2024 Colorado Solar Incentives, Tax Credits, Rebates, & Exemptions

Last updated: December2024

Colorado homeowners can save an average of $3,690 on solar incentives and rebates. Colorado offers some pretty stellar incentives to go solar and for battery storage, contributing to the state’s goal of achieving 100% clean energy generation by 2050.

Due to the solar-friendly policies and tax incentives, it’s considered one of the best home solar states in the country. If you’re a Colorado resident curious about solar power, here’s the ultimate guide to all the incentives and rebates offered at Centennial State.

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Overview of Colorado solar incentives and rebates

Incentive	Estimated average annual savings	Eligibility	About
Federal solar tax credit	$3,690	All tax-paying U.S. citizens	Tax credit equal to 30% of installation costs, applied to federal income taxes
Colorado solar property tax exemption	$177, varies based on system and property value	All tax-paying Colorado citizens	Homeowners are 100% exempt from any additional property tax from installing solar
Colorado solar sales  and use tax exemption	$356.70	All tax-paying Colorado citizens	100% sales tax exemption for the purchase of a solar system
Xcel Energy Solar*Rewards	$5,000	Colorado customers of Xcel Energy	Customers of Xcel energy who meet income requirements can receive upfront incentives for every watt of solar installed.
Local rebates and incentives	Savings vary by location and utility	Customers of Holy Cross Energy, and eligible participants of EnergySmart Colorado	EnergySmart Colorado and Holy Cross Energy offer upfront rebates to customers who install solar

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Calculate how much you can save with Colorado incentives

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Federal solar tax credit

Colorado homeowners can use the 30% federal tax credit when they go solar. The credit equals 30% of the solar panel system installation cost and is applied to federal income liability.

The average solar panel installation in Colorado will earn a federal tax credit of $3,690. It’s important to remember that this is not an upfront payment. The solar investment tax credit (ITC) reduces your income tax liability, and you won’t see the benefits of the tax credit until you file your taxes for the year.

If your liability is less than the value of the federal solar investment tax credit, it will be reduced to $0, and the remaining credit value will be applied to next year’s taxes. The credit can roll over for five years without an income limit.

Colorado solar property tax exemption

Experts at SolarReviews found in a recent Zillow study that solar can raise your home’s value by 6.8% on average. That’s good news, right? Well, an increase in property value can bring higher property taxes. Luckily, Colorado offers a 100% exemption from any raised property taxes for homeowners who install solar as a home improvement project.

When considering the median value of a home in Colorado and the state’s average property tax value of 0.48%, the solar property tax exemption can save homeowners an average of $177 each year.

Colorado solar sales and use tax exemption

Colorado offers a sales tax exemption for homeowners who purchase home solar system equipment. This means that Colorado residents do not have to pay the additional 2.9% state sales tax on any type of solar equipment.

The city of Boulder offers a Sales and Use Tax Rebate, which will essentially pay you back the total amount of sales and use tax you paid on your solar equipment, rather than just not including it in the final sale.

Xcel Energy Solar*Rewards 

Xcel Energy, Colorado’s largest investor-owned utility company, offers multiple solar rebate programs to encourage solar and battery storage. There are five programs in total, but the one that targets residential customers is called the Income Qualified/DI Community On-site Solar program.

Through this program, residential customers who are income-qualified or located in a Disproportionately Impacted Community can receive an upfront incentive of $1 per watt of installed solar to lower the upfront costs of solar systems. If the average solar system in Colorado is about 5 kW, that’s a $5,000 rebate!

Please note that this program is closed for 2024 applications, but more capacity will be released in 2025.

Local incentives and rebates in Colorado

There are several local solar rebates and incentives available throughout Colorado. Depending on where you live, you may get to take advantage of these rebate programs. Here are a few of the most well-known local solar rebate programs in Colorado:

• Holy Cross Energy customers can receive an upfront rebate for installing solar energy systems. Rates vary with system size, with systems between 0 and 6 kW earning $250/kW installed and systems 6 to 25 kW earning $100/kW. 

• EnergySmart Colorado is a nonprofit organization that partners with organizations, utility companies, and local governments to offer rebates to qualifying participants who install solar. You can learn more about EnergySmart Colorado incentives through the program’s website.

These incentives can save over $1,000 when installing solar panels in Colorado, so be sure to check if they’re available in your area.

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Colorado net metering and solar buyback plans

Colorado’s state net metering policy requires all utilities and electric cooperatives (with the exception of ones located in smaller municipalities) to purchase any excess energy generated from rooftop solar systems. 

Utilities are required to provide a credit on your bill for each kilowatt-hour of solar energy you send to the grid. Each credit is worth 1 kWh and fully covers the cost of energy you use from the grid later in the day, when your solar panels aren’t producing electricity. 

Any excess bill credits can be carried over to next month’s bill, but if the customer’s net production of electricity remains above consumption for a year utilities must reimburse the customers at the end of the year, if they don’t elect to have the credits rolled over.

This is the best-case scenario for solar homeowners, so you’ll want to take advantage of this net metering program while it’s still around. While there is no end-date in sight for Colorado’s net metering, utilities across the country are reducing net metering benefits. You won’t want to miss out on this excellent program.

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Solar battery incentives in Colorado

Customers looking to pair their solar systems with solar energy storage do so to help reduce energy bills or provide backup power during an outage. 

However, installing the most popular batteries on the market costs about $15,000. Luckily, Colorado has some great programs to help lower the cost and make solar batteries more affordable. Here are some solar battery incentive options in Colorado:

Colorado Residential Energy Storage Income Tax Credit

Colorado allows an income tax credit to building owners who install eligible residential energy storage systems. The credit is worth 10% of the system cost, not including installation or permitting fees. 

Building owners have the option to assign the credit to their battery installer at the time of purchase in exchange for a 10% discount on the installation. If your battery installation cost $12,000 in total, you could receive a $1,200 tax credit.

If you don’t take the discount at the time of installation, you will need to fill out form DR 1307 when filing your taxes.

We recommend consulting with a tax professional for further guidance on how this tax credit works. This battery tax credit is only available until January 2025, so act fast before time is up!

Xcel Energy Renewable Battery Connect program 

Customers of Xcel Energy who install an eligible Tesla Powerwall or SolarEdge battery can participate in its Renewable Battery Connect Program. 

Under the Renewable Battery Connect Program, you allow Xcel to discharge your battery 60 times per year. In exchange, you receive $500 per kilowatt of storage charge rate, up to 50% of your installation costs. Customers who are income-qualified receive $800 per kW for up to 75% of equipment costs!

You also earn $100 per year for five years just for participating! You can enroll in this program through your battery installer who will submit an interconnection application for you. 

By discharging your battery when demand is high, the utility can reduce stress on the grid and prevent widespread power outages. So, not only does this incentive save you money, it can help your community and prevent power blackouts.  Demand is usually highest during hot summer months in the afternoon and evening. 

Federal solar tax credit

As an extension of the Inflation Reduction Act (IRA), solar battery installations are also eligible for the 30% federal tax credit.

So, if you buy a battery that costs $12,000, you can save $3,600 through your income tax liability when you file your taxes for the year. You can claim the tax credit through IRS Form 5695 as well.

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Colorado installation costs

The average residential solar photovoltaic installation in Colorado costs about $2.51 per watt, bringing the average 4.9 kW system size to about $12,300 before any incentives are applied. Once you factor in the federal solar tax credit, the cost to install solar panels in Colorado falls to $8,610. 

You might even save more money on solar if you live somewhere with local rebates available. Here’s an example of how to calculate your savings, using a Holy Cross Energy customer as an example: 

Holy Cross Energy Rebate: 5 kW x $250 = $1,250

Federal tax credit (after rebate): ($12,300 - $1,250) x 30% = $3,315

Total savings: $3,315 + $1,250 = $4,565

Effective system cost: $12,550 - $4,565 = $7,985

These savings don’t include the additional savings from Colorado’s full retail net metering, or other local rebates that might be available in your area. 

The total cost of a solar panel installation will depend on a few factors, like how many solar panels you install, the solar company used, and the characteristics of your roof.

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Do incentives make solar worthwhile in Colorado?

Yes! Incentives offered in Colorado, combined with the low cost of solar per watt, all make going solar in Colorado worthwhile. Xcel Energy offers great incentive programs to target low-income customers. The average payback period for solar power systems in Colorado is about 9 years, which falls in line with the national average of 10 years.

The best way to determine if solar solar is right for you is to speak with local solar companies. We recommend getting quotes from at least three installers to get the best deal possible without having to sacrifice the quality of your installation. SolarReviews can connect you with pre-vetted solar installers in Colorado, or you can research our expansive directory or solar companies in Colorado to find the best one for you.

Calculate how much you can save with Colorado incentives

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Colorado solar incentives: FAQ