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8 Lesser-Known Tax Incentives That Could Slash Your Solar Financing Costs in 2024

8 Lesser-Known Tax Incentives That Could Slash Your Solar Financing Costs in 2024

8 Lesser-Known Tax Incentives That Could Slash Your Solar Financing Costs in 2024

1. Federal Residential Energy Efficient Property Credit (Expanded)

Most solar buyers are aware of the well-publicized federal tax credit, but fewer know that it has been expanded in 2024. Previously capped at 30%, recent legislation has increased the credit rate for certain new solar installations.

This means homeowners could deduct a larger percentage of their solar panel system costs directly from their federal taxes. Importantly, the expansion also now includes battery storage systems paired with solar panels.

According to the IRS Publication 17, this credit applies to both new installations and significant upgrades, providing an attractive opportunity for homeowners eager to reduce their upfront solar financing costs.

2. State-Specific Property Tax Exemptions

Several states offer property tax exemptions on solar energy systems, meaning the added value of solar panels won’t increase your home's tax assessment. This incentive reduces your tax burden without affecting your utility savings from solar energy.

Examples include Florida’s “Save Our Homes” protection and California’s property tax exclusion for solar energy systems, which effectively protects your investment and savings simultaneously.

Checking your state’s department of revenue or energy office website can uncover these exemptions, which are not widely advertised but make a significant difference over time.

3. Sales Tax Exemptions for Solar Equipment

In certain states, the purchase of solar panels and related equipment is exempt from sales tax. This can reduce your equipment cost by 5-8% or more depending on your state's sales tax rate.

For example, states like New Jersey and Massachusetts provide such exemptions, significantly lowering the initial cost and consequently the financing required.

Be sure to confirm eligibility with your solar installer or local taxing authority since these exemptions often vary by county or city and have specific documentation requirements.

4. Local Rebates and Grant Programs

Many municipalities and utilities maintain under-the-radar rebate or grant programs for solar installations. These incentives can sometimes provide hundreds to thousands of dollars off the total cost.

Unlike federal credits, rebates and grants tend to reduce your out-of-pocket expense upfront, which can lower financing amounts or improve cash flow for financing solar adoption.

Programs like the Los Angeles Department of Water and Power’s Solar Incentive Program or Austin Energy’s Solar Rebate offer such opportunities that are less publicized but impactful. Visit your local energy provider’s website for more details.

5. Business Energy Investment Tax Credit (ITC) Extensions

Although typically geared towards commercial solar projects, the ITC extensions could benefit small business owners and homeowners with mixed-use properties in 2024.

The tax credit covers a significant portion of solar system costs and has been extended and modified to cover new technological advances and deployment scenarios.

This incentive can be combined with depreciation benefits under the Modified Accelerated Cost Recovery System (MACRS), potentially providing substantial tax savings that lower effective system costs.

6. Clean Renewable Energy Bonds (CREBs) Financing

Originally intended for public solar projects, new interpretations and pilot programs have made CREBs available to certain private solar installations in 2024.

CREBs allow for interest-free or low-interest financing backed by federal subsidies, reducing the cost of capital for solar installations and making financing more manageable.

While these bonds typically require working with municipal entities or non-profits, savvy homeowners and business owners may find partners to seize this opportunity.

7. State Income Tax Credits on Solar Investment

Some states offer direct income tax credits for solar installations that stack on top of federal credits. These can range from a flat-dollar amount to a percentage of your investment.

For example, states like Colorado, New York, and Oregon offer such additional credits that significantly decrease your taxable income and reduce your net solar costs.

Combining these with federal credits can result in more than 40% reduction in overall solar financing requirements when done carefully with professional tax assistance.

8. Tax Credits for Solar Water Heating Systems

Alongside photovoltaic solar panels, some tax incentives in 2024 now include solar water heating systems, often overlooked by casual solar buyers.

Including solar thermal technology, these systems have been retrofitted in many homes offering significant energy savings and tax credit eligibility under residential energy property credits.

This inclusion is important because it expands the types of solar-related investments that qualify for incentives, providing more financing flexibility and greater energy bill reductions.

Bonus: Combining Incentives for Maximum Savings

Smart solar buyers in 2024 often combine several of these lesser-known tax incentives to slash their costs drastically. Layering federal, state, local, and financing incentives can reduce capital needs and financing risks.

For instance, a homeowner in California might utilize expanded federal credits, state property exemptions, sales tax exemptions, and a local rebate program simultaneously.

Careful planning, timing of installation, and consultation with a tax professional or solar financing advisor are key to maximizing these benefits — something manufacturers and installers often neglect to emphasize sufficiently.

Conclusion

While the solar tax credit landscape is often thought to be dominated by a few headline federal credits, a host of lesser-known incentives exist in 2024 that can meaningfully reduce your solar financing costs.

Exploring these opportunities requires some homework but can pay off with reduced costs, improving your solar return on investment, and accelerating the transition to clean energy.

For the most accurate and current information, always consult official IRS guidance, state energy offices, and local utility programs as they regularly update incentive offerings and eligibility requirements.

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