Illinois Solar Incentives and Tax Credits
Illinois solar incentives and federal tax credits cover about 60% of the purchase price of solar.
Illinois Solar Incentives
Illinois solar incentives were created by Illinois law. The law requires the state to achieve 100% renewable energy by 2045 and a significant portion of that energy come from residential solar. To achieve this goal, Illinois’s largest utilities must make incentive payments that benefit homeowners who invest in solar. These Illinois solar incentives are on top of a longstanding federal solar tax credit (which we explain later on this page).
Introducing Illinois SRECs
The Illinois solar incentive payments utilities make are technically payments for Solar Renewable Energy Credits (or “SRECs”, which is pronounced “ess-wrecks“) your system will generate.
One Illinois SREC represents the renewable attributes of one megawatt-hour of electricity generated by a solar system. Utilities such as ComEd must purchase these SRECs on terms dictated by the Illinois Power Agency, a unit of State of Illinois. For most residential systems, the utilities must pay for 15 years of estimated SREC production in advance, usually within six months of when you first install your system.
How Much Are SRECs Worth?
The Illinois Power Agency sets the prices for Illinois SRECs. The price per SREC depends on when a homeowner signs up; originally, the price was $72.97 per SREC. Contact Certasun to understand current pricing.
The number of SRECs a home solar system will produce over 15 years depends on the size of the system (measured in kilowatts), the position of the panels on the home relative to the sun (south-facing is best), shading, and a few other factors.
For almost all residential systems, homeowners can expect to receive their Illinois solar incentives about 180 days after their system is installed.
Please contact Certasun to understand current block pricing, but here is an illustrative example of a fairly typical system using expired Block 1 pricing:
|System size||= 8.4 kWdc|
|Est. production over 15 years||= 146 MWh|
|Est. SRECs produced||= 146 SRECs|
|Block 1 Price per SREC||= $72.97|
|Price of SRECs to utility:||= $10,654|
System size= 8.4 kWdc
Est. production over 15 years = 146 mWh
Est. SRECs produced = 146 SRECs
Block 1 Price per SREC = $72.97
Price of SRECs to utility = $10,654
SREC Prices Will Decline Over Time
To ensure Illinois solar installers have an incentive to reduce costs, Illinois requires the prices of SRECs to decline as more solar systems are installed. The initial blocks of systems have already filled. Each block lasts about 5,000-10,000 systems. Once that block of systems has been installed, the price will decline. For each subsequent block of systems, the price will decline further. If you want the largest incentive, you should install your solar system now.
We’ll Do The Math and File your Application for Illinois Solar Incentives
You don’t have to do any of these estimates or calculations. When Certasun designs a solar system for you, we estimate the value of your Illinois incentive, taking into account the current SREC price and how many SRECs your system will produce. When you decide to move forward with an installation, we make a reservation with the state to ensure you get the payment we quote and you expect.
The best way to estimate the size of the incentive you can receive for your home is to consult with a residential solar expert like Certasun. Fill out the form below for a completely free, no-obligation consultation!
Federal Solar Tax Credits
The federal government also offers an incentive for residential solar, in the form of a tax credit. For systems installed in 2021, the credit is 26% of the cost of the system. It declines to 22% for systems installed in 2023.
A Tax Credit is Not a Tax Deduction
A tax credit is a direct reduction in the amount of tax you owe. If you have a $10,000 credit you would pay $10,000 less in taxes than you would otherwise owe. Many taxpayers are more familiar with tax deductions, which reduce the amount of income that is taxed. A tax credit is much more valuable.
Claiming the Solar Tax Credit
Unlike the Illinois solar incentives, which Certasun can and does apply for on your behalf, you must claim the federal incentives on your own tax return.
There is one additional form involved: Form 5695: Residential Energy Credits. On line 1 of this form you enter the cost of your solar system. In our example, this is $20,000. The video here shows how to fill this out. After filling out the rest of form 5695, you take the result to line 53 of Form 1040.
Residential Solar Tax Credits and Estimated Taxes
If you are required to file quarterly estimated taxes, you can take advantage of the federal incentives almost immediately after installing your system. (If you are required to file estimated taxes, you already know who you are. If you don’t know what estimated taxes are, you can skip this section.) Estimated taxes are based on the amount of tax liability you expect to have for a given year. Let’s assume our taxpayer above is required to make estimated tax payments. Since our taxpayer would expect to owe $5,200 less in taxes than she otherwise would because of the tax credits, she could reduce her estimated payments by $1,300 each quarter.
Two Tax Credits?
There are actually two tax credits that apply to solar, although you can only benefit from one or the other. The Section 25D credit described above applies to homeowners who install solar on their own homes. The other solar tax credit is available to businesses that install solar equipment, whether or not it is on their place of business. It is defined in Sections 38 and 48 of the Code. If you lease your system, the lessor will use these business investment tax credits.
The Inevitable Disclaimer
You had to know this was coming, right? Certasun is not your tax preparer, accountant, or lawyer. We are not giving you individualized tax advice. You should consult your own advisors about your particular situation.
Let Us Tell You More
Certasun would be more than happy to explain more about both the Illinois solar incentives and federal tax credits. Sign up for a completely free, no-obligation consultation. We will provide a quote for a system for your particular home, calculate the value of the incentives, and clearly explain your financing options. Fill out the form below or call us at (781) 230-6050!