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2021 Texas Solar Tax Credits, Incentives & Rebates

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Austin Texas suburb solar energy production to fight climate change. Aerial drone view
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Though Texas still meets the majority of its massive energy needs through crude oil and natural gas, the Lone Star State is rapidly expanding its deployment of renewable energy technology like solar. A below-average cost of solar panels, as well as Texas' solar tax credit and rebate opportunities make it one of the top states for solar in the U.S.

The long, sunny days in Texas provide massive potential for homeowners weighing the pros and cons of solar energy. Despite renewable energy still maintaining a relatively low percentage of the state's total energy supply, there has been strong solar market growth in Texas. In fact, the state installed the second-most residential solar power by watt in the country in 2020 and led the country in installations in the second quarter of 2021.

So, what kind of financial incentives are available to Texans installing solar panels? Let's take a look.

Texas Solar Tax Incentives

Because Texas typically assesses and administers its taxes locally, it doesn't offer many statewide tax incentives. However, while there is no Texas solar tax credit, all homeowners are still eligible for the federal solar tax credit, and the state does offer local property tax exemptions for both photovoltaic solar and wind-powered renewable energy systems.

Local Texas Solar Incentives and Solar Rebates

The sunny climate and prevalence of top solar companies in Texas make the state one of the easiest places to install a solar energy system. However, the state government doesn't do much to incentivize home solar.

Luckily, many local governments have implemented their own solar incentives and rebates for homeowners in Texas.

Texas Solar IncentiveProgram Overview
Texas Net Metering ProgramsCustomers who generate their own electricity via solar panels may be eligible for a net metering program in Texas, which credits homeowners for excess energy fed back to the grid.
Texas Solar Rebate ProgramsHome and business owners who purchase solar panels in Texas may be eligible for a number of incentives and rebates depending on their local utility company or municipality.

Texas Net Metering Programs

Net energy metering (NEM), or net metering, allows customers to feed the excess energy generated by their solar panels back to the grid in exchange for energy credits from their local utility company. As most solar energy systems generate more energy than can be used during the day, this incentive provides homeowners additional savings on their electricity bills and lowers the demand for grid-supplied electricity in the region.

There is no statewide net metering program in Texas — eligibility will depend on your local utility company or municipality. Many utilities in the state offer NEM, such as American Electric Power (AEP), CPS Energy, Green Mountain Energy, El Paso Electric, TXU Energy in Dallas and more. To check for net metering in your area, we recommend checking out the Database of State Incentives for Renewables & Efficiency (DSIRE).

Texas Solar Rebate Programs

Similar to Texas solar tax credit and net metering availability, there is no statewide solar rebate program. Rather, specific cities, utility companies and municipalities offer a variety of local incentives and rebates for homeowners investing in clean energy and energy-efficient technology.

For example, utility companies such as Austin Energy and cities including San Marcos, Sunset Valley and Denton offer rebates for solar installations. DSIRE has a full list of local rebates, solar loan programs and more.

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, or ITC, for installing solar panels as well as solar batteries and other energy storage systems. You can claim the ITC on your federal tax returns, and it deducts 26% of the total cost of the system from your taxable income.

The ITC 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 success has continually been extended for solar installations. It's important to note that, unless Congress extends the credit, it is set to phase out by the end of 2023.

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

  • You have installed a residential solar energy system at any point from 2006 through the end of 2022.
  • You have placed the solar energy system in a residential location. It does not have to be your primary residence.
  • You own the solar energy system, either having paid for it in cash or by taking out a solar loan. Homeowners who lease solar panels are not eligible to claim the ITC.

We understand that for most homeowners, the decision to invest in a solar energy system comes down to cost. To see how much you would pay to install a solar panel system on your roof, you can get a free, no-obligation quote from a top solar company near you by filling out the form below.

FAQs: Texas Solar Incentives

Does Texas have a solar rebate?

Texas does not have a statewide solar rebate, but many local governments and utility companies offer rebates to residents who own solar panels. These solar rebates will vary in scope but can often lower the cost of purchasing a solar PV system by 10-20%.

How much is the tax credit for solar panels in Texas?

All American households are eligible for the federal solar tax credit, so residents of Texas can claim 26% of the cost of their solar energy system on their federal tax returns. Texas also offers a statewide property tax exclusion that ensures property taxes won't rise after your home value increases due to a solar panel installation.

How do I apply for the solar tax credit in Texas?

Claiming a tax credit for purchasing solar panels can be done when filing your federal tax returns. Once the claim is filed to the IRS, the 26% credit will be deducted from your tax payment.

Is Texas a good state for solar?

Long, sunny days and below-average solar installation costs make Texas one of the best states in the U.S. for generating energy with solar panels. The ample sunshine provides more than enough energy for most homes, giving huge benefits to homes in Texas equipped with solar panels.

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