Will Other Incentives Reduce My Federal Tax Credit?
Some incentives do not affect your tax credit, while others may reduce it slightly. Refer to the information below and visit dsireusa.org for updated information on incentives.
Electric to Solar Installation Rebates
Some utility providers often subsidize solar system installations that can be excluded from your income tax through a federal law exemption. The solar installation rebate should be subtracted from your total solar system costs before you calculate the solar tax credit. Say you upgraded to solar in 2022 for $20,000, but your utility provider provided a $2,000 rebate for the installation.
Here’s how you would calculate your tax credit:
($20,000 - $2,000) * 0.30 = $5,400
Renewable Energy Certificates and State Government Rebates
If you’ve received cash for renewable energy certificates, this is usually counted as taxable income. While this money will increase your gross income, it won’t reduce your solar tax credit. Rebates from your state government also generally won’t reduce your federal solar tax credit. If you paid $20,000 for a solar system in 2022 and the state gave you a $2,000 rebate, the tax credit calculations would look like this:
$20,000 * 0.30 = $6,000
State Tax Credits
If you get a tax credit from the state for a solar installation, it does not reduce your federal tax credit. However, you may end up with higher taxable income on your federal taxes with less state income tax to deduct. In essence, claiming a state tax credit means it will be subject to tax at the federal level.