2024 Colorado Solar Incentives Guide (Tax Credits, Rebates & More)

In the chart below, we’ll include a quick breakdown of the solar incentives available in Colorado, including how much each incentive could save you upfront and over the life of your home solar energy system.

What Do Coloradans Need to Know About the Federal Solar Tax Credit?

The federal solar tax credit is offered by the federal government and is available to all U.S. residents, including property owners in Colorado.

The Federal ITC provides a credit to your income tax liability — or the amount you owe to the federal government — for 30% of your system value, which includes the cost of solar panels, batteries, inverters and electric vehicle (EV) chargers. In Colorado, where the average system totals $26,400 before any incentives, the credit averages out to $7,920.

But keep in mind that this is not a rebate, so you won’t get the $7,920 back. Instead, the credit amount gets applied to your income taxes owed for the year after you install your solar system. If you don’t owe money in income taxes, you won’t be able to take the credit. However, you can take a partial credit and roll over the remainder for up to five years.

If you expect to owe at least $1,584 per year in income taxes over the next five years, then you should be able to take the entire credit making solar in Colorado worthwhile.

The credit has been around since 2005, at which time it provided the same 30% tax break it does today. The credit rate dropped to 26% in 2022 and was scheduled to decrease again to 22% in 2023 and disappear in 2024. But it was renewed in 2022 thanks to the Inflation Reduction Act, which raised the ITC rate back to 30% and delayed the credit expiration date.

The new rate schedule is as follows:

• The credit rate will be 30% for systems installed between 2022 and 2032
• The credit rate will drop to 26% in 2033
• The credit rate will drop to 22% in 2034
• The credit will no longer be available in 2035 unless renewed by Congress before then

How to Claim the Federal ITC in Colorado

Claiming the federal credit in Colorado is simple and takes just a few minutes of your time. You can follow the steps below to ensure you get to take advantage of this incentive program and effectively lower your cost of switching to solar.

• Step 1: Go to the Internal Revenue Service (IRS) website and print out IRS form 5695. This is the form for claiming renewable energy credits. The form requires some information about the capacity of your system, the total amount you paid and contact information for the company that installed it.

• Step 2: When you or your accountant go to file your taxes, submit the completed IRS form along with your return. If you’re using tax software like TurboTax or H&R Block, you should be prompted to answer questions about whether or not you installed clean energy equipment throughout the tax year. The software will ask for the relevant information, so you won’t need to print out any forms.
• Step 3: File the form with your taxes. It’s a good idea to check your tax return once it’s accepted to confirm that the federal credit was applied.

EcoWatch’s Opinion of the Federal ITC in Colorado

In our opinion, the federal solar credit is the most valuable and worthwhile incentive to take advantage of in Colorado. If you only have time to take one credit, we strongly recommend making it this one.

Not only can the federal credit bring down your effective system price by around $7,900 in Colorado, but the application process is also super easy and quick. The value you receive is outstanding for the minimal amount of time it takes to claim this incentive.

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Colorado Solar Equipment Sales Tax Exemption

Since the cost of solar panels in Colorado averages around $26,400 before any incentives are applied, the state waives sales tax on all photovoltaic (PV) equipment. This tax exemption can help bring down the upfront cost of your solar system, and it’s useful whether you buy your system in cash or use other financing options like a solar loan.

With the typical solar system price in Colorado averaging $26,400 and a state sales tax rate of 2.9%, you can save around $765 with this perk.

Keep in mind that you might still have to pay city or county taxes on your equipment, which can be expensive in areas like Denver, Boulder, Fort Collins and other major cities.

How to Claim the Sales Tax Exemption in Colorado

The sales and use tax exemption offers just a small amount off of your upfront system costs, but it’s worthwhile because it takes no time or effort to apply. The state will simply not charge sales tax on your system purchase — including labor — and your initial total will automatically reflect that exemption.

EcoWatch’s Opinion of the Sales Tax Exemption in Colorado

With an average savings of just $765, the sales tax isn’t the most appealing incentive. However, it’s an automatic perk that you don’t need to apply for. These types of incentives help make solar more affordable and accessible and send a message that the state supports the clean energy movement.
Watch Below: Learn How Colorado’s Incentives Make Going Solar More Affordable

Colorado Solar Property Tax Exemption

When you convert to solar in Colorado, you can also take advantage of the state’s property tax exemption on your equipment. Under normal circumstances, home improvements would increase the value of your home and cause your assessed property value to go up, which also means a higher tax bill.

Solar panel installation is expected to boost your property value by over 4%.1 With an average property value in Colorado of $528,285, solar equipment can add a pretty substantial increase.2 Colorado’s property tax rate is 0.48%, which when considering the total value of your solar system, would equate to an annual property tax increase of $126.3

Over the lifespan of your system — which is typically around 25 years — that would be around $3,168 in added property taxes. Note that this figure is higher than the increase you’d likely see on your tax bills because your system will depreciate over time. Still, the property tax exemption helps reduce the financial burden of converting to solar and makes your panels more valuable overall.

How to Claim the Property Tax Exemption in Colorado

Much like the sales tax exemption offered in the Centennial State, the exemption for property taxes is automatic and doesn’t require any time or effort on your part. When the tax assessor’s office in your municipality calculates your assessed value, they will exclude any value added by your PV system.

EcoWatch’s Opinion of Colorado’s Solar Property Tax Exemption

Property tax exemptions for solar equipment are a great way for states like Colorado to make solar more appealing and accessible to homeowners. Since Colorado’s effective property tax rate is below the national average, this is less beneficial than it would be in many other states, but it’s still an important incentive in the Centennial State.

We especially like this perk because it doesn’t take any time or effort for you to apply and reap the benefits, which are substantial over the lifespan of your solar panels.

Net Metering in Colorado

Net metering — also called net energy metering (NEM) — is a pro-solar billing policy and one of the most common perks available throughout the U.S. Through interconnection, net energy metering allows you to earn energy credits for all excess solar electricity you produce and don’t use.

Those credits accrue and can then be used to pay down future electric bills if you ever need to pull energy from the power grid, like in less than optimal conditions such as if your solar panels are covered in snow.

Colorado offers one of the best net metering policies in the country, and the Public Utilities Commission (PUC) mandates net energy metering for all investor-owned utilities (IOUs). The legislation allows energy providers to credit your account for up to 120% of the retail value of the excess energy you generate.

All major electric providers in Colorado are required to offer net metering, including:

• Public Service Company of Colorado, also known as Xcel Energy
• Black Hills Energy
• Some electric cooperatives
• Some municipal utility providers

Although net energy metering is a massively beneficial perk in Colorado, policies across the country have been changing to make net metering less appealing in other areas. Some utility providers have dropped the credit rate to below the retail value per kilowatt-hour (kWh) — usually to an avoided-cost rate — while other states abandoned the perk altogether.

As such, it’s possible that net energy metering won’t be available in Colorado in the future, especially since the state’s RPS goal has already been met.

How to Enroll in Net Metering in Colorado

Enrolling in the net metering program in Colorado should be automatic for most homeowners. However, it’s worth walking through the steps below to ensure you take full advantage of this incentive.

• Step 1: Contact your electricity company to confirm you have a bi-directional meter. This is a requirement for interconnection and net energy metering. If you don’t have a meter, you can request that your electricity company install one. This is done at no cost to you.

• Step 2: Install your renewable energy system. Net energy metering is most beneficial if your system is appropriately sized for your home, which most reputable solar installers in Colorado should do.

• Step 3: We recommend monitoring your energy bills for a month or two after your system is commissioned to ensure your credits are registering as expected.

EcoWatch’s Opinion of Net Metering in Colorado

Net energy metering is historically one of the best incentives for solar adoption available in the country. It provides a handful of benefits, including:

• Reducing your solar panel payback period, sometimes by several years
• Minimizing the effective total you pay for your solar array
• Maximizing the long-term energy savings you enjoy by converting to solar energy
• Helping to keep your energy bills to a minimum year-round

Net energy metering can help you approach the maximum lifetime savings of converting to solar — an average of around $18,300 in Colorado after your panels pay for themselves in energy costs — although the precise financial benefits of net metering are challenging to estimate.

In any case, net energy metering is one of the best incentives in Colorado, in our opinion, and should take minimal time and effort on your part to take advantage of.

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Local Solar Incentives in Colorado

While the federal and state incentives are appealing enough for most solar customers, Colorado residents also have access to a handful of local perks. These include cash-back incentives offered by local utility companies, municipalities and more. We’ll include a list of the most prominent local perks available in Colorado below.

• Xcel Energy Low-Income Solar Rebate: Income-qualified customers of Xcel may be eligible for a cashback incentive of up to $2,000 for each kilowatt (kW) of solar capacity installed, plus $0.07 for every kWh generated after installation. With an average system size of 7.5 kW in Colorado, that rebate could total as much as $15,000, not including the ongoing credits for solar production. This perk is also available for community solar projects, nonprofits and commercial solar customers.

• Colorado Energy Office (CEO) Incentive for Low-Income Individuals: This incentive offers energy savings of around $400 per year for income-qualified customers in the Weatherization Assistance Program (WAP).⁴ This program can provide solar systems on a limited basis at minimal cost to qualifying customers.

• Xcel Solar*Rewards Program: This is another cashback program that isn’t exclusive to low-income households. It offers up to $0.005 per kWh generated with your system, provided it’s under 25 kW, which most are in Colorado.⁵

• Colorado Springs Utilities Renewable Energy Rebate: This is a rebate for residential rooftop solar systems up to 15 kW, which most systems in Colorado will qualify for. The rebate is offered to customers of Colorado Springs Utilities and provides a cashback incentive of up to $0.10 per watt installed — an average of $750 in Colorado.⁶

• EnergySmart Colorado: This is a rebate offered by EnergySmart, an energy efficiency-based company that partners with local utilities to provide rebates for efficiency upgrades. One such rebate is for 25% of your entire system cost or $2,500, whichever is lower.⁷

• Black Hills Energy Solar Power Program: This is available to Black Hills customers and provides a gradual cash-back perk of $0.03 per kilowatt produced for systems up to 20 kW.⁸

• Holy Cross Energy Renewable Energy Rebate: Customers of Holy Cross Energy can take a rebate of up to $250 per kW installed for solar systems up to 6 kW, or up to $100 per kW for systems over 6 kW.⁹ With an average system size of 7.5 kW in Colorado, the typical cashback amount will be around $750.

• City of Boulder Solar Grant Program: Low-income residents of Boulder can get up to $1 per watt installed in rebates for going solar.¹⁰ This program is capped at $8,000 or 50% of your entire system value after all other incentives are considered, whichever is lower.

In addition to these more substantial and widely applicable rebates, there are additional perks offered by the following utility companies and municipalities:

• La Plata Electric Association
• City of Aspen
• San Miguel Power Association
• Roaring Fork Valley

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Which Tax Incentives Are Best in Colorado?

We’ve mentioned all of the incentive programs available to Colorado solar customers above, but not all options are as appealing as others — for example, some take more time to apply for or provide a lower overall benefit. In the sections below, we’ll rank what we believe are the top incentives available in Colorado that you should make sure you take advantage of.

Federal Solar Tax Credit

In our opinion, the biggest bang for your buck in terms of potential savings when going solar in Colorado is the federal solar credit. This is offered to all residents, so you’re guaranteed to have access to the program.

We think this is the best incentive available, partially because applying is simple and takes minimal time, and the result provides a massive potential value. The average maximum credit in Colorado is just over $7,900, making the federal credit the most impressive perk in your area.

Net Energy Metering

Next, we recommend ensuring you can take advantage of net energy metering. You may have to contact your electricity provider to confirm you have the right meter installed, but that single phone call can end up saving you hundreds or, more likely, thousands of dollars over time.

Net energy metering is a breeze to take advantage of and provides massive benefits and savings over time.

Local Incentives

Finally, we recommend looking into the numerous local incentives we’ve mentioned above. Colorado has far more local rebate programs and perks than most other states, and most solar customers in the state will be able to take advantage of at least one of them.

All of the local benefit programs mentioned above require minimal time to apply for, and most provide cash-back incentives of up to several hundred dollars.

What’s the Near-Term Outlook for More Incentives in Colorado?

There currently aren’t any plans or pieces of legislation in the works to add more incentives in Colorado or to make the existing ones more beneficial.

Colorado homeowners are already spoiled with the number of incentives available to them compared to other states. The likelihood is there won’t be any additional perks offered in Colorado in the coming years, considering the state reached its RPS goal in 2020 and has yet to set a new one.

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The cost information presented in this article is derived from a comprehensive analysis, incorporating data from multiple industry sources. The average cost per watt per state was calculated based on figures from Consumer Affairs, Energy Sage, and Berkeley Lab’s Electricity Markets & Policy Department. Additionally, monthly energy consumption and the average monthly cost of electricity were sourced from the U.S. Energy Information Administration, ensuring a well-rounded and accurate representation of the information presented.