Solar Energy Incentives
While solar panels can pay for themselves over the long run, there are many solar incentives that can greatly shorten the time and increase your return on investment. These benefits are great, but keep in mind, they benefit the owner of the solar system, so if you are leasing your system, you are not the owner and therefore do not receive these benefits.
- Maryland Residential clean energy grant program - The Maryland Energy Administration (MEA) offers this $1,000 grant to eligible Maryland homeowners who have installed qualified clean energy systems at their homes. Once this home solar system is installed and operational, we will work with you to secure the grant money. More information is on the MEA website.
- Solar Renewable Energy Credits (SREC) - SREC’s (pronounced S - REX), are your chance to take part in the renewable energy trade market. The Renewable Portfolio Standard (RPS) requires utilities to receive a portion of their electricity from renewable energy. This is managed through credits. For every 1,000 kWh (1 MWh) of electricity produced, you earn roughly 1 SREC. The value of an SREC is determined by supply and demand as well as fees imposed on utilities for not meeting solar energy targets. Currently in Maryland, the market value of one credit is about $74. Therefore, a solar system that produces over 14,000 kWh could earn 14 SRECs at $74 = $1036 per year in revenue paid to the solar system’s owner. We will register your system and help you participate in this exciting and lucrative program.
- The federal solar tax credit - This is the big one and time is running out. The federal government offers an Investment Tax Credit (ITC). Through 2022, this is a 26% credit on your income taxes.
To be clear, this is not a deduction but a tax credit - which is much better. For example, if you install a system in 2021 which costs $30,000, you will be able to take a 26% tax credit ($7,800) to be used to offset future tax payments to the IRS, dollar for dollar, until the $7,800 credit is gone.
In 2023 that goes down to 22%. The tax credit percentage is set by the year it is installed so for the full 26% your system must be installed in 2022. Pending any new legislation, in 2023 and beyond, the benefits for commercial solar systems continue at 10%, but there will no longer be a residential solar tax credit. Please discuss with a tax professional to understand how solar tax credits will work in your case. You can access form 5695, Residential Energy Credits in the IRS web site, or see our article on how to file for the solar tax credit.
- Maryland Property Tax Exemption - Due to a series of Maryland legislative acts, solar systems are exempt from state and local property tax assessments. This means you can add value to your home or business without adding additional tax liability. No other home improvement or business property improvement can do that for you while it is also reducing cost and generating income. More details are on the Energy Department’s website and we always recommend discussing your unique case with a tax professional.
- Modified Accelerated Cost Recovery System - For businesses, the tax code allows for solar panels to depreciate over an accelerated period, five years, for an increased return on investment. We recommend discussing with a tax professional.
- Maryland Net Metering - Net metering is a billing arrangement that allows your solar panels to supply any excess power they produce to the power grid. While the rate the utilities charge for electricity and the rate they are willing to pay you differ, there may be a small income generated depending on your consumption and production balance.