credit: Residential Solar Energy System Tax Credit
- Details: 50% of the first $25,000 of the system cost, capped at $12,500.
5. Maryland
- Tax Credit: Residential Clean Energy Grant Program
- Details: $1,000 grants for solar photovoltaic (PV) systems.
6. Massachusetts
- Tax Credit: Residential Renewable Energy Income Tax Credit
- Details: 15% of the system cost, up to $1,000, applied against personal income tax.
- Rebate:
- Massachusetts SMART Program: Homeowners receive performance-based incentives for solar production over 10-20 years, with payments varying by system size and utility provider.
7. Montana
- Tax Credit: Residential Alternative Energy System Tax Credit
- Details: $500 per taxpayer ($1,000 for joint filers) for solar system installations.
8. New Mexico
- Tax Credit: Solar Market Development Tax Credit
- Details: 10% of the system cost, up to $6,000.
9. New York
- Tax Credit: Solar Energy System Equipment Credit
- Details: 25% of the system cost, up to $5,000, applied against personal income tax.
- Rebate:
- NY-Sun Incentive Program: Provides upfront incentives of $0.20–$0.35 per watt of installed solar capacity, varying by utility provider.
10. Oregon
- Tax Credit: Residential Energy Tax Credit (RETC)
- Details: Credit amounts are based on the installed capacity of the system, with caps varying by size.
- Rebate:
- Energy Trust of Oregon Solar Incentives: Rebates of $0.20–$0.45 per watt for eligible systems, depending on the utility provider.
11. South Carolina
- Tax Credit: Solar Energy System Credit
- Details: 25% of the system cost, up to $35,000, with credits carried forward for up to 10 years.
12. Utah
- Tax Credit: Renewable Energy Systems Tax Credit
- Details: 25% of the system cost, up to $2,000, applied against personal income tax.
13. Vermont
- Tax Credit: Investment Tax Credit
- Details: 24% of the federal investment tax credit for solar systems.
14. Wisconsin
- Rebate: Focus on Energy Program
- Details: Provides $500 rebates for eligible solar systems; rural homeowners may receive an additional $500.
- Exemption: Solar equipment is exempt from the state’s 5% sales tax, saving $1,500 on a $30,000 system.
Additional Rebates or Programs
Some states may not offer tax credits but have strong rebate programs through utilities or state-funded initiatives. For example:
- California: While it no longer has a state solar tax credit, the California Solar Initiative (CSI) offered rebates through local utilities. The state now focuses on the Self-Generation Incentive Program (SGIP) for battery storage.
- Colorado: Utilities like Xcel Energy provide rebates of up to $500 for residential solar installations.
Sample Calculations
Not all States have local tax credits. Some have other incentives, such as rebates, which will have to be applied for by the solar installer.
Here are two calculations that show your potential savings. Please keep in mind that we have not applied any financing costs that you might have to add to the total cost of your system.
Wisconsin | Local Rebate + Federal Tax Credit
Example Calculation for a 10 kW Solar System in Wisconsin:
- System Size: 10 kilowatts (kW)
- Cost per Watt: $3
- Total Installation Cost: 10,000 watts × $3/watt = $30,000
Applying Incentives:
- Focus on Energy Rebate:
- Rebate Amount: $500
- Cost After Rebate: $30,000 – $500 = $29,500
- Sales Tax Exemption:
- Wisconsin Sales Tax Rate: 5%
- Sales Tax Savings: 5% of $30,000 = $1,500
- Cost After Sales Tax Savings: $29,500 – $1,500 = $28,000
- Federal Tax Credit:
- Credit Amount: 30% of $28,000 = $8,400
- Final Net Cost: $28,000 – $8,400 = $19,600
Note: These calculations assume the homeowner has sufficient tax liability to fully utilize the federal tax credit. Actual savings may vary based on individual circumstances and any additional local incentives.
While Wisconsin does not offer a state-specific solar tax credit, these combined incentives significantly reduce the overall cost of installing a solar energy system.
New York | State Tax Credit + Federal Tax Credit
Example Calculation for a 10 kW Solar System in Wisconsin:
- System Size: 10 kilowatts (kW)
- Cost per Watt: $3
- Total Installation Cost: 10,000 watts × $3/watt = $30,000
Applying Incentives:
- State Tax Credit:
- 25% of $30,000 = $7,500 (capped at $5,000)
- State Tax Credit: $5,000
- Net Cost After State Credit: $30,000 – $5,000 = $25,000
- Federal Tax Credit:
- Credit Amount: 30% of $25,000 = $7,500
- Final Net Cost: $25,000 – $7,500 = $17,500
If you feel we have missed some information, or we got something wrong, feel free to contact us at info (at) craftstrom.com with the information. We’ll be happy to give you an extra discount on any products on our site.
