Do you run an energy-heavy operation and want to lower your power bill? Or, maybe you simply support going green as an initiative. Investing in energy-efficient upgrades, whether for your business or home is beneficial both for reducing your carbon footprint, reducing your utility costs; and unlocking valuable tax savings. These include state-level incentives like credits and rebates to help offset your upfront investment.
But here’s the catch: every state plays by different rules, and understanding how to claim the right incentives is key. Our CPAs can help you tap into the full range of benefits available to you.
The Importance of Energy-Efficient Improvements
Beyond financial savings, energy-efficient upgrades make your home or business smarter in other ways:
They enhance everyday comfort with better air quality, more consistent temperatures, and quieter indoor spaces.
They can increase property value by making the space cheaper to run and more appealing to eco-conscious buyers.
They reduce your carbon footprint, helping you become a more responsible and efficient energy user.
Which Upgrades Qualify for Incentives?
Not sure where to start? If financial savings is the goal, you would need to consider energy-efficient upgrades that qualify for incentives. Under the Inflation Reduction Act of 2022, several federal tax credits were extended, and many states mirror these definitions for eligibility.
The following upgrades typically qualify:
- Energy-Efficient Windows and Doors
- Insulation and Weatherproofing
- Solar Energy Systems
- High-Efficiency HVAC Systems
- Smart Thermostats and Energy Management Tools
- Energy-Efficient Appliances
That said, each state sets its own criteria, limits, and paperwork. Some incentives cover only specific products or installation methods. Others may require pre-approval or inspections.
For example, the federal Investment Tax Credit (ITC) allows homeowners to claim a credit for installing solar energy systems. In states like Texas, that federal credit can be stacked with state-level rebates to amplify the total benefit.
State programs can also be layered with other federal credits, which means greater total savings on your investment. So, consulting a tax expert who understands both federal and state-level rules and intricacies is key to a smart strategy.
Types of State-Level Incentives
Financial incentives for energy upgrades come in different forms. From offering upfront savings to reducing your tax bill over time, here are the most common types of incentives to look out for.
- State Tax Credits. Reduce your state income tax bill when you install eligible upgrades – like solar panels, energy-efficient windows, or geothermal systems.
- Rebates. Get cash back from your state or local utility when you upgrade HVAC systems, insulation, or qualifying appliances. Many rebates can be stacked with federal programs.
- Property Tax Incentives. Energy-efficient improvements can raise your property value, but in California, for example, qualifying solar energy systems are exempt from property tax reassessment under Section 73 of the California Revenue and Taxation Code.
- Sales Tax Exemptions or Holidays. A handful of states, including Texas, the state holds waive sales tax on approved energy-saving products during certain windows. For Texas it’s typically over Memorial Day weekend, lowering upfront costs of energy-efficient upgrades.
- Utility and Local Programs. Cities and utility providers often run their own rebate or financing programs, many of which fly under the radar without professional guidance.
For example ,in California, local utility providers like SMUD (Sacramento Municipal Utility District) offer rebates and incentives for energy-efficient home upgrades. - Low-Interest Financing Programs. Some states offer green loans or property-assessed financing options to help you spread the cost of improvements over time, often through your property tax bill or utility provider.
Key State-Specific Incentive Programs
While many states offer some form of energy efficiency support, the following represent some of the strongest examples of state-level commitment to energy efficiency. Here are 10 of the most widely recognized:
California’s Self-Generation Incentive Program (SGIP) offers broad rebates for solar, battery storage, and efficiency upgrades.
New York – EmPower New York provides cash rebates and no-cost efficiency improvements for eligible households.
Massachusetts offers rebates and low-interest financing for heating, cooling, and whole-home upgrades.
Texas – The TX-PACE Program offers long-term, low-cost financing for energy efficiency, water conservation, and renewable upgrades—paid back through a voluntary property tax assessment, with little to no upfront capital required.
- Connecticut – Energize Connecticut provides assessments, rebates, and loans for residential efficiency upgrades.
Minnesota offers in-home assessments and instant savings for energy-efficient improvements.
Washington’s Clean Energy Fund supports residential and grid-tied clean energy tech adoption.
How to Apply for Incentives and Credits
Claiming these incentives isn’t automatic. Different programs also vary in scope and eligibility and you’ll need to follow the right steps to receive the full benefit.
- For federal tax credits, like those under the Inflation Reduction Act, you’ll typically file IRS Form 5695 with your federal tax return.
- For state-level incentives, the process varies: some require filing specific forms with your state tax return, while others involve applying directly through your utility provider or a state-run energy office.
You’ll also need to keep documentation such as receipts, installation date and product certifications. Working with a CPA will help maximize every available incentive.
From navigating state-specific programs to optimizing your federal tax credits, Fusion CPA can help you make smart moves that pay off. Contact us today!
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This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.