Last Updated December 2024
Written by
Catherine Lane
Homeowners in Alabama can save an average of $4,590 on solar panels through solar incentives. We break down everything Alabamians need to know about solar incentives so you can decide if solar energy is a good investment for your home.
Incentive | Estimated average annual savings | Eligibility | About |
|---|---|---|---|
Federal solar tax credit | $4,590 | All tax-paying U.S. citizens | Tax credit equal to 30% of installation costs, applied to federal income taxes |
Alabama solar property tax exemption | $70, varies by property and system value | Alabama homeowners who live in participating municipalities | Exemption of solar panel value from property tax assessment for 10 - 20 years |
Quick Facts:
Value: 30% of solar installation costs
Frequency: One-time tax credit, rollover for five years
How to apply: File IRS Form 5695 with annual tax return
The federal solar tax credit is the most significant incentive for Alabamians looking to install solar panels. The tax credit equals 30% of your solar installation costs and reduces what you owe in federal income taxes for the year. The following table outlines how much you can expect to earn from the federal government through the tax credit for different solar system sizes in Alabama:
System size | Estimated cost (before credit) | Estimated tax credit value |
|---|---|---|
4 kW | $12,000 | $3,600 |
6 kW | $18,000 | $5,400 |
8 kW | $24,000 | $7,200 |
10 kW | $30,000 | $9,000 |
Sometimes, the solar tax credit you earn will be worth more than what you owe in taxes. If so, you can roll over the remainder of the credit to cover your tax liability next year.
Remember that the federal tax credit is not an upfront incentive, so you won’t immediately see the savings come off your system cost. You’ll get the benefits when you file your taxes later in the year.
Quick Facts:
Value: Exempts property tax on the value solar panels add to your home
Frequency: Annual, for 10 or 20 years
How to apply: Check your local property assessor for further details.
Solar panels are an excellent way to add value to your home, but this means you may see an increase in your property taxes when you go solar.
Luckily, Alabama allows local municipalities to exempt the value solar panels add to your home from being assessed. Terms vary between jurisdictions, but the exemption may last between 10 and 20 years. Based on the median home price and the state’s effective property tax rate, Alabama's solar property tax exemption can save you an average of $70 per year.
Quick Facts
Electric rates average $0.15 per kWh in Alabama
Alabama does not require utilities to offer net metering or solar buyback plans.
Alabama 's largest utility, Alabama Power, buys excess energy for $0.03 per kWh.
Alabama does not require power companies to credit customers fully for solar energy they send to the electric grid. Net metering is one of the main ways solar homeowners save money on their monthly bills when they go solar.
Although the state doesn’t require net metering, Alabama Power does offer a solar buyback plan. Under Alabama Power’s Purchase of Alternate Energy rate, excess solar power sent to the grid is valued at an energy credit rate of about $0.03 per kWh, depending on your rate plan.
Your local utility may also offer a solar buyback plan, but they are generally few and far between in Alabama.
There are no statewide solar battery incentives or rebates in Alabama. However, with the federal solar tax credit, Alabamians who install energy storage can save 30% on their battery installation.
Solar batteries typically cost between $12,000 and $16,000 to install, so the tax credit can save you over $3,500! While that is a high upfront cost, batteries can help save you extra money on your electricity bill when your utility doesn’t provide net metering.
The average-sized 6-kilowatt solar panel system in Alabama costs $18,000 before incentives. Once you consider the federal solar tax credit, the cost of solar panels in Alabama drops to $12,600.
Federal tax credit: $18,000 x 30% = $5,400
Total savings: $5,400
Effective system cost: $18,000 - $5,400 = $12,600
Keep in mind that the actual cost of home solar will depend on how many solar panels you need, the characteristics of your roof, your solar equipment, and the solar installer you choose.
Solar power systems can be worth it for some homeowners in Alabama, especially those who install a solar-plus-storage system. However, the lack of solar rebates and solar programs can make investing in solar panels a difficult investment for Alabamians.
But everyone’s situation is unique. If you want to generate your own power, rely less on big utility companies, and use clean energy, the best way to start is by contacting local solar companies. Reliable solar installers near you can help you decide if going solar is right for you.
Finding a trusted company may seem difficult, but SolarReviews can help. We can connect you with pre-vetted solar companies near you, taking the hassle out of finding the best solar company in Alabama.
Catherine has been researching and reporting on the solar industry for five years and is the Written Content Manager at SolarReviews. She leads a dynamic team in producing informative and engaging content on residential solar to help homeowners make informed decisions about investing in solar panels.
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