Vermont Solar Tax Credits, Incentives and Rebates (2023)

Oct 11, 2023

Vermont has a statewide target to generate 75% of its energy using renewable sources by 2032, and it offers multiple incentive programs to support that goal. Vermont solar incentives include two tax exemptions for home solar systems, and Green Mountain Power (GMP) offers a rebate of up to $10,500 for customers who install a home battery.

We at the MarketWatch Guides Team have conducted in-depth research to determine the cost of going solar in Vermont. The Green Mountain State is not particularly sunny, but at 19.26 cents per kilowatt-hour (kWh), local electric rates are nearly 30% higher than the U.S. average. Vermont residents who use solar panels to generate their own electricity can save hundreds of dollars in annual electric bills — and you can save even more by taking advantage of solar incentive programs.

The federal solar tax credit, officially called the solar Investment Tax Credit (ITC), is a major incentive for U.S. homeowners who install photovoltaic (PV) systems. The credit is worth 30% of your total solar system cost, and you can combine it with local tax exemptions and rebates. You can apply the credit to your federal tax burden for the year you install a solar power system. If the credit exceeds what you owe in taxes, you can roll over the remainder for up to five years.

Keep in mind that the credit is not a rebate or refund. You can claim the federal tax credit on your IRS filing the year you turn on your solar panel system. You must include Form 5695, and we strongly recommend contacting a certified public accountant to ensure you file the tax credit properly.

According to our March 2023 solar survey of 1,000 homeowners with installed solar, the average cost of solar energy systems in Vermont is $3.01 per watt. Here's a breakdown of how the credit can reduce that cost:

According to the Solar Energy Industries Association (SEIA), the U.S. has seen a 24% average annual growth in solar over the last decade thanks to the federal tax credit. The federal government renewed the solar ITC with the Inflation Reduction Act, which extends the benefit through 2034.

Vermont residents who install solar panels are eligible for a sales tax exemption and a property tax exemption. The state does not have solar rebates and Renewable Energy Certificates (RECs) as of 2023, but Green Mountain Power offers rebates of up to $10,500 for home batteries.

Incentive value: Exempts solar equipment from the state's 6% sales tax

Frequency: Applied at the time of purchase

Vermont enacted a sales tax exemption for renewable energy systems in 1999 that applies to PV systems with up to 500 kilowatts (kW) of capacity. The exemption is available for residential, commercial and agricultural solar projects. Here's how it works:

The state sales tax exemption is also available for solar water heaters.

Incentive value: Worth the annual increase in property taxes after you install solar

Frequency: Annual tax exemption

Vermont homeowners also get a property tax exemption for solar energy systems. For example, if your property is worth $350,000 and your home value increases to $375,000 with solar panels, you are not taxed for the increase of $25,000. Assuming you live in a municipality with a property tax rate of 1.7%, you would save $425 per year.

Solar energy systems with a capacity of 50 kW or more are subject to a uniform capacity tax of $4 per kW. So if you have a 100 kW system, you would pay $400 per year in property taxes. But this should not be an issue for most homeowners since residential installations are generally smaller than 10 kW.

Incentive value: $850–$950 per kW of battery capacity, up to $10,500 per system

Frequency: One-time

Green Mountain Power is the largest power company in Vermont, delivering around 75% of the electricity used in the state. GMP does not offer any incentives for solar installations, but its Bring Your Own Device (BYOD) program offers generous rebates for home battery systems.

Distributed energy storage is a valuable resource for power companies since it can help manage electrical loads during times of high demand. GMP offers incentives for battery owners who make their storage capacity available to offset hours of peak demand for 10 years. Incentives include:

The maximum incentive you can earn is $10,500 per battery system. If you already own solar panels and live in a region that needs grid storage capacity, you can earn a bonus incentive of $100 per kW of battery power.

GMP has a list of battery models that are eligible to participate in the BYOD incentive program, which includes:

You can enroll your home battery on the BYOD program website. If you have an Enphase battery, you can enroll using the Enphase Enlighten App. Your battery installation must be completed by approved providers listed on the Renewable Energy Vermont directory to qualify, regardless of the model.

Note that GMP also offers rebates for home energy efficiency projects. Eligible equipment includes heat pumps and induction cooktops.

Vermont is working to reduce statewide emissions through a Renewable Portfolio Standard (RPS) goal that mandates 75% clean power generation by 2032. Since distributed solar power can help reach this target, the state has a favorable net metering policy. Homeowners with renewable generation systems can export their surplus production to the grid in exchange for electricity bill credits.

Green Mountain Power has the largest net metering program in Vermont, which credits excess energy at a rate of 18.035 cents per kWh. This solar buyback rate is close to the average electricity price for Vermont residents of 19.26 cents.

Green Mountain Power explains interconnection requirements for homeowners who want to enroll in net metering on its website. You can also download the Net Metering Registration Form to learn more about program requirements and how to earn energy credits.

To be eligible for net metering, your solar power system must meet standards set by the IEEE 1547 and UL 1741, along with specific requirements from GMP and ISO New England.

If you install a 6 kW solar system in a location with decent sunshine in Vermont, you can expect to generate over 7,800 kWh per year. Considering the state's average electricity price of 20.38 cents per kWh in March 2023, your annual energy bill savings could reach $1,600.

After subtracting the 30% federal tax credit, the upfront cost of a 6 kW solar system in Vermont is around $12,642. Considering you save around $1,600 per year on energy bills, your estimated payback period would be 7.9 years. This is only a fraction of the 25- to 30-year warranty that leading solar providers offer — meaning your solar panels will continue to perform and result in energy savings even after you pay them off.

Vermont sees less annual sunshine than many other U.S. regions, but local electricity prices are high, and the state has favorable incentives for solar owners. In addition to energy bill credits from net metering, your photovoltaic system is exempt from sales and property taxes. Plus, you can claim the 30% federal tax credit. If you’re considering a battery system for your solar systems and are a Green Mountain Power customer, you can get a rebate of up to $10,500.

The best solar companies have ample experience with net metering and rebate programs and can help you apply. Many solar companies also offer financing and leasing options, so you can go solar for $0 upfront and then use your monthly savings to pay your loan or lease.

Vermont does not have a state income tax credit for solar power systems. However, you can claim the 30% federal tax credit for renewable energy systems. The state also offers solar sales tax and property tax exemptions.

Yes, solar panels are worth it in Vermont. Investing in a solar system can help you offset the state's above-average electricity prices of 19.26 cents per kWh — which is 30% higher than the U.S. average. Installing solar can also help contribute to the state's renewable energy goals while producing clean energy to power your home.

You can expect to pay $3.01 per watt when installing solar panels in Vermont, according to our 2023 solar cost survey. A 6 kW solar system costs $18,060 on average or $12,642 after the federal tax credit, whereas a 10 kW system costs $30,100 or $21,070 after the credit. Considering Vermont's electric tariffs, you can save around $1,6000 in annual energy bills with a 6 kW system and $2,650 with a 10 kW system. In both cases, your payback period would be less than 10 years.

Vermont has a Renewable Portfolio Standard (RPS) goal to produce 75% of the state's energy using renewable sources by 2032. As for solar incentives, the Green Mountain State offers sales tax and property tax exemptions for home solar systems. It also has a favorable net metering policy that compensates you for sending surplus solar energy to the grid. Vermont offers an energy bill credit rate that is close to the retail electricity amount.

Leonardo David is an electromechanical engineer, MBA, energy consultant and technical writer. His energy-efficiency and solar consulting experience covers sectors including banking, textile manufacturing, plastics processing, pharmaceutics, education, food processing, real estate and retail. He has also been writing articles about energy and engineering topics since 2015.

Tori Addison is an editor who has worked in the digital marketing industry for over five years. Her experience includes communications and marketing work in the nonprofit, governmental and academic sectors. A journalist by trade, she started her career covering politics and news in New York's Hudson Valley. Her work included coverage of local and state budgets, federal financial regulations and health care legislation.