Solar Energy Systems Rebate Information

 Under most circumstances, subsidies provided by your utility to you to install a solar PV system are excluded from income taxes through an exemption in federal law. When this is the case, the utility rebate for installing solar is subtracted from your system costs before you calculate your tax credit. For example, if your solar PV system installed in 2022 cost $18,000, and your utility gave you a one-time rebate of $1,000 for installing the system, your tax credit would be calculated as follows:
($18,000 - $1,000) * 0.30 = $5,100  

 When your utility, or other buyer, gives you cash or an incentive in exchange for renewable energy certificates or other environmental attributes of the electricity generated (either upfront or over time), the payment likely will be considered taxable income. If that is the case, the payment will increase your gross income, but it will not reduce the federal solar tax credit. Note: A private letter ruling may not be relied on as precedent by other taxpayers. 

 Unlike utility rebates, rebates from state governments generally do not reduce your federal tax credit. For example, if your solar PV system was installed in 2022, installation costs totaled $18,000, and your state government gave you a one-time rebate of $1,000 for installing the system, your federal tax credit would be calculated as follows:
$18,000 * 0.30 = $5,400  

 State tax credits for installing solar PV generally do not reduce federal tax credits—and vice versa. However, when you receive a state tax credit, the taxable income you report on your federal taxes may be higher than it otherwise would have been because you now have less state income tax to deduct. (The Tax Cuts and Jobs Act of 2017 placed a $10,000 limit on state and local tax (SALT) deduction through 2025. Therefore, if a homeowner is still paying more than $10,000 in SALT after claiming a state tax credit, the state tax credit benefit would not effectively be reduced by the federal tax rate, as it would not impact federal taxes (due to the SALT limit).) The end result of claiming a state tax credit is that the amount of the state tax credit is effectively taxed at the federal tax level.