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2021 California Solar Tax Credits, Incentives & Rebates

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Wide angle image of a group of solar panels on top of a home in the city of Indian Wells, California.
rappensuncle / iStock / Getty Images

Though California enjoys one of the best climates for solar power in the U.S., it isn't just ample sunshine that's spurring the growth of renewable energy in the Golden State. There are a number of California solar tax credit, exemption and rebate opportunities that make installing solar panels more affordable for residents.

By taking early advantage of the economic and environmental benefits of solar, California has positioned itself as a leader in solar energy in the U.S. Several of the nation's top solar companies are based in California, and data from the Energy Information Administration shows that the state accounted for nearly 45% of the nation's small-scale residential solar energy generation in 2019.

While the availability of products and quality installers adds to the ease of purchasing solar panels, what financial incentives are currently available for California residents interested in solar? Let's explore.


California Solar Tax Credits and Solar Rebates

Solar panels have long proved a reliable and savvy financial investment for Californians, and many buyers are able to secure a speedy return on investment (ROI). However, there is currently no statewide California solar tax credit to help residents with the upfront cost of solar panels.

That said, all Californians are eligible for the federal solar tax credit, and the state offers several incentive programs and solar rebates aimed at further increasing access to reliable, affordable solar panels.

California Solar IncentiveIncentive Overview
Self-Generation Incentive Program (SGIP)The SGIP offers rebates for installing energy storage systems at both residential and non-residential facilities.
Active Solar Energy System Property Tax ExclusionThis incentive ensures the addition of a solar panel installation doesn't raise homeowners' property taxes.
Single-Family Affordable Solar Homes (SASH) ProgramThe California Solar Initiative (CSI) launched SASH to provide fixed, up-front incentives on qualifying affordable single-family housing.

Self-Generation Incentive Program (SGIP)

In response to an increasing frequency of power outages, California's SGIP offers rebates to residents using solar battery systems to store excess energy. Battery storage is an important component of emergency preparedness. However, these rebates are only available to certain areas of the state prone to outages. You can check your eligibility on the SGIP website.

Active Solar Energy Tax Exclusion

Typically, when something of value is installed on a property, the addition is assessed and added to the property value (increasing property taxes accordingly). California's Active Solar Energy Tax Exclusion incentive allows residents to install solar systems without a change to the assessment of their property (even though solar panels increase property values significantly).

Single-Family Affordable Solar Housing (SASH) Program

SASH offers an incentive of $3 per watt to qualified low-income homeowners. Along with making solar more accessible in disadvantaged communities, this program reduces collective conventional electricity usage and promotes energy solutions that are environmentally and economically sustainable. Note that you must be a customer of Pacific Gas & Electric (PG&E), Southern California Edison (SCE) or San Diego Gas & Electric (SDG&E) to be eligible for this program.

Other California Solar Incentives

Net energy metering (NEM), or net metering, allows customers to feed any excess energy generated by their solar panels back to the local power grid. In exchange, customers receive credits from their utility companies that can be applied to future bills. As most solar systems generate more energy than a home uses, selling that surplus power back to a utility company provides homeowners additional savings on their electricity bills and lowers the demand for grid-supplied electricity in the region.

California currently offers a statewide net metering incentive for residents generating electricity with solar panels. Exact credit values will vary based on your utility company.

Some local utility companies and municipalities also have their own solar rebates and incentives, such as Sacramento's $300 rebate. Most top solar companies will help you identify local solar programs you're eligible for, but it's always worth taking a look at your local government and utility company websites to see if there are any additional incentives to take advantage of.

Federal Solar Tax Credit

Regardless of which state you live in, all homeowners in the U.S. are eligible for the federal solar investment tax credit (ITC) for installing solar panels and energy storage devices. The ITC is a tax credit you can claim on your federal return that's currently valued at 26% of the total cost of your system.

Though the solar tax credit currently sits at 26%, it is set to phase out over the next few years. The credit was first developed through the Energy Policy Act of 2005, under the Bush administration. Initially, it was set to last for just two years, but due to its bipartisan success has been extended for solar installations through at least 2023. (Note that the specific terms of the solar tax credit have changed over the years and may continue to shift.)

To be currently eligible for the federal tax credit, homeowners must meet the following criteria:

  • You have installed a residential solar panel system at any point from 2006 through the end of 2022.
  • You have placed the solar panel system in a residential location. It does not have to be your primary residence.
  • You own the solar system (as opposed to leasing solar panels), meaning you paid for it in cash or took out a solar loan.

We understand that for most homeowners, the decision to invest in solar panels is easiest when presented with a firm cost. To learn how much it would cost to install solar panels on your home, factoring in the solar tax credit, you can get a free, no-obligation quote from a top solar company near you by filling out the form below.

FAQs: California Solar Incentives

Is there a California state tax credit for solar?

Though California does not offer a statewide solar tax credit, all residents are eligible for the current federal solar tax credit. The solar tax credit is worth 26% of the value of the system installed and can be claimed on federal tax returns.

What is the California solar tax credit for 2021?

All American households are eligible for the federal solar tax credit, which is valued at 26% of your solar system cost. California does not have any other state-specific solar tax credit, but it does offer property tax exemptions for new solar installations.

Does California have a free solar program?

The reality is, no state has a free solar program. Fortunately, California does offer several incentives and rebates for installing solar panels, making it a very cost-effective place to do so.

How much is the solar tax credit for 2021?

All U.S. households are eligible for the federal solar tax credit. In 2021, this tax credit is valued at 26% of the purchase of solar panels and qualifying energy storage devices.

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