With its abundance of sunlight and the state's commitment to renewable energy, Colorado has become a leader in the adoption of solar energy. As more residents turn to solar power, understanding solar tax credit and other financial incentives available in Colorado is critical. These programs can significantly lower the cost of solar panel installations and increase long-term savings.
Residential clean energy credit
The Residential Clean Energy Credit, formerly known as the federal investment tax credit (ITC), is one of the most valuable incentives for homeowners and businesses installing solar energy systems. This program allows for a tax credit of 30% of the total system cost, which can be deducted from your federal tax liability.
For example, if your solar installation costs $20,000, the federal solar tax credit would allow you to deduct $6,000 from your taxes (30% of $20,000) for the year of installation, bringing your system cost down to $14,000.
When you file your federal income taxes, this incentive applies as a credit toward your federal tax bill. To qualify for the ITC, you need to purchase your system either with cash or a solar loan. If you finance your system with a lease or power purchase agreement (PPA), you won't be eligible. You also need to owe more in taxes than the 30% value of your system. If you don’t, you can roll over any remaining credit balance and apply it in subsequent years until the end of 2034 when the ITC expires. You may be eligible for a direct payment for the ITC if you're a tax-exempt entity, like a nonprofit organization.
How to claim the federal ITC
To claim the federal tax credit, you'll need to:
- Complete IRS Form 5695 and submit it with your tax return
- Ensure your system meets the eligibility criteria for solar panel installations under the ITC
- Keep your receipts and documentation handy to prove the total system cost
Net metering in Colorado
Colorado's net metering policy is among the best in the country. Net metering can help you:
- Lower energy bills by earning credits for excess energy production
- Reduce your payback period and maximize your solar investment over time
How net metering works
Your utility tracks how much energy your solar system produces and how much electricity you use, and provides bill credits at the full retail rate for the surplus power you send back to the grid. You can either receive a check or roll over the credit to reduce future energy bills, maximizing savings from your solar system and shortening system payback time.
How to enroll in net metering in Colorado
To enroll in net metering in Colorado, you need to meet your utility provider's interconnection requirements, which typically include using a solar system with a smart inverter certified under IEEE 1547 and UL 1741 standards—like our powerful ţţ淨r microinverters. Professional solar installation is recommended, as DIY systems aren’t eligible for net metering.
Programs like and are among the largest in the state, offering robust net metering options for qualified solar systems.
Colorado Residential Energy Upgrade (RENU) Loan
The provides low-interest loans for solar projects. These loans help residents cover the cost of solar panel installations and other home energy upgrades.
The RENU Loan program offers solar financing at competitive rates, without requiring collateral or charging hidden fees. If you own your home and don't share a heating or cooling system with another home, you can qualify for a loan of up to $75,000, with a repayment period of up to 20 years. The interest rate will depend on your credit score and the credit union you work with.
There are no upfront costs, and the loan comes with a fixed monthly payment and no prepayment penalty. This program is supported by the , a not-for-profit organization with ties to the Colorado state government.
State and local solar incentives and rebates in Colorado
In addition to the federal tax credit, Colorado offers several incentives and rebate programs at the state and local levels. These programs are designed to make solar energy more accessible and affordable for homeowners.
Local incentives and rebates
- Black Hills Energy: The offers a rebate of $1 per watt for solar systems ranging from 0.5 kW to 25 kW, as well as a 3.8-cent per kWh incentive, for those who qualify based on income. Additionally, all customers can receive a $100 per kW rebate for paired storage systems. The total rebate is capped at $1,000 per customer. In return, Black Hills claims the system's Renewable Energy Credits (RECs). This incentive helps lower the overall cost of installing solar panels and storage systems.
Holy Cross Energy (HCE) Program: Customers can earn an upfront incentive of $250 per kW for systems up to 6 kW and $100 per kW for systems between 6-25 kW. HCE also offers incentives for energy storage systems that meet HCE program requirements. Incentives are limited to available funds on a first come, first-served basis. These can be in addition to the incentives for renewable systems.
0-25 kWh $500/kWh Incentive for energy storage system with DFT* 0-25 kWh $250/kWh Incentive for energy storage system without DFT *Distribution Flexibility Program – Optional Tariff (DFT) - Xcel Energy’s Solar*Rewards: Income-qualified residents and those in Disproportionately Impacted (DI) communities may receive for systems up to 10 kW. Xcel claims the RECs for 20 years, and payments are made within 60 days of permission to operate (PTO)
- High Country Conservation Center’s Solarize Summit: The offers residents of Breckenridge, Frisco, Silverthorne, and Summit County the opportunity to earn up to $3,000 in local rebates for installing solar panels. The program also includes a 5% discount from the installer, Active Energies Solar, with savings capped at $1,500. Rebates are limited and available to those who sign contracts through the program.
- Low-Income Solar Grant Program in Boulder: For low-income residents, Boulder offers a grant program to offset the cost of going solar. This program ensures that solar energy is accessible to more households.
- Energy Smart Colorado program: The offers one-time rebates ranging from $500 to $2,500 for homeowners who install solar equipment or make energy efficiency upgrades. These rebates are available through regional sub-programs and aren’t statewide. Areas covered include Boulder, Eagle, Gunnison, Lake, Pueblo, and surrounding counties. Roaring Fork Valley, Southwest Colorado, Summit, Park, Yampa Valley, Routt, and Moffat counties are eligible for energy efficiency and renewable energy assistance, rebates, and financing through the Energy Smart Colorado program. Since rebate programs frequently change, check the for the most up-to-date information.
Tax exemptions for solar in Colorado
Colorado offers two major tax exemptions that further reduce the cost of solar installations:
- Colorado Solar Sales Tax Exemption: You won’t have to pay the on your new solar panel system, which can result in significant savings.
- Colorado Solar Property Tax Exemption: Although solar panels increase your property’s value, Colorado exempts this added value from property taxes, allowing you to enjoy the financial benefits of solar without increased property tax bills.
How to get a rebate for solar panels in Colorado
Rebates are offered at different levels based on utility providers and county programs.
To claim your rebate:
- Research available rebates in your area
- Contact your local utility provider or visit their website to see if your system qualifies
- Follow the rebate program’s application process, which often requires proof of purchase, system size, and certification of installation
You can also take advantage of rebates simply by leaving everything to local certified , because they live where you live, and they know what rebates are available to homeowners looking to get solar.
Estimated cost savings in Colorado
The typical cost for a solar installation in Colorado can range from $15,000 to $30,000, depending on the size and composition. However, once you factor in the federal solar tax credit, state rebates, and net metering benefits, your total costs can decrease by 30-40%.
With incentives
- Federal tax credit: 30%
- Local rebates: Vary by location
- Net metering: Monthly savings of 10-20%
Without incentives
If you don't take advantage of these programs, you could miss out on thousands in savings. For example, a $20,000 system without the federal tax credit would cost the full $20,000, whereas you'd pay only $14,000 with the tax credit.
Now is the best time to go solar
By taking advantage of solar tax credits, local incentives, and net metering, Colorado homeowners can save significantly on their solar panel systems. These programs not only reduce the overall costs but also maximize your long-term return on investment.
Navigating the variety of rebates, incentives, tax credits, and grants available for solar installation can be confusing for homeowners, and missing out on these benefits could cost you valuable savings. Be sure to consult a solar professional to ensure you take full advantage of every opportunity. We can connect you with expert local installers in Colorado who can help you maximize your solar investment and simplify the process of going solar at home.
Frequently asked questions
Can you get free solar panels in Colorado?
While there are no “free” solar panels, incentives and tax credits can significantly reduce the cost of installation.
Is it worth going solar in Colorado?
Yes. Thanks to Colorado’s solar incentives and the state’s abundant sunlight, solar energy is an excellent long-term investment.
Are there any local utility rebate programs for solar in Colorado?
Yes, utility companies like Xcel Energy, Black Hills Energy, and Holy Cross Energy offer rebate programs.
How do I qualify for the solar tax credit in Colorado?
You automatically qualify for the federal solar ITC when you install a solar panel system on your property.
