2023 Colorado Solar Incentives Guide (Tax Credits, Rebates & More)

In this guide to solar benefit programs in Colorado, you’ll learn:

  • What solar incentives are available in Colorado?
  • How can incentives help save you money on solar panels in Colorado?
  • How do you file for the federal solar tax credit in Colorado?
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Do Colorado Solar Incentives Make It Affordable for Homeowners to Go Solar?

While the cost of converting to solar energy in Colorado is rather high, the incentives and rebates available in the state make solar far more accessible and affordable for homeowners.

The typical Colorado resident pays around $20,175 for a complete solar array before the federal solar tax credit or $14,123 after the credit is applied — offering a 30% price drop before you factor in any other incentives.

The incentives available in Colorado are more appealing and beneficial to solar customers than those in most states, making the Centennial State a great place to convert to renewable energy. These perks helped the state reach its lofty Renewable Portfolio Standard (RPS) goal for 2020, although it’s possible some benefits could go away in the future if a new goal isn’t set.

When you’re ready to speak with a qualified professional, follow the links below. Each of these companies can help you identify and apply for incentives available in Colorado.

Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.

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In the chart below, we’ll include a quick breakdown of the solar incentives available in Colorado, including how much each incentive could save you upfront and over the life of your home solar energy system.

Incentives for Solar Conversion in Colorado Incentive Type Description Occurrence Estimated Dollar Amount You Can Save
Federal Solar Investment Tax Credit (ITC) Federal Credit to your income tax liability for 30% of your entire solar panel system value One-time: Applied when you file your taxes for the year you install your solar panel system $6,053 on average in Colorado
Colorado Solar Equipment Sales Tax Exemption State Sales tax on all solar equipment is waived One-time: Applied when you purchase your system $585 on average in CO
Colorado Solar Property Tax Exemption for Residential Renewable Energy Equipment State Prevents your property taxes from increasing due to the added value from your solar system Ongoing: Always in effect Varies based on the size of your solar system and the assessed value of your property
Net Energy Metering Local Provides credits for all excess energy production you export to the grid. Those credits can pay down future utility bills Ongoing: Always in effect Varies based on your monthly energy bills, your system size, your energy consumption and several other factors
Local Incentives Local Local rebate programs offered by municipalities and local utility companies Ongoing: Rebates are offered after you purchase your system Varies based on the specific rebate, your solar system and more

What Do Coloradans Need to Know About the Federal Solar Tax Credit?

The federal solar tax credit is offered by the federal government and is available to all U.S. residents, including property owners in Colorado.

It provides a credit to your income tax liability — or the amount you owe to the federal government — for 30% of your system value, which includes the cost of solar panels, batteries, inverters and electric vehicle (EV) chargers. In Colorado, where the average system totals $20,175 before any incentives, the credit averages out to $6,053.

But keep in mind that this is not a rebate, so you won’t get the $6,000 back. Instead, the credit amount gets applied to your income taxes owed for the year after you install your solar system. If you don’t owe money in income taxes, you won’t be able to take the credit. However, you can take a partial credit and roll over the remainder for up to five years.

If you expect to owe at least $1,200 per year in income taxes over the next five years, then you should be able to take the entire credit making solar in Colorado worthwhile.

The credit has been around since 2005, at which time it provided the same 30% tax break it does today. The credit rate dropped to 26% in 2022 and was scheduled to decrease again to 22% in 2023 and disappear in 2024. But it was renewed in 2022 thanks to the Inflation Reduction Act, which raised the rate back to 30% and delayed the credit expiration date.

The new rate schedule is as follows:

  • The credit rate will be 30% for systems installed between 2022 and 2032
  • The credit rate will drop to 26% in 2033
  • The credit rate will drop to 22% in 2034
  • The credit will no longer be available in 2035 unless renewed by Congress before then

How to Claim the Federal ITC in Colorado

Claiming the federal credit in Colorado is simple and takes just a few minutes of your time. You can follow the steps below to ensure you get to take advantage of this incentive program and effectively lower your cost of switching to solar.

  • Step 1: Go to the Internal Revenue Service (IRS) website and print out IRS form 5695. This is the form for claiming renewable energy credits. The form requires some information about the capacity of your system, the total amount you paid and contact information for the company that installed it.
  • Step 2: When you or your accountant go to file your taxes, submit the completed IRS form along with your return. If you’re using tax software like TurboTax or H&R Block, you should be prompted to answer questions about whether or not you installed clean energy equipment throughout the tax year. The software will ask for the relevant information, so you won’t need to print out any forms.
  • Step 3: File the form with your taxes. It’s a good idea to check your tax return once it’s accepted to confirm that the federal credit was applied.

EcoWatch’s Opinion of the Federal ITC in Colorado

In our opinion, the federal solar credit is the most valuable and worthwhile incentive to take advantage of in Colorado. If you only have time to take one credit, we strongly recommend making it this one.

Not only can the federal credit bring down your effective system price by around $6,000 in Colorado, but the application process is also super easy and quick. The value you receive is outstanding for the minimal amount of time it takes to claim this incentive.

Colorado Solar Equipment Sales Tax Exemption

Since the cost of solar panels in Colorado averages around $20,000 before any incentives are applied, the state waives sales tax on all photovoltaic (PV) equipment. This tax exemption can help bring down the upfront cost of your solar system, and it’s useful whether you buy your system in cash or use other financing options like a solar loan.

With the typical system price in Colorado averaging $20,175 and a state sales tax rate of 2.9%, you can save around $585 with this perk.

Keep in mind that you might still have to pay city or county taxes on your equipment, which can be expensive in areas like Denver, Boulder, Fort Collins and other major cities.

How to Claim the Sales Tax Exemption in Colorado

The sales and use tax exemption offers just a small amount off of your upfront system costs, but it’s worthwhile because it takes no time or effort to apply. The state will simply not charge sales tax on your system purchase — including labor — and your initial total will automatically reflect that exemption.

EcoWatch’s Opinion of the Sales Tax Exemption in Colorado

With an average savings of just $585, the sales tax isn’t the most appealing incentive. However, it’s an automatic perk that you don’t need to apply for. These types of incentives help make solar more affordable and accessible and send a message that the state supports the clean energy movement.

Colorado Solar Property Tax Exemptionwhat incentive programs does colorado offer for solar

When you convert to solar in Colorado, you can also take advantage of the state’s property tax exemption on your equipment. Under normal circumstances, home improvements would increase the value of your home and cause your assessed property value to go up, which also means a higher tax bill.

Solar panel installation is expected to boost your property value by over 4%.1 With an average property value in Colorado of $575,013, solar equipment can add a pretty substantial increase.2 Colorado’s property tax rate is 7.15%, which when considering the total value of your solar system, would equate to an annual property tax increase of $1,442.3

Over the lifespan of your system — which is typically around 25 years — that would be around $28,840 in added property taxes. Note that this figure is higher than the increase you’d likely see on your tax bills because your system will depreciate over time. Still, the property tax exemption helps reduce the financial burden of converting to solar and makes your panels more valuable overall.

How to Claim the Property Tax Exemption in Colorado

Much like the sales tax exemption offered in the Centennial State, the exemption for property taxes is automatic and doesn’t require any time or effort on your part. When the tax assessor’s office in your municipality calculates your assessed value, they will exclude any value added by your PV system.

EcoWatch’s Opinion of Colorado’s Solar Property Tax Exemption

Property tax exemptions for solar equipment are a great way for states like Colorado to make solar more appealing and accessible to homeowners. Since Colorado’s property tax rate is well above the national average, this is an especially important incentive in the Centennial State.

We especially like this perk because it doesn’t take any time or effort for you to apply and reap the benefits, which are substantial over the lifespan of your solar panels.

Net Metering in Colorado

Net metering — also called net energy metering (NEM) — is a pro-solar billing policy and one of the most common perks available throughout the U.S. Through interconnection, net energy metering allows you to earn energy credits for all excess solar electricity you produce and don’t use.

Those credits accrue and can then be used to pay down future electric bills if you ever need to pull energy from the power grid, like in less than optimal conditions such as cloudy days or at night.

Colorado offers one of the best net metering policies in the country, and the Public Utilities Commission (PUC) mandates net energy metering for all investor-owned utilities (IOUs). The legislation allows energy providers to credit your account for up to 120% of the retail value of the excess energy you generate.

All major electric providers in Colorado are required to offer net metering, including:

  • Public Service Company of Colorado, also known as Xcel Energy
  • Black Hills Energy
  • Some electric cooperatives
  • Some municipal utility providers

Although net energy metering is a massively beneficial perk in Colorado, policies across the country have been changing to make net metering less appealing in other areas. Some utility providers have dropped the credit rate to below the retail value per kilowatt-hour (kWh) — usually to an avoided-cost rate — while other states abandoned the perk altogether.

As such, it’s possible that net energy metering won’t be available in Colorado in the future, especially since the state’s RPS goal has already been met.

How to Enroll in Net Metering in Colorado

Enrolling in the net metering program in Colorado should be automatic for most homeowners. However, it’s worth walking through the steps below to ensure you take full advantage of this incentive.

  • Step 1: Contact your electricity company to confirm you have a bi-directional meter. This is a requirement for interconnection and net energy metering. If you don’t have a meter, you can request that your electricity company install one. This is done at no cost to you.
  • Step 3: We recommend monitoring your energy bills for a month or two after your system is commissioned to ensure your credits are registering as expected.

EcoWatch’s Opinion of Net Metering in Colorado

Net energy metering is historically one of the best incentives for solar adoption available in the country. It provides a handful of benefits, including:

  • Reducing your panel payback period, sometimes by several years
  • Minimizing the effective total you pay for your solar array
  • Maximizing the long-term energy savings you enjoy by converting to solar energy
  • Helping to keep your energy bills to a minimum year-round

Net energy metering can help you approach the maximum lifetime savings of converting to solar — an average of around $14,479 in Colorado after your panels pay for themselves in energy costs — although the precise financial benefits of net metering are challenging to estimate.

In any case, net energy metering is one of the best incentives in Colorado, in our opinion, and should take minimal time and effort on your part to take advantage of.

Local Solar Incentives in Coloradosolar incentives in colorado

While the federal and state incentives are appealing enough for most solar customers, Colorado residents also have access to a handful of local perks. These include cash-back incentives offered by local utility companies, municipalities and more. We’ll include a list of the most prominent local perks available in Colorado below.

  • Xcel Energy Low-Income Solar Rebate: Income-qualified customers of Xcel may be eligible for a cashback incentive of up to $2,000 for each kilowatt (kW) of solar capacity installed, plus $0.07 for every kWh generated after installation. With an average system size of 7.5 kW in Colorado, that rebate could total as much as $15,000, not including the ongoing credits for solar production. This perk is also available for community solar projects, nonprofits and commercial solar customers.
  • Colorado Energy Office (CEO) Incentive for Low-Income Individuals: This incentive offers energy savings of around $400 per year for income-qualified customers in the Weatherization Assistance Program (WAP).4 This program can provide solar systems on a limited basis at minimal cost to qualifying customers.
  • Xcel Solar*Rewards Program: This is another cashback program that isn’t exclusive to low-income households. It offers up to $0.005 per kWh generated with your system, provided it’s under 25 kW, which most are in Colorado.5
  • Colorado Springs Utilities Renewable Energy Rebate: This is a rebate for residential rooftop solar systems up to 15 kW, which most systems in Colorado will qualify for. The rebate is offered to customers of Colorado Springs Utilities and provides a cashback incentive of up to $0.10 per watt installed — an average of $750 in Colorado.6
  • EnergySmart Colorado: This is a rebate offered by EnergySmart, an energy efficiency-based company that partners with local utilities to provide rebates for efficiency upgrades. One such rebate is for 25% of your entire system cost or $2,500, whichever is lower.7
  • Black Hills Energy Solar Power Program: This is available to Black Hills customers and provides a gradual cash-back perk of $0.03 per kilowatt produced for systems up to 20 kW.8
  • Holy Cross Energy Renewable Energy Rebate: Customers of Holy Cross Energy can take a rebate of up to $250 per kW installed for systems up to 6 kW, or up to $100 per kW for systems over 6 kW.9 With an average system size of 7.5 kW in Colorado, the typical cashback amount will be around $750.
  • City of Boulder Solar Grant Program: Low-income residents of Boulder can get up to $1 per watt installed in rebates for going solar.10 This program is capped at $8,000 or 50% of your entire system value after all other incentives are considered, whichever is lower.

In addition to these more substantial and widely applicable rebates, there are additional perks offered by the following utility companies and municipalities:

  • La Plata Electric Association
  • City of Aspen
  • San Miguel Power Association
  • Roaring Fork Valley

Which Tax Incentives Are Best in Colorado?

We’ve mentioned all of the incentive programs available to Colorado solar customers above, but not all options are as appealing as others — for example, some take more time to apply for or provide a lower overall benefit. In the sections below, we’ll rank what we believe are the top incentives available in Colorado that you should make sure you take advantage of.

Federal Solar Tax Credit

In our opinion, the biggest bang for your buck in terms of potential savings when going solar in Colorado is the federal solar credit. This is offered to all residents, so you’re guaranteed to have access to the program.

We think this is the best incentive available, partially because applying is simple and takes minimal time, and the result provides a massive potential value. The average maximum credit in Colorado is just over $6,000, making the federal credit the most impressive perk in your area.

Net Energy Metering

Next, we recommend ensuring you can take advantage of net energy metering. You may have to contact your electricity provider to confirm you have the right meter installed, but that single phone call can end up saving you hundreds or, more likely, thousands of dollars over time.

Net energy metering is a breeze to take advantage of and provides massive benefits and savings over time.

Local Incentives

Finally, we recommend looking into the numerous local incentives we’ve mentioned above. Colorado has far more local rebate programs and perks than most other states, and most solar customers in the state will be able to take advantage of at least one of them.

All of the local benefit programs mentioned above require minimal time to apply for, and most provide cash-back incentives of up to several hundred dollars.

What’s the Near-Term Outlook for More Incentives in Colorado?

There currently aren’t any plans or pieces of legislation in the works to add more incentives in Colorado or to make the existing ones more beneficial.

Colorado homeowners are already spoiled with the number of incentives available to them compared to other states. The likelihood is there won’t be any additional perks offered in Colorado in the coming years, considering the state reached its RPS goal in 2020 and has yet to set a new one.

Read More About Going Solar in Colorado

FAQ: Colorado Solar Incentives

Given the popularity of solar conversions in Colorado, the EcoWatch team gets inundated with questions about solar incentives, rebates and other benefits available in the area. Below are some of the questions we see most often, along with our responses. If you have specific questions that aren’t answered here, reach out to our team of solar experts at solar@ecowatch.com.

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Article author
Dan Simms is an experienced writer with a passion for renewable energy. As a solar and EV advocate, much of his work has focused on the potential of solar power and deregulated energy, but he also writes on related topics, like real estate and economics. In his free time — when he's not checking his own home's solar production — he enjoys outdoor activities like hiking, mountain biking, skiing and rock climbing.
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Expert reviewer
Tori is an editor, writer, rock climber and travel enthusiast. A native New Yorker, she graduated from the College of Saint Rose with a degree in communications and journalism. Before joining EcoWatch, Tori helped to oversee communication strategies for the City of Philadelphia. Her experience also includes communications work in the nonprofit and academic sectors. A journalist by trade, she started her career covering political, environmental and social issues in New York's Hudson Valley. In her spare time, Tori can be found in the mountains climbing boulders, traveling to new cities or at one of Philadelphia's many music venues.

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