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Solar panels on a roof.
Solar panels on a roof.
Wondering how you’re going to pay for a $25,000 rooftop solar system?
Help is on the way.
Two historic climate laws — one state, one federal — offer incentives that cut the cost for residential solar by more than half, starting this week.
The Inflation Reduction Act, signed by President Joe Biden last month, includes a tax credit equal to 30% of the cost of installing home solar, and the Illinois Climate and Equitable Jobs Act offers an incentive expected to save rooftop solar customers roughly 40% of their costs, starting Thursday.
That would bring the cost of a $25,000 system down to approximately $7,500.
“It’s a really big deal,” said Vito Greco, director of solar programs at the Chicago nonprofit Elevate, which supports clean and affordable energy. “If you’re in Illinois, this is such a great time to get solar.”
Those who don’t pay enough taxes to claim the 30% federal tax credit can now get the full amount anyway, via a check from the government, Greco said.
And residents of low and moderate-income communities can benefit from additional federal tax credits of 10% to 20% of the cost of their solar projects, with some details still being worked out.
The federal tax incentive for people with average or high incomes is straightforward: a credit that reduces what you owe in taxes, not a deduction, so you would get $7,500 back on a $25,000 system.
The federal solar tax credit — increased and extended 10 years under the Inflation Reduction Act — is retroactive through the beginning of 2022.
The federal government is also offering a 30% federal tax credit for the batteries that are sometimes used to back up home solar systems, and starting in 2023 the government is extending that credit to batteries that aren’t powered by solar, according to Nick Liberati, communication manager for the EnergySage, an online comparison-shopping marketplace for solar.
The state solar incentive is calculated based on how much electricity your solar panels are expected to generate in the first 15 years, with a dollar amount assigned to each kilowatt-hour of energy.
The state solar incentive is equivalent to roughly 40% of the cost of a rooftop solar system, according to the Illinois Power Agency, or about $10,000 for a $25,000 system.
Greco also estimated the state incentive at close to 40%, and said that “well over half” the cost of residential solar is now covered by state and federal incentives.
The state incentive is available directly from your solar company; you don’t have to file your taxes to get it. And you don’t have to wait for 15 years for the incentive to accrue. You get an upfront payment, based on the amount of energy your solar panels are expected to generate.
“It’s nice for consumers that from the outset (Illinois is) fixing the amount and paying it upfront,” said EnergySage product marketer Kerry Thoubboron. “You find in other states that prices vary over time, and you receive the incentives over time. It seems like this is just making it more transparent, in terms of what customers will get, and more reliable.”
The state tax credit is thanks in large part to the Climate and Equitable Jobs Act, which became law in September 2021. The state climate act didn’t create the approximately 40% rebate for rooftop solar, but it restarted it after funding ran out.
After the passage of the state climate act, Illinois reintroduced the 40% incentive for a while, then paused to revamp. The state announced Thursday that the full incentive is once again available to residential customers.
Similarly, the federal government had offered a residential solar credit before, most recently in 2018, according to EnergySage founder and CEO Vikram Aggarwal. But the credit had fallen to 26% this year, and it was supposed to drop to 22% in 2023.
The Inflation Reduction Act brought the credit up to 30% and extended it for 10 years.
Nara Schoenberg can be reached at nschoenberg@chicagotribune.com ©2022 Chicago Tribune. Visit chicagotribune.com. Distributed by Tribune Content Agency, LLC.
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