Texas Solar Tax Credit 2024 – Incentives & Claiming Process!

The Investment Tax Credit (ITC) stands at a substantial 30% of the total system cost in 2024. This applies to all residents of the United States, including Texans. So, if you install a $20,000 solar energy system, you can claim a $6,000 tax credit when you file your federal taxes the following year.

Texas Solar Tax Credit 2024

Texas, known for its abundant sunlight and robust solar potential, has emerged as a leading hub for solar energy adoption. With the federal solar tax credit and various local incentives, homeowners and businesses alike can reduce the cost of solar installations. 

The Federal Solar Tax Credit, also known as the Investment Tax Credit (ITC), is a crucial incentive for solar energy adoption in the United States. As of 2024, homeowners and businesses can claim a 30% tax credit on the installation costs of solar panels. 

The ITC is a tax reduction, not a refund. It will decrease after 2032 and expire in 2035 unless renewed. In 2024, homeowners can claim a 30% credit on solar system costs, making it a great time to invest in solar energy.

How much do solar panels cost in Texas?

The cost of solar panels in Texas varies depending on several factors, but here’s a breakdown to help you estimate the investment:

  • Price per Watt: The average cost per watt for solar panels in Texas falls between $2.35 and $3.18 (as of June 2024).
    • Average Cost per Watt: $2.35/W (including installation)
    • 5 kW System Cost: $11,774 – $13,540 (before federal ITC)
    • 10 kW System Cost: $23,548 – $27,080 (before federal ITC)
  • System Size: The size of your solar panel system, measured in kilowatts (kW), is the most significant cost factor. 
  • Larger systems generate more electricity but require more panels and installation work, driving up the price. Texas homes typically require a system size between 5 kW and 10 kW to meet their energy needs.
  • Panel Efficiency: Higher efficiency solar panels convert more sunlight into electricity, potentially reducing the number of panels needed. However, they tend to be more expensive per watt.
  • Brand and Equipment: Different solar panel manufacturers and installation companies offer varying equipment and service packages, which can influence the overall cost.
  • Roof Factors: The size, shape, and condition of your roof can affect installation complexity and potentially add costs.

Texas Solar Tax Credit 2024 Financing Options

There are several ways to pay for your solar panel system, allowing you to spread out the cost and avoid a large upfront payment. Here are the most common options:

Cash Purchase: 

  • This offers the best long-term value. You’ll own the system outright and enjoy the full financial benefits.

Solar Loan: 

  • Similar to a car loan, you borrow money to pay for the system and own it upon full payment. This option often comes with little to no down payment but requires good credit. 
  • Look for subsidised clean energy loans offered through local programs – they typically have the lowest interest rates. 
  • Home equity or personal loans are alternative options, but be prepared for potentially higher interest rates or upfront fees.

Solar Lease or Power Purchase Agreement (PPA): 

  • A third-party company owns the system and either leases you the panels (solar lease) or sells you the electricity they generate (PPA). 
  • This option typically requires minimal upfront costs, but it often comes with lower long-term savings compared to ownership. 
  • Carefully review the terms of any lease or PPA – you could be locked into a long-term contract with limited control over the system.

Top Solar Tax Credit and Incentives in Texas for 2024

While Texas doesn’t offer a state-specific solar tax credit, there are still significant incentives that make solar power an attractive option. Let’s explore the major programs that can help you save on your solar panel system:

Federal Residential Clean Energy Tax Credit (ITC):

  • Average Savings: $9,399 (based on a national average system cost)
  • Description: This federal program, formerly known as the Investment Tax Credit (ITC), is a powerhouse incentive.
  • It allows you to deduct 30% of the total cost of your solar panel system from your federal taxes in the year it’s installed. So, for a $20,000 system, you could save a substantial $6,000!

Local Utility Rebates:

  • Average Savings: Up to $3,000
  • Description: Depending on your location and utility provider, you might be eligible for additional rebates on top of the federal credit. 
  • These programs are offered by some Texas utility companies to further encourage residents to go solar. Be sure to check with your specific provider to see if they offer a solar rebate program and what the details are.

Texas Solar Property Tax Exemption:

  • Average Savings: Approximately 1.81% of your system’s value annually (based on the average Texas property tax rate)
  • Description: In Texas, you’ll receive a property tax exemption for the increased value your solar panels add to your home. 
  • This means you won’t pay extra property taxes on the value of your clean energy investment. Considering the average Texas property tax rate is 1.81%, this exemption translates to ongoing annual savings.

Claiming the Texas Solar Tax Credit 2024

You can benefit from the generous federal Residential Clean Energy Tax Credit (ITC), formerly known as the Investment Tax Credit. Here’s how to receive it:

  • Install a Qualifying Solar Panel System: Ensure your solar panel system meets all the requirements set by the Internal Revenue Service (IRS) to qualify for the ITC.
  • Obtain a Form W-9 from your installer: This form provides your installer’s tax identification number, which you’ll need to file your taxes.
  • Save all relevant documents: Keep a record of your solar panel system’s total cost, including installation fees. This documentation will be crucial when claiming the credit.
  • File Your Federal Tax Return: When filing your federal taxes for the year you installed the solar panels, claim the 30% ITC deduction on the total cost of the system.
  • When filing your federal income taxes for the year your system was installed (2024), you’ll need to claim the Residential Clean Energy Tax Credit (Form 5695). This form calculates the credit amount based on your system’s cost.

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