The integration of renewable energy resources and hybrid plug-in electric vehicles (PHEVs) to the power grid plays an important role in responding to the increasing demand for electrical energy all over the world. In this paper, the authors aim to propose an improved scheduling model for home appliances and PHEV considering battery pack degradation cost and incentives for the vehicle to grid (V2G) service. The significant number of PHEVs provides an opportunity for storing electric energy in residential buildings and supplying the grid energy shortage. The stored energy can be delivered to the power grid at peak hours, which is called V2G service. It is clear that although V2G service provides attractive revenue opportunities, operating the electric vehicles in V2G mode imposes extra degradation cost on owners; therefore, battery-pack degradation cost in V2G service should be considered in the optimal scheduling of its operation. A semi-empirical lithium-ion battery degradation model is used for degradation cost analysis of PHEV battery pack due to the characteristics such as accuracy and low computational load. The proposed model is implemented on a case study to investigate the influence of degradation cost and incentives on the operation of PHEV in charging or V2G mode.