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California Solar Incentives: Tax Credits & Rebates Guide (2022)

By Jacob L.

With over one million solar installations across the state, California is one of the top leaders of the American solar industry. The passage of recent legislation mandating the addition of solar panels to all newly constructed homes and buildings will only increase the number of photovoltaic (PV) systems in California.

In addition to being a leader in solar panels installed, California is also home to some of the most generous solar incentives and rebates for property owners anywhere in the world. Plus, the rise in energy prices across the world should only serve to remind you of the importance of producing your own electricity. By having a solar power system in your home, you can ensure minimal initial costs and steady savings for decades to come.

For these reasons and more, it is a great time to buy a new solar energy system in California. Keep reading to learn all about how your purchase and installation of solar panels in California can be made more financially accessible.

Why Go Solar in California?

Thanks to its incredibly sunny climate, abnormally high electricity costs, and commitment to reducing carbon emissions, California is a hotspot for solar energy production. With an average of 248 sunny days per year in Los Angeles, California, it is no wonder that solar panels line the roofs of homes across the golden state. Compared to the American average of 205 sunny days per year, California is well-positioned to produce large amounts of solar power.

California is also a great place to invest in solar energy because of the preexisting availability of local solar providers throughout the state. These providers offer customers the opportunity to entertain a variety of competing quotes while ensuring that they receive the best quality service and equipment.

Finally, solar panels can dramatically increase your home’s value. According to Zillow, the average home experiences a 4.1% increase in its value after the addition of a solar power system. In California, the average home value increase from solar panels will be close to $18,324.

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California Solar Cost

The average total cost of solar installations in California ranges from $11,815 to $15,985. On a cost-per-watt basis, solar panel installation in California is $2.78. These costs have come down significantly in recent years. Obviously, if you purchase a larger system (more watts), your cost will increase in addition to your energy production. With energy bills increasing amid high oil and gas prices, the relative cost of solar is bound to decline further.

How Much Can You Save on Solar in California?

Despite the upfront cost of purchasing and installing your solar system, you can save lots of money per year, thanks to the electricity your system produces. The mechanism behind the savings works like this: when solar panels produce electricity for your home, they reduce the amount of energy that you pull from the grid, thus lowering your utility bills.

People living in California save as much as $2,000 per year on electricity bills after paying off the cost of their initial purchase. With a payback period of 4 to 4.9 years, you can be saving thousands of dollars per year in almost half a decade. Over the 20 to 25-year lifetime of your photovoltaic (PV) equipment, you will experience net savings between $68,120 and $83,258.

The Best Solar Incentives, Tax Credits, & Rebates in California

There are several public and private incentives in California that help you save on your purchase of solar panels in California:

Incentive Summary End Date
Federal Solar Tax Credit (ITC) California residents can take advantage of the Federal Solar Tax Credit and get a discount of 26% applied to their tax return. December 31st, 2022
California Solar Property Tax Exemption California will exempt property taxes on the added value to your home that comes with installing a solar energy system. None
Net Metering Net metering allows homeowners that create excess energy to use it as a credit on their next electric bill. All energy providers are required to offer this option to homeowners. None
Self-Generation Incentive Program (SGIP) If you buy a home solar battery along with rooftop panels in California, you can get a rebate for the installation of the energy storage system. The rebate can be as high as $1,000 per kilowatt-hour. None
Single-Family Affordable Solar Housing (SASH) Program Low-income households in California can get a one-time, capacity-based incentive of $3,000 for each kilowatt of home solar installed through the SASH program. Qualifying recipients must have total incomes at 80% of the area median income or below. None
Sacramento Municipal Utility District (SMUD) Solar Rebate Residents of Sacramento can receive a solar incentive of $300 to install a new rooftop solar system. None
GoSolarSF Solar Rebate Residents of San Francisco can receive a cash incentive of $100 to $2,000 per kilowatt of home solar installed for up to 4 kilowatts. The incentive will vary by system size, location, and applicant income. None
USDA REAP GRANT REAP assists agricultural producers and rural small businesses reduce their energy costs and consumption by providing loan financing and grant funding to purchase and install renewable energy systems. Eligibility for the REAP program is dependent on you being an agricultural producer, with at least 50 percent of your gross income coming from agricultural operations and small businesses in eligible rural areas. None
Solar Sales Tax Exemption Although a sales tax exclusion doesn’t apply to all purchases of solar energy equipment, some solar power facilities may qualify as farm equipment and be eligible for a partial exemption of the sales tax. This means you could tax exclusion of 5.25% on renewable energy equipment and machinery that is primarily used in agricultural activities. None

Federal Solar Investment Tax Credit (ITC)

The Federal Solar Investment Tax Credit (ITC) is a 26% federal tax credit available for home solar systems purchased and installed by the end of 2022. This is a significant chunk of money taken off their personal income taxes. Plus, the ITC has done a great job expanding the country’s solar industry. It has helped create hundreds of thousands of jobs while bringing billions of dollars into the economy since being enacted in 2006.

California Solar Property Tax Exemption

California will exempt property taxes on the added value to your home that comes with installing a solar energy system.

California Net Metering

Electricity companies in California have all adopted net energy metering, which is a policy that ensures your solar panels will be connected to the public-utility power grid, and that surplus power created by your panels will be transferred to the grid. You can offset the cost of power drawn from the electricity grid as a result of net metering.

The minimum amount of compensation that you’ll receive is the avoided-cost rate, which is below the retail rate. While the policy specifics of net metering programs will vary among providers, it remains hugely beneficial for owners of solar energy systems.

Self-Generation Incentive Program (SGIP)

Californians that buy a home solar battery along with rooftop panels can get a rebate for the installation costs of the energy storage system. The rebate program may be as high as $1,000 per kilowatt-hour.

Single-Family Affordable Solar Housing (SASH) Program

If you belong to a low-income household or a disadvantaged community in California, you can get a one-time, capacity-based incentive of $3,000 for each kilowatt of home solar installed. Eligible recipients must have total incomes at 80% of the area median income or below.

Sacramento Municipal Utility District (SMUD) Solar Rebate

Residents of Sacramento can receive a solar incentive of $300 to install a new rooftop solar system. Unfortunately, if you don’t live in Sacramento, you are ineligible for this incentive.

GoSolarSF Solar Rebate

Residents of San Francisco can receive a cash incentive of $100 to $2,000 per kilowatt of home solar installed for up to 4 kilowatts. The incentive will vary by system size, location, and applicant income. Again, this is a location-specific incentive that only benefits residents of San Francisco.

Commercial California Solar Incentives

Solar Incentives for Nonprofits and Businesses in California

Unfortunately, there are few to no other incentives available specifically for nonprofits and businesses in California. However, some private and local incentive programs may exist depending on where you live and which utility company you use.

USDA REAP Grant

The United States Department of Agriculture (USDA) has launched a program designed to increase investments in clean energy called the Rural Energy for America Program (REAP). REAP helps agricultural producers and rural small businesses lower their energy costs and consumption by financing loans and grant funding to purchase and install renewable energy systems.

You are eligible to participate in the REAP program if you are an agricultural producer with at least 50 percent of your gross income coming from agricultural operations or a small business in eligible rural areas.

State Sales Tax Exemption

Although a sales tax exemption doesn’t apply to all purchases of solar energy equipment, some solar power facilities may qualify as farm equipment and be eligible for a partial exemption of the sales tax. This means you could exempt a tax of 5.25% on renewable energy equipment and machinery that is primarily used in agricultural activities.

Key Takeaways: The Best California Solar Incentives

California is likely the best place in the world to invest in residential, commercial, or industrial solar energy systems. With lots of sun to power your systems and a government that offers tons of tax incentives to install solar panels, what more could you ask for? There is really no reason not to buy a solar energy system, especially with variable energy prices around the world and climbing utility bills at home. If you are interested in purchasing, there are many great companies that will help get you set up.

California Solar FAQ

Is solar worth it in California?

Yes, we highly recommend solar energy systems in California. Solar can save you tons of money on your utility bills and help reduce your production of emissions and your carbon footprint. Plus, a variety of federal, state, and local financial incentives are available in California to make the purchase of solar panels accessible to anyone!

How much will my electricity bill go down with solar in California?

People living in California save as much as $2,000 per year on electricity bills after paying off the cost of their initial purchase. With a payback period of 4 to 4.9 years, you can be saving thousands of dollars per year in almost half a decade. Over the 20 to 25-year lifetime of your PV system, you will experience net savings between $68,120 and $83,258.

How much does it cost for solar panels in California?

The average total cost of solar installations in California ranges from $11,815 to $15,985. On a cost-per-watt basis, solar panel installation in California is $2.78. These costs have come down significantly in recent years.

Can you get solar panels for free in California?

Although you won’t find ‘free’ solar panels in California, residents of California are lucky to have the support of numerous federal, state, and local financial incentives that will help to minimize the costs associated with purchasing a new solar energy system.

What solar rebates are available in California?

There are many federal, state, and local financial incentives for purchasers of solar energy systems in California. These include the federal government’s Solar Investment Tax Credit (ITC), the California Property Tax Exemption, and many local and private incentives.

How many homes in California have solar panels?

There is enough solar installed in California to power over nine million homes, and solar accounts for 25.29% of the state’s electricity production.

Do solar panels increase property taxes in California?

No, your taxes won’t increase. California will exempt property taxes on the added value to your home that comes with installing a solar energy system. This is another excellent reason to invest in solar!

How much can you write off for solar panels on taxes in California?

California taxpayers can choose to write off lots of the costs associated with the purchase of new solar panel systems. For more information about incentive programs, check out the California government’s website.

House Method’s Solar Companies Rating Methodology

At House Method, transparency and trust are our most important values for the reader. That’s why we took the time to create an objective rating system and score each solar energy company/service according to our methodology.

Our research team dug deep into the fine print of contracts, combed through more than one hundred customer reviews, and thoroughly investigated all of each solar energy company’s services, costs, and products. We’ve done the homework for you by researching nearly all of the solar energy companies on the market so you can have the information you need to make the best choice for your home.

We developed a formula to objectively determine the best solar energy companies and give each a score out of 100 based on the following criteria:

  • Plan Options (30): Do they provide a variety of plan options? We looked at the number of plans each solar energy company offered and the flexibility of adjusting the plan.
  • Services offered (20): How many services are offered in each plan? We looked at whether the company manufactures its own solar panels, whether it contracts out installation, and what additional products each company offers.
  • Trust (10): What do customers say after their solar panels are installed? Does this company offer a guarantee? We considered how satisfied customers are post-service if the company does what it says it will, BBB accreditation, and service guarantees.
  • Prices (10): How reasonable are the costs of the plan or service in comparison to the industry average? We compared the costs of each company to competitors that offer the same solar energy services.
  • Unique perks (10): Does the company offer discounts or special services such as financial incentives, rebates, or a useful mobile app? We looked for extras each company offers that set them apart from the competition.
  • Customer Service (10): How is the customer experience when contacting the company? We considered the speed of response, weekend/holiday availability, and ease of communication through phone calls, email, and online chat functions.
  • Nationwide availability (10): How many states does the company offer its services? Companies that operate nationally and in all zip codes are favored over those with limited availability.

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