Introduction
If you’re a California homeowner or business owner considering solar energy, you’re in luck. Solar power tax credits in California can significantly reduce the cost of installation, making renewable energy more affordable than ever. With federal and state incentives, property tax exclusions, and net metering programs, switching to solar can lead to substantial financial savings.
In this guide, we’ll break down all the key tax credits, rebates, and incentive programs available in California to help you maximize your solar investment.
1. Federal Solar Investment Tax Credit (ITC) – 30% Savings
The Investment Tax Credit (ITC) is a federal incentive available to all U.S. residents, including Californians, that allows homeowners and businesses to deduct 30% of the cost of a solar system from their federal taxes.
How Does the ITC Work?
- The ITC covers 30% of the total cost of solar system installation, including equipment and labor.
- Available to both residential and commercial solar systems.
- Unused portions of the credit can be carried over to future tax years if you don’t owe enough in taxes for a full deduction.
- This 30% credit is available through 2032, after which it will drop to:
- 26% in 2033
- 22% in 2034
- Expires for residential solar systems in 2035 unless extended by Congress.
💡 Example Calculation: If your solar installation costs $25,000, you could claim a $7,500 tax credit when filing your federal taxes.
Where to Apply:
The ITC is claimed when filing federal taxes using IRS Form 5695 (IRS.gov).
2. California’s Active Solar Energy System Property Tax Exclusion
Installing solar panels in California will not increase your property taxes due to the Active Solar Energy System Property Tax Exclusion.
What Does This Mean?
- Normally, home improvements increase property value and taxes.
- This exclusion prevents an increase in assessed value when installing solar.
- This benefit applies to both residential and commercial properties.
- The program is currently available through the 2024–2025 fiscal year.
💡 Key Benefit:
If you install a solar system worth $30,000, your property taxes won’t increase due to the added value.
More Details: California Board of Equalization
3. Net Energy Metering (NEM) – Earn Credit for Excess Solar Power
California’s Net Energy Metering (NEM) program allows homeowners to sell excess solar energy back to the grid, reducing overall electricity costs.
How NEM Works:
- Solar panels produce more electricity than you use during the day.
- The excess energy goes back into the grid, and you receive credits on your bill.
- At night or on cloudy days, when you need power, you use those credits instead of paying for electricity.
NEM 3.0: What Changed?
- In April 2023, NEM 3.0 was implemented, reducing the value of solar credits.
- Under NEM 3.0, exported electricity is worth about 75% less than under NEM 2.0.
- This makes solar battery storage more valuable, as it allows homeowners to store power instead of selling it back at lower rates.
💡 Takeaway:
If you are considering solar, pairing it with a battery system can increase your energy savings under the new NEM 3.0 rules.
Learn More: California Public Utilities Commission
4. California Solar Initiative (CSI) – Rebates & Programs
The California Solar Initiative (CSI) was a state-funded program that provided rebates to homeowners and businesses for installing solar panels. While most CSI programs have ended, some local and utility-based rebates may still be available.
Potential Local & Utility Solar Rebates:
- Self-Generation Incentive Program (SGIP): Offers rebates for solar battery storage systems.
- City & County Rebates: Some municipalities still offer solar incentives—check with your local government.
- Utility Company Programs: Utilities like PG&E, SCE, and SDG&E have special solar programs.
💡 Check for Local Incentives:
Search for available programs at Go Solar California.
5. Solar Battery Storage Rebates – Save More with SGIP
The Self-Generation Incentive Program (SGIP) provides cash rebates for Californians installing solar battery storage systems.
SGIP Battery Rebate Tiers:
- Standard Residential Storage: Up to $200 per kWh of installed battery capacity.
- Equity Resiliency Program: Provides higher incentives for low-income and fire-prone area residents.
💡 Why Batteries?
- Store solar energy for nighttime use.
- Reduce reliance on the grid during power outages.
- Maximize savings under NEM 3.0.
Find Available Rebates: SGIP Program
6. Additional Ways to Save on Solar in California
Beyond tax credits and rebates, there are more financial benefits when going solar:
PACE (Property Assessed Clean Energy) Financing
- Lets homeowners finance solar installations through property tax assessments.
- No upfront costs, and repayment is made through property tax bills.
Solar Panel Leasing & PPAs
- Some companies offer zero-down solar leasing or Power Purchase Agreements (PPAs).
- Instead of buying, you pay a fixed rate for electricity—often lower than utility rates.
FAQs
1. What is the federal solar tax credit (ITC)?
The Investment Tax Credit (ITC) allows homeowners and businesses to deduct 30% of their solar system costs from their federal taxes. This credit applies to solar installations through 2032 and decreases after that.
2. Can I claim the California solar tax credit in addition to the federal ITC?
California does not offer a state-level solar tax credit. However, residents can still claim the federal ITC and benefit from state incentives like the property tax exclusion and net metering.
3. How do I claim the federal solar tax credit?
You can claim the 30% federal solar tax credit when filing your taxes by using IRS Form 5695. If you don’t owe enough taxes to use the full credit, you can carry it forward to future years.
4. Does adding solar panels increase my property taxes?
No. Thanks to California’s Active Solar Energy System Property Tax Exclusion, your home’s assessed value will not increase due to solar panel installation, meaning no higher property taxes.
5. What is California’s Net Energy Metering (NEM) program?
Net Energy Metering (NEM 3.0) lets homeowners sell excess solar energy back to the grid for bill credits. However, under NEM 3.0 (2023 update), credit values have been reduced, making solar battery storage more valuable.
6. Are there rebates for solar battery storage in California?
Yes! The Self-Generation Incentive Program (SGIP) offers rebates for solar batteries, with higher incentives available for low-income and wildfire-prone areas.
7. How much can I save with California solar tax credits and incentives?
Your total savings depend on system cost and available incentives. With the 30% federal ITC, property tax exclusion, NEM credits, and battery rebates, you could save thousands of dollars.
8. Is there a deadline to claim the solar tax credit?
The 30% ITC is available through 2032, then drops to 26% in 2033, 22% in 2034, and expires for residential systems in 2035 unless renewed by Congress.
9. Can I get a solar tax credit if I lease my system?
No. If you lease solar panels or enter a Power Purchase Agreement (PPA), the tax credit goes to the company that owns the system, not the homeowner.
10. How do I check for local solar rebates?
Some utilities and cities offer additional solar incentives. Visit Go Solar California to find available rebates in your area.
Conclusion: Should You Go Solar in California in 2025?
Absolutely! With the 30% federal tax credit, California’s property tax exclusion, net metering, and battery storage rebates, there has never been a better time to switch to solar.
💡 Take Action Today: ✔ Check your eligibility for tax credits & rebates.
✔ Get quotes from multiple solar installers.
✔ Consider battery storage to maximize savings under NEM 3.0.
Disclosure: As an Amazon Associate, I earn from qualifying purchases.
