California Solar Tax Credit: What you Need to Know
The California Solar Tax Credit is the California Solar Initiative
California is the biggest market for residential solar in the country. In fact, among the 10 states with the most solar, California alone has more solar than all the others combined! I think we can safely say that in California the solar industry – unlike in other states where solar is only now just catching on – is a matured industry, with a lot of experience and growth under its belt.
Keeping that in mind, solar incentives in California are relatively sparse. Obviously it’s not because the state hates solar – you can’t be the biggest solar market in the US and not love solar! Really, it’s that solar incentives exist to jumpstart the solar industry by overcoming solar’s biggest problem: high costs, until it can survive on its own. Because of this, organizations who fund solar incentives (usually the state or local governments) set limits or ‘caps’ on the amount of incentives they’ll provide for going solar, typically based on total installed capacity (think megawatts).
The solar industry in California is so matured, many of these solar incentives are now defunct! It may seem ironic, but incentives beyond the federal tax credit, state tax exemptions, and a few local rebates, are actually quite scarce in the most pro-solar state in the US! However, with the incentives that do exist, coupled with California’s high utility rates and sunny skies, you can still see a great return on your investment when you go solar.
To help get you started, below is a summary of the financial incentives that are available (or recently were) for California homeowners going solar.
California Solar Initiative Residential Rebates
In 2006, the California Public Utilities Commission (CPUC) set aside $2.3 million of financial incentives for homeowners installing solar. As the CPUC only has authority over investor owned utilities working in the state (as opposed to municipal utilities like SMUD and LADWP), incentives are only available to customers of the ‘big three’ utilities: Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison.
The incentives were divided among three programs all under the California Solar Initiative badge: the general market program, the Multi-family Affordable Solar Housing (MASH) program, and the Single-family Affordable Solar Housing (SASH) program.
While now defunct, under the general program, any homeowner in the state who installed solar was eligible for an upfront rebate for their installation. The program was extremely popular and as of 2017 all funding for the program has run out, so homeowners who go solar in the future will not be eligible for these incentives.
However, incentives are still available for the low-income multi- and single-family housing programs!
Affordable Housing Programs
Of that $2.3 million, the California Solar Initiative set aside a certain amount for both the Multi-family Affordable Solar Housing (MASH) and the Single-family Affordable Solar Housing (SASH) programs. Both programs offer one-time upfront rebates for solar installations for low-income families and both are administered by GRID Alternatives, a solar non-profit organization.
SASH offers rebates equal to $3.00 per watt for solar installations in the service territory of San Diego Gas & Electric, Pacific Gas & Electric, and Southern California Edison. To receive the rebate, the home must be occupied by the actual homeowner and the household’s total income must 80% or less than the average income in the area.
While the program is now waitlisted as of 2017, MASH provided one-time upfront rebates between $1.10 and $1.80 for solar installations on multi-family buildings. The rebate amount depended on what area of the building the solar electricity offset, with the program offering higher incentives for electricity used by tenants than common areas like lobbies.
Federal Renewable Energy Tax Credit
All homeowners who purchase their own solar installation are eligible to receive the 30% federal Renewable Energy Tax Credit. As you can probably deduce from the name, it’s a tax credit, not a deduction and as such, is equal to a dollar-for-dollar rebate on your solar installation!
The tax credit goes to the owner of the installation, so to be eligible to receive this credit you must either purchase your installation in cash or finance through a loan. If you lease your system or finance through a power purchase agreement (better known as a PPA), the solar installer is eligible to receive the incentive as the owner of the installation. Don’t worry too much about this, as most installers pass these savings on to you indirectly by lowering your monthly bills accordingly.
The 30% tax credit is set to partially expire in 2019, at which time it will drop to 26% until 2021, then 22% until 2022, when it finally expires completely.
State Property Tax Exclusion
This property tax exclusion allows homeowners to exclude the value of their solar installation from their property tax calculations as follows:
- 100% of the value of the solar installation.
- 75% of the value of “dual-use” equipment. For example, if you install thermal solar panels on your roof to preheat your water, your hot water tank is considered “dual-use”.
- Originally set to expire in 2016, the California legislature subsequently extended the exclusion until 2024, at which point it is set to expire.
City-Sponsored Solar Incentives
Currently, San Francisco is the only city or town in California directly offering financial incentives for residential solar installations (some municipal utilities offer rebates, see section below).
Through the GoSolarSF program, the City of San Francisco offers rebates to homeowners, businesses, and non-profits. The city offers homeowners rebates from $500 to $3,500 depending on the size of the installation, the location of the installation, and if local installers are used.
For the 2016 to 2017 cycle, San Francisco has set aside $1.5 million of incentives for homeowners and businesses going solar, with just under $500,000 of incentives requested as of January 2017. If you’re in the San Francisco area, take advantage of one of the last solar rebates in the state while it lasts!
Utility-Sponsored Solar Incentives
There is also a handful of smaller municipal utilities providing rebates to local homeowners who install solar. While there are far too many towns and cities throughout California to list each and every incentive program here, below is a quick overview of a few representative rebate programs. Be sure to call your local utility or city to see if they are currently offering solar incentives!
Pasadena Water and Power
Through the Pasadena Solar Initiative, the local municipal utility offers rebates to homeowners, businesses, and non-profits who install solar, with the goal of installing 14 megawatts by the end of 2017. The utility provides $0.45/watt for residential solar installations under 100 kilowatts in size and $1.80/watt for low-income residential installations under 100 kilowatts. For an average-sized solar installation of 5.5 kW, this rebate adds up to $2,475!
City of Ukiah’s Electric Department
Until June 2017, at which point the program expires, the City of Ukiah’s Electric Department offers $0.28/watt for residential solar installations, with a maximum payout of $7,000.
Riverside Public Utilities
Riverside Public Utilities’ GreenRiverside program offers $0.25/watt for residential solar installations, with no cap on the total amount. The utility has helped install over 16 megawatts of solar to date!
Even without the numerous incentives that California homeowners enjoyed a few years ago, you can save money going solar. While it’s not the good old days, with the federal tax credit alone, you can drop your total cost to go solar by thousands of dollars! Just be smart and take advantage of all the tax incentives and rebates that you can!
Photo Credit: CC License via Flickr