Guest Post: How Tax Credits Keep Solar Panels Within Reach
Post provided by Ryan McNeill, president of Renewable Energy Corporation, a Maryland solar solutions firm serving the Mid-Atlantic.
You already know that installing solar photovoltaic (PV) panels on your home can dramatically reduce your monthly electricity bills. And with each successive year, those savings only grow with time. As utility rates rise, clean energy from the sun remains consistently free.
But as with any investment, there are start-up costs with solar energy. Even with the impressive savings potential, can you really afford paying for a new system upfront? The answer may surprise you.
These days, there exist a range of solar-related incentives and rebates specifically designed to help make the technology more affordable for average homeowners. Solar PV systems that were once prohibitively expensive are now within relatively easy reach.
Thanks to a number of local, state, and federal incentives, you rarely have to pay full price for a new solar PV installation.
Let’s take a look at some of these incentives.
1. The Federal Investment Tax Credit
The Federal Investment Tax Credit (ITC) allows you to deduct up to 30% of the installation cost from your total income. Think of it as a “charitable donation” or “business expense” that you claim on your yearly taxes.
2. Solar Renewable Energy Credits (SRECs)
Certain states have renewable energy quotas in which utility companies are actually obligated to generate a certain portion of their electricity from clean power sources.
Rather than generate this energy themselves, utility companies frequently “purchase” credits from homeowners who already produce clean energy from their solar PV systems. For example, in a state like Maryland, the average payout for every 1,000 kilowatts (kW) of solar energy exceeded $200 in 2012.
3. Additional Solar Incentives in Maryland
Maryland is actually one of the most generous solar states in the country, offering a slew of additional incentives for homeowners thinking about going solar. Let’s take a look at a few:
- The Maryland Residential Clean Energy Grant Program pays eligible homeowners an even $1,000 for each newly installed solar PV system.
- The Maryland Clean Energy Production Tax Credit allows eligible homeowners to claim up to $0.0085 for every kilowatt-hour of solar energy produced (this credit only applies to state taxes).
- Maryland offers a 100% tax exemption from the sale and use of solar PV technology. This can reduce the upfront cost of a new installation by as much as 6%.
- You can also find any number of incentives at the utility and county level to further drive down the cost of your system.
A couple things to keep in mind: First, you can combine many of these incentives to really bring costs down. Second, in addition to government incentives, you might also qualify for solar financing and leasing options. Done correctly, you can push down the upfront cost to $0 while still paying next to nothing on your monthly electricity bills. It’s a pretty sweet deal any way you cut it.
Ryan McNeill is the president of Renewable Energy Corporation, a Maryland solar solutions firm serving the Mid-Atlantic. Ryan has written for the ASES, Energy Viewpoints, Renewable Energy World and various other publications covering the renewable energy industry.