Solar Panels in Texas: How to Leverage Tax Credits for the Environment

Texas is shining bright in the solar energy world. It’s become a leader in the U.S., with enough solar panels installed to power 1.9 million homes. That’s a whopping 17,247 megawatts of solar power.

The state offers many solar incentive programs from local utility companies. These incentives help offset the cost of going solar and boost the state’s clean energy production. Residents also have access to the 30% tax credit for solar panels in Texas.

In the next sections, we’ll dive deep into the details of the solar tax credits. We’ll also unveil how they translate into real savings for homes. Here’s a breakdown of these insights:

Texas State Solar Incentives

While Texas doesn’t offer a direct solar rebate program, it still rewards homeowners who go green with a property tax exemption. This means the value of your solar system won’t increase your property taxes. The exemption can potentially save you hundreds or even thousands of dollars down the line.

Going solar in Texas just got more exciting. Thanks to the Renewable Energy Systems Property Tax Exemption, we can enjoy free and clear sunshine. We won’t have to worry about extra property taxes on our new solar panels.

Here’s the deal: when we install a solar energy system in our Texas home, the state exempts any additional value the system adds to our property from property taxes. That means if our solar panels increase our home’s value by $25,000, we don’t pay taxes on that additional $25,000. It’s like a built-in discount for going green and switching to clean and renewable energy.

Texas Local Solar Incentives

On top of the awesome federal solar tax credit, some areas in our state offer even more sweet deals to help us power up with the sun. Even if your electricity comes from a local company, don’t miss out on potential solar savings. Visit their website and quickly search to see if they have any solar incentives.

At Chariot Energy, we’ve got special “Rise & Shine” plans just for you. We’ll buy back 100% of the extra energy the panels generate, turning your sunshine into real savings. This offer is perfect if you already have solar or are about to make the switch.

How to Claim Local Incentives

It’s important to remember individual electric companies run local solar incentives. As such, their rules might differ. However, there are some general requirements:

• Residents must either already have solar panels installed or have a confirmed installation contract in place
• Be in a deregulated area of Texas, meaning one can choose their electricity provider (not everyone in Texas has this option)
• There’s an interconnection agreement with a company like Chariot Energy that operates on the ERCOT grid (this ensures the solar energy can flow back and forth)
• The home has a bi-directional smart meter installed by a utility company to track both the energy use and the excess generated from solar panels

After meeting these requirements, one is ready to explore the specific program a local electric company offers. Our website (Chariot Energy website) has dedicated sections outlining eligibility requirements. These sections also state the application process and potential rewards.

Net Metering in Texas

A solar panel is like a mini power plant that up the sun’s rays and generates clean energy for a home. But what happens when it produces more electricity than a household can use? In Texas, something awesome called net metering comes into play.

Any extra energy the solar panels generate gets sent back to the grid. The energy provider gives the customer solar credits in Texas. It’s like a reward for going green.

These credits then magically appear on future electricity bills. This way, they reduce the overall costs. Texas doesn’t have a blanket net metering policy for the whole state.

Luckily, many individual electric companies and even some local power companies like us at Chariot Energy offer these fantastic buyback plans. The technical details and how much one can get back for extra electricity vary. So, researching and choosing a plan that fits one’s needs and solar system potential are important.

Federal Solar Tax Credit

The Federal Solar Tax Credit or ITC is a nationwide incentive, started in 2006 but raised to 30% for the installation in August 2022. It cuts 30% off the cost of a home’s solar system. But how much tax credit for solar panels in Texas? – Let’s say a resident installs a 10-kilowatt system that costs $33,000; they just earned a $9,900 credit on their federal taxes.

It’s a credit, not a refund. As such, the solar panel tax credit in Texas doesn’t reflect in one’s bank account. Instead, it reduces the tax bill dollar for dollar.

So, if one owes $10,000 in taxes and has a $9,900 credit, they only pay $100. Any leftover Texas solar panel tax credit can hang around for up to five years. It may be used in future tax seasons.

What Does the Federal Solar Tax Credit Cover?

The credit applies to new PV panels that convert sunlight into electricity. It also covers wiring, inverters, and mounting hardware. It’s because these accessories ensure the solar system runs smoothly.

Battery systems charged by your panels are also eligible. The same applies to labor costs like permits, inspections, and developer fees. Even the sales tax paid on all these eligible expenses can be covered by the credit.

Eligibility Rules for the Federal Solar Tax Credit

Solar panels must have been installed between January 1st, 2006, and December 31st, 2034. The Texas solar tax credit is strictly for new solar systems, not used or repurposed ones. Even more, the new solar panels need to be on one’s primary or secondary residence (or even contribute to an off-site community project that powers a home).

Leasing or buying electricity from a solar system won’t cut it. As such, this credit is only reserved for proud solar owners who reap the benefits. It also caters to condo and apartment dwellers.

Claiming the Federal Solar Tax Credit

Solar providers should equip their customers with all the necessary paperwork. The paperwork includes receipts and a pre-filled IRS Form 5695. Part I of the form must be filled to consider the solar system “qualified solar electric property costs.”

The applicant must follow the instructions on lines 6a and 6b of the form. Then, they can head to line 14, using the IRS worksheet to ensure they maximize their credit based on any limitations. Finally, the process ends by completing lines 15 and 16 and transferring that figure to Schedule 3 (Form 1040), line 5 for nonrefundable credit.

For solar systems that are up and running between 2022 and 2032, the full 30% federal tax credit applies. The credit starts to shrink after 2032: In 2033, the credit dips to 26%, followed by 22% in 2034. After that, in 2035 and onwards, the credit disappears unless Congress decides to extend it.

Residential property owners can only claim the federal solar tax credit on a rental property if they also live there for some time. The more they live there, the bigger the tax credit. For instance, if the new solar panels cost $20,000 and the owner lives there half the year, they could score half the credit, which is $3,000.

Estimated Solar Savings in Texas

Texas is practically dripping with sunshine, ranking second in the nation for solar power potential. So, what does that mean for residents? Well, harnessing that sunshine with a home solar system could save some money on the electric bill.

Let’s break it down: a standard 6 kW solar system soaks up solar energy, generating over 9,500 kWh of clean energy each year. With the average Texan paying around 14.26 cents per kWh, that translates to a $1,350 cut off the annual electricity bill. It’s a great way to turn solar power into savings.

Now, installing a solar system does come with an upfront cost. But here’s the good news: Texas is brimming with solar incentives to help households. First, the 30% federal tax credit slashes a cool $4,410 off the system price. And on top of that, households might be eligible for additional state or local incentives.

Let’s say a resident gets some extra state perks, and the system cost drops to $10,290. With those $1,350 annual savings, they’ll see a payback period of just 7-8 years. And remember, those panels are built to last 30 years (or more), so the savings keep flowing long after recouping the initial investment.

Reap the Rewards of Tax Credit for Solar Panels in Texas

Home solar systems help reduce reliance on fossil fuels, and a tax credit for solar panels in Texas sweetens the deal. With falling costs and increasing efficiency, there’s never been a better time to join the solar revolution. This way, you invest in your home, planet, and wallet.

Ready to positively impact the environment and your wallet while enjoying some of the most competitive rates in Texas? Look no further than Chariot Energy’s 100% renewable energy plans, complete with our industry-leading Solar Buyback programs.

Head over to our Find My Plan section now to discover the perfect Solar Buyback plan for your needs, and for any questions, reach out to us by chat module or phone. Get solar today and save big!