Although sunlight is free, harnessing that energy to power your home can be costly. That is why the federal, state, and local governments offer financial incentives to property owners who are considering installing a solar energy system on their structure.
Texas and the energy industry are inextricably linked, so it’s no surprise that solar is gaining traction in the Lone Star State.
As the state with the most sunlight and the lowest solar costs in the country, citizens of the nation’s largest energy-producing and energy-consuming state welcome sustainable energy options. This interest in solar ensures Texas maintains its position as an energy powerhouse.
Here’s everything you need to know about solar energy incentives in Texas.
Solar Incentives for Texans in 2022
Early 2021 taught Texans a harsh lesson about their electricity system: it is unprepared to manage weather events like February 2021’s record snow and cold. Texans could be without power or face exorbitant electric bills. More renewable energy could benefit the state as a whole, but if something similar happens again, solar panels on your home’s roof could be a literal life saver.
Incentives to help you install solar panels make the switch more attainable for many homeowners.
Federal Solar Investment Tax Credit
The Federal Solar Investment Tax Credit (ITC) lets you deduct up to 30% of the solar power system installation costs on your federal taxes.
Consider the ITC a coupon giving you a 30% discount on your home solar installation. For example, if your solar installation costs $20,000, you may theoretically obtain $5,200 in federal tax credits. The credit could be used to offset the amount owed in federal income tax for that year. In other words, the ITC can help you save a lot of money by lowering or even eliminating federal taxes that you would have had to pay otherwise.
If you do not owe federal taxes in the year your solar system is built, you have the opportunity to claim the credit for up to 5 years following installation. Not everyone is qualified for the ITC, however.
Texas Net Energy Metering
Net metering allows you to receive a retail rate credit for the electricity produced by your solar panels that you put back into the grid. Net metering requires the utility company to track how much energy your solar power system generates vs. how much you actually consume.
In Texas, net metering is not guaranteed because there is no statewide net metering statute in effect. However, you can find a municipal electric provider that offers net metering. Some Retail Electric Providers (REP), like Green Mountain Energy, will buy your extra solar output for retail or near-retail pricing in most of the heavily populated areas of the state.
Renewable Energy Property Tax Exemption
Texans who install a solar or wind-powered device to generate electricity for their home or business are eligible for a tax exemption on the device’s value added to their property. It’s easy to get excited about works like “exemption,” but it’s important to look at precisely what the terms mean in regards to your solar energy system.
The Texas exemption means that anyone who installs solar panels on their property will not have to pay taxes in the amount of the increase in property value due to the addition of solar. It’s a win-win situation: your solar system could raise the value of your home while also saving you money on property taxes. It can be a significant benefit, particularly for homes that require a larger system to counteract their electricity consumption.
Texas Solar Rebates
There is no statewide rebate program in Texas. The majority of residents in the state have access to a variety of electric firms through the state’s open energy marketplace, but unfortunately, none of the energy companies want to offer rebates for going solar.
There are some local rebate programs, however. Those fortunate enough to reside in an area served by a municipal electric utility may have options. For example, Austin Energy gives a $2,500 incentive to people who want to install solar panels. Getting the rebate requires an online course and passing a quiz.
Grab the Incentives While They Last
Solar energy financial incentives may not be around forever. The Energy Policy Act created the Federal Solar Investment Tax Credit in 2005, and it was originally meant to expire in 2007. It has been extended several times, but it is currently set to drop to 22% in 2023.
Beginning in 2024, the federal tax credit for residential solar systems will be eliminated entirely, leaving just a minuscule 10% tax credit for commercial solar installations. There is a chance Congress will decide to extend the ITC, but it is still probably beneficial to take advantage of it while you can. All of the current incentives and rebates are likely to disappear as solar becomes more and more common.
