If you’d like to install solar panels in Colorado, it’s important to learn about all of the tax incentives, rebates, and programs that may be available to help you lower the costs of your clean energy investment.
As one of the first states in the country to establish a Renewable Energy Portfolio Standard, Colorado has been a long supporter of solar, and homeowners can take advantage of a handful of tax incentives available at federal and local levels to keep the lifetime costs of a photovoltaic (PV) system low.
To help you save more on your home’s electricity expenses, let’s look at Colorado’s key solar tax incentives and programs to know in 2022.
Colorado Solar Investment Tax Credit (ITC) for Homeowners
Although Colorado itself does not offer any state-specific solar tax credits, the federal investment tax credit (ITC) is available to all qualifying homeowners that install PV panels in the Centennial State.
Alongside Colorado’s favorable net metering policies, the federal investment tax credit has helped drive significant growth in the local solar industry over the past 15 years. With thousands of dollars in potential savings, qualification for the federal ITC is the most valuable solar incentive to know as a Colorado homeowner and taxpayer.
Recently extended by the Inflation Reduction Act and rebranded as the “Residential Clean Energy Credit,” the solar ITC allows homeowners to deduct a large percentage of their total installation costs directly from their federal income tax liability.
Applicable for home solar installations completed between 2022 and 2032, the residential clean energy tax credit is currently redeemable for up to 30% of total system costs, which includes expenses for parts, labor, permitting, and more. After a decade at 30%, the tax credit rate will be reduced to 26% of total project costs in 2033 and 22% in 2034.
Colorado Solar Tax Exemptions
Beyond the federal clean energy tax credit, homeowners in Colorado can also save money on solar installations with two statewide tax exemptions. While not federally available, Colorado is one of 25 states with a solar sales tax exemption and 1 of 36 with a solar property tax exemption.
Sales Tax Exemption
To promote green energy adoption at every level, Colorado instated a Sales and Use Tax Exemption for Renewable Energy Equipment in 2006. Under this exemption, renewable energy adopters can purchase equipment like solar panels and wind turbines without any state sales tax applied to the transaction. Colorado currently has a 2.9% state sales tax, 100% of which is exempt in solar energy equipment purchases.
Property Tax Exemptions
Although solar panels add value to your home, homeowners in Colorado do not have to worry about this fact increasing their annual property tax. Residential renewable energy systems are completely exempt from Colorado property taxation, which means that their added value is not considered during a home tax assessment.
Rebates and Financing Programs
Outside of tax credits and exemptions, Colorado homeowners may also be eligible for local solar rebates and special financing programs that reduce the start-up costs of a renewable energy installation. Although qualification and availability are often limited by income and physical location, homeowners going solar in Colorado should seek out programs like the Boulder Solar Grant Program and Colorado Residential Energy Upgrade (RENU) Loan Program wherever available.
Solar rebates may be available at the city, county, or utility level. In northern Colorado, the City of Fort Collins offers a residential solar rebate of up to $1,000 depending on the size of the system. If you have any questions about rebates or financing programs in your area, we encourage you to seek out a local solar installer to find out more information about what may be available in your area.
The Cost of Going Solar in Colorado
Ready to find out how much you can save on your electricity expenses with solar energy?
For homeowners near Denver, Apollo Energy is a 5-star solar company and certified B-corp located in the heart of Colorado. Serving the entire Front Range up to Southern Wyoming, we can provide a free solar assessment for any residential property in Denver, Boulder, Fort Collins, and surrounding areas. Contact us today to learn more.
Apollo Energy is a solar installation company and not a professional tax advisor. The information in this article is meant to be introductory and should not be taken as tax, legal, or accounting advice.