How Does the Solar Tax Credit Differ from a Rebate or Incentive?

Some of the common questions homeowners ask about taxes and their solar systems include: 

• Is there a tax rebate? 
• Is there a tax credit? 
• Is there a tax incentive?
• What is the difference? 
• How will I get money back for my solar panels? 

For those who get constant mis-information regarding the difference between a tax rebate, tax credit, or tax incentive here’s the breakdown:

Is there a tax rebate? – No. There are some local solar rebates in some areas we service, but they have nothing to do with taxes. It’s a common misconception.

Is there a tax credit? – Yes. There are a few. First, there are some local solar tax credits which we detail on our Solar Finanacing and Tax Credits Page. The second is the federal tax incentive everyone’s talking about. The Federal Government is currently offering a tax credit of up 30% of the value of your solar system for making the switch to renewable energy. Yep, you heard that right. For more details on the tax credit specifically, check out our blog post dedicated to the subject here.

Is there an incentive for going solar: Yes. Both local solar rebates and solar tax credits are considered incentives for going solar. 

What’s the difference between them? It’s subtle, but very important. Let’s break it down:

SOLAR INCENTIVES

An incentive is something designed to entice you into doing something. The way the government operates is to use tax credits (a reduction in what you owe the IRS) as an incentive for going solar. The way some utilities and local municipalities operate is to use tax rebates (a check to you in the mail) as an incentive for going solar. Both are designed to incentivize homeowners to make the switch to renewable energy, so both are considered solar incentives. 

What is a rebate, and is there one for making the switch to solar power?

Miriam Webster defines a rebate as “a return of a part of a payment”. It’s money back directly as a result of a purchase, once the terms agreed upon have been completed.

Solar rebates do exist in some areas, and are usually offered by utility companies or local municipalities. Here are a few examples:

• Denver implemented a local solar rebate program in 2023 for clients of Xcel that gives up to $4,000 to homeowners that pair a solar system with certain other energy efficient home improvements like adding attic insulation. 
• The City of Fort Collins offers a $1,000 rebate for anyone in the city that makes the switch to solar with an approved solar provider like Klick.

Like the solar tax credit, there are specifications for eligibility. But, the main points to note about solar rebates are that they are offered on a local level, and have nothing to do with your taxes. 

What is a tax credit, and is there one for having solar panels installed? 

A tax credit helps reduce the amount of taxes you owe. Some people would say tax credits have more value than rebates due to the fact that they lower your overall tax liability and have the ability to save you a considerable amount of money. 

The Solar Investment ( ITC ) is a tax program in the United States designed to help homeowners install solar panels without breaking the bank. It’s a tax deduction of up to 30% of the value of your solar system. This is the the program that all the buzz has been about, so go check out our FAQ section where we talk specifically about it for more details on how it works and whether or not you might qualify.

So, in summary, there are several different incentives to go solar offered in the form of local rebates, as well as local and federal tax credits. It’s important to understand the distinctions, and the requirements for eligibility to ensure that you’ll qualify for them. Book a time to talk with one of our highly trained solar experts to go over local incentives in your area, and get a better understanding about how everything works.