Is There a California Tax Credit for Solar Panels? Here is All You Need to Know.

Are you determined to lower your home’s electricity bill?

The cost of solar has drastically reduced in the last decade. Homeowners in Orange County have invested in solar due to the enormous benefits it provides homeowners. After investing in solar, you will be lowering your utility bills and enjoying the low energy consumption rates.

benefits of going solar in ca

(Source: Forme Solar)

Is there a California tax credit for solar panels?

Yes. The Federal government in California offers the best incentives to solar panel investors, making it more affordable for them to install panels on their roofs. In addition, this encourages the investors to go solar.  The California solar incentives come in the form of rebates and tax benefits and can give you a 25-50 percent discount.  

Solar in Orange County is your best option given the all-round sunny climate in Southern California. Enlightened Solar is the leading solar installation company in Orange County. We have supported homeowners transitioning into solar, and they have attested to the numerous benefits they continue to experience by working with our team. 

2021 has seen remarkable changes in residential solar in the Golden State. For example, the building codes made in 2020 demanded the installation of solar in every new home. 

The residents of Orange County are making big considerations for going solar. The COVID-19 effects and the continuous blackouts experienced across Northern and Central California in 2019 have influenced the move. Every homeowner in California yearns for the independence that comes with investing in solar panels and California solar panel rebates are also something to look forward to as you go solar. 

solar tax credit ramp down schedule

(Source: Sun Valley Solar Solutions)

How do solar incentives work? 

In this article, we will explain the laws and regulations in California, including the solar tax credit in California. We will detail everything you need to know about the financial advantages of going solar in Southern California

Let’s focus on the following:

  • Does California have incentives for solar panels?
  • California solar incentives in 2021
  • What solar energy rebates and incentives are available in California?
  • California Solar Incentive Battery Cover Self-Generation Incentive Program (SGIP)

Does California have incentives for solar panels?

Homeowners in California always want to know if there are incentives offered in the area. So yes, you will enjoy the California solar incentives as long as you are within the state.

The cost of solar panel installation in Orange County is dependent on various factors. It could range from the size and quality of the solar panels, the choice of the solar panel installer, the amount of electric power consumption in your home, and the services in your region. 

California Solar Incentive in 2021

How do solar incentives work?

As long as you are within California, there are solar incentives and good savings that you will enjoy by installing solar for your home. They include; Property-Assessed Clean Energy (PACE), Property Tax exemption for solar panels, and Net Energy Metering (NEM). There is also a solar tax incentive that is very significant, known as the Federal Solar Tax Credit. 

Let us examine these California tax-based incentives and the benefits they carry for homeowners looking to install residential solar panels. 

Property-Assessed Clean Energy (PACE)

This incentive is a loan option that gives homeowners a chance to finance their energy-related projects using their property taxes. The incentive is also known as the Home Energy Renovation Opportunity or HERO. What happens is that the local government works with financiers and funds the initial costs of the project. Then, after completion of the project, the homeowners repay the loan to the local authority for more than 20 years. The payment happens through an increased property tax bill.

When you decide to sell your house or embark on major construction, your property will be eligible for a value reassessment on a total market value in California. 

California’s taxation code allows for a tax exclusion for properties that qualify for new solar installations. It is good news for you as a property owner because your property taxes will decrease if you install active solar energy. However, the tax exclusion will expire in 2025.

What’s an active solar energy system?

It is a system that uses solar energy devices isolated from the primary energy area. They provide for the collection, storage, and distribution of solar energy.  The following ways are used to assess active solar power configurations in California:

  • The production of electricity
  • Processing of heat
  • Domestic, recreational, therapeutic, or service water heating
  • Space conditioning
  • Solar mechanical energy

On the other hand, an active solar energy system does not include the following:

  • Wind energy systems
  • Solar swimming pool heaters
  • Hot tub heaters
  • Passive energy systems

Net Energy Metering (NEM)

NEM allows homeowners to reduce their electric bills by selling the extra solar energy produced. NEM has built a name in the US for this service that compensates solar customers for energy contribution to the grid. 

NEM is approved to increase the value of rooftop solar. Due to this, it is now mandatory to have the NEM incentive in place. An assessment is usually done to meet the client’s demands as they transition to using the electricity rate for the new solar panels installed.

solar electric system

(Source: Process Industry Forum)

As a NEM member, you will be able to receive a solar tax credit in California for the surplus solar energy produced by your PV system and transferred to the electric grid. In turn, the credits you will receive will be at the same rate as the electric bill you will receive. 

Under NEM policies, each kilowatt-hour (kWh) that you produce as a solar customer values at the same market rate as kilowatt-hours that you purchase from the utility. It means a solar customer can make excess energy during the day, receive a credit for sending it to the grid, and then use that credit to pay for the power they purchase at night.

The Investment Tax Credit (ITC)

ITC is not a California solar tax incentive. However, every homeowner in the US who owns a solar panel system can claim a 26% deduction from their federal taxes. So, for example, if you install a solar system at $20,000, and you owe $6,000 in taxes, you can reduce your tax liability from $6,000 to $1,200 by applying your $5,200 ($20,000 x .26) solar installation tax credit.

If the value of your tax credit exceeds your tax liability, you can apply the unused credit to the following year’s taxes. In addition, if your tax liability was $3,000 instead of $6,000, you can rollover the unused $2,200 ($5,200 – $3,000) to next year’s taxes.

You are only eligible to rollover any unused credit once, and the ITC is in addition to all local and state rebates and solar incentives you receive. Also, the value of the ITC dropped to 22% in 2021 and will further drop to zero for residential installations in 2022 unless Congress renews it.

extension of the itc solar tax credit

(Source: Energy Sage)

What Solar Energy Rebates are Available in California

Over time, solar adoption has primarily happened in higher-income households. However, the benefits of solar energy cannot be classified according to economic status because it is a necessity for everyone. The support from solar panel incentives has been able to increase the adoption of solar orange county. The two most important California solar rebates are aimed at increasing affordable housing. Let’s check them out;

Single-Family Affordable Solar Housing (SASH) 

California’s SASH program offers incentives to qualified low-income single-family household owners. It helps them offset their goal of installing solar. In this program, the family gets a $3/watt up-front incentive level. So, if you qualify for this program and establish a $6/watt system, you will be eligible for an $18,000 incentive. 

Depending on the energy consumption rate, the installation company will advise you on how many solar panels your home will need. However, you should note that the amount received does not exceed the cost of the solar panels.

In addition to the incentive, the SASH program has training that allows people from low-income areas to get well-paying green energy jobs. As of January 2021, there were 9,400 installations in California.

The SASH program is run by California Public Utilities Commission (CPUC) and administered by non-profit Grid Alternatives.

california annual solar installs

(Source: Clean Technica)

Multifamily Affordable Solar Housing (MASH)

The state’s MASH program provides incentive rates of $1.10 to $1.80/watt for qualified multifamily affordable housing. 

The program is administered by PG&E, SCE, and the Center for Sustainable Energy in SDG&E territory. To qualify for this program, you need;

  • General obligation bonds
  • Low-income housing tax credits
  • Local, state, or federal grant or loans
  • Tax-exempt mortgage revenue bonds

The MASH program consists of two tracks of qualification. That is track 1C and Track 1D. If you are eligible for Track 1C, you receive a $1.10 per watt rebate of solar installed.

Local Incentives

There are different levels of local incentives. The local incentive is offered in cash to support residential, commercial, and non-profits. The main goal is to encourage solar installations in California. As a homeowner, this is a great support system, especially if you are working on a budget. Enlightened Solar is here to give you the best installation service. In line with that, we can assess and advise you on the way forward.

California Solar Incentive Battery Cover Self-Generation Incentive Program (SGIP)

As a residential homeowner in California, you are qualified for an SGIP rebate of $200-$1,000/watt-hour of storage. It increases with the level of KWh you install. If you get battery storage in a property serviced by Southern California, SCE, SDG&E, or PG&E, then you can grab the chance for the SGIP incentive.

The incentive comes in three tiers:

  • Residential equity storage
  • Residential storage
  • Residential equity resiliency storage

Residential Equity Storage Incentive

SGIP has an equity budget set aside for solar batteries installed in low-income areas. In addition, the federal government started the residential equity incentive to promote and encourage more battery storage in disadvantaged areas. The rebate received is $850/kWh installed.

Residential Storage

If you have a battery storage system smaller than 10kW in your residential property, you are qualified for a $200/kWh incentive. As a homeowner, you are eligible for this incentive.

Residential Equity Resilience Storage

This equity resilience incentive works for homes located in areas that have experienced more than one planned safety power shut-off (PSPS) or Tier 3 or Tier 4 fire district. Power outages can be an inconvenience and create a negative effect on the household.

The areas experiencing PSPS are eligible for more incentives should they install battery storage. For projects that qualify for this resiliency incentive program, they can receive a California solar panel rebate of $1,000/kWh of the installed storage. This incentive could cover the whole amount used for the solar battery system.

Ready to reap the rewards of solar installation in Orange County? It’s the best time to go solar! 

So, how much is the solar tax credit for California in 2021?

If you are a residential owner installing solar panels in California, you will receive a 26% tax credit upon the purchase. When we talk of California tax credit, we refer to the federal solar tax credit applicable to all homes in the US, inclusive of California.

As a homeowner looking to invest in solar panels, you should note that the federal solar tax credit sums up 26% of the system cost until 2022. After that, it will drop to 22% in 2023.

As a homeowner in California, you are eligible for different California solar incentives should you have solar installed in your home.

Is there a California tax credit for solar panels? It’s a significant concern that our clients ask when seeking solar installation services. We have been transforming homes to go solar in Orange County, and we have seen the comfort experienced by our clients with their reduction in monthly electric bills.

In the article above, you have been able to note down the eligibility for California solar panel rebates.

How do solar incentives work? At Enlightened Solar, we have all the information. Being a premium solar panel installation company, we care about your energy needs. Investing in solar panels will save you money and time. Contact us today for further consultation.