There are two major solar incentive programs in Massachusetts: a state tax rebate worth up to $1,000, and the new SMART program that pays you money for every kilowatt of solar electricity that you generate.
The tax credit is the more straightforward program, so let’s talk about that first.
The Massachusetts Department of Revenue offers a tax credit worth 15% of the cost of a renewable energy system (including solar panels) up to a maximum credit of $1,000. Technologies that qualify for the credit include solar photovoltaics, solar thermal, and wind power.
The following things do not qualify for the credit:
The credit is used to reduce your state tax owed. If the credit exceeds the amount of tax owed, you may roll over the credit to subsequent years until it’s used up, for a maximum of three years.
Further details: 830 CMR 62.6.1: Residential Energy Credit
Massachusetts used to have a Solar Renewable Energy Credit (SREC) program that paid solar homeowners a credit for every kilowatt hour of electricity they generated. While the SREC program is still in place for anyone who previously enrolled, since November 2018 it has been replaced by the Solar Massachusetts Renewable Target (SMART) program for new enrollees.
Like the program it replaced, SMART pays participants a credit for each kilowatt hour of electricity that their solar array or wind turbine generates. A key thing to note is that this is not a net metering credit that pays you for the difference between what you use and what you generate. Instead, you’re paid for each kilowatt hour of electricity generated, whether or not it’s sent into the grid or used by your home.
The SMART program will pay you the incentive for 10 years after your system is online.
Compared to the SREC program it replaced, SMART is easier for consumers in a couple important ways.
First, the SREC program gives consumers a renewable energy credit that can be sold on the open market using an exchange like SRECTrade. This means that if you want to actually get your money, you’re responsible for going to a market to sell your credits.
And because it’s a market, the value of these credits fluctuates. At the time of writing, the price of one SREC credit (which is equal to 1,000 kWh of electricity) is $305. It might be different tomorrow.
The one complication with this program is that the value of your incentive depends on a number of factors. An overview of the calculation is below. Here’s a summary of the base compensation rates for each utility:
There are two components to calculate your incentive:
Your net incentive is your compensation rate minus the value of energy rate.
As mentioned, the actual value will depend on several factors, but homeowners can expect it to be between $0.111 and $0.199 per kWh, depending on your utility and where you live.
To find out exactly what your value of energy rate is, you can download this Excel spreadsheet and follow the instructions.
The average home in Massachusetts uses about 583 kWh per month, so with a solar array that generates 100% of their electricity, that would mean the average solar homeowner would receive around $769 in incentives annually if their value of solar rate is $0.111. The program will pay incentives for 10 years, so that’s $7,690 in total.
First of all, the SMART program is a block program, which means that the base compensation rate starts relatively high and then decreases in value as more capacity is signed onto the program over time.
The block compensation rate also varies by utility.
Download this Excel spreadsheet to see a table of the current rates.
The SMART program is designed to incentivize solar energy in preferred locations and with preferred technologies. This is done through “adders” that increase your base compensation rate.
The spreadsheet above has a list of adders, but here’s some examples:
Like the base compensation rate, the adders decrease over time as the block program matures.
In addition to the SMART credit, the major utilities in Massachusetts (Eversource, National Grid, and Unitil) offer net metering. You can read our guide to net metering to learn more.
A solar property tax exemption means that the added value of solar panels on your home doesn’t increase the assessed value of your home for the purposes of your property tax bill.
This is an important tax break because major improvements to your home will normally increase its assessed value, which means higher property taxes. The gross price of a home solar panel system, before incentives, might be in the range of $20,000. Without an exemption, your tax bill would increase because of that additional $20,000 in home equity.
Thankfully, in Massachusetts, any added value from your solar panels doesn’t increase your property tax bill. While the annual value of this incentive is fairly small, it can really add up over time because you can expect your solar system to last 25 years or more.
The current state sales tax in Massachusetts is 6.25%. Good news: solar panel equipment is exempt from this tax. This means that your solar hardware such as solar panels, inverters, and racking basically get a 6.25% discount right off the top.