Tennessee Solar Incentives: Tax Credits & Rebates Guide (2022)

By Britt Olizarowicz

Every state in the nation has different rebates and incentives to help promote clean energy technology. The energy programs in Tennessee are not quite as strong as we see in other states, but there are some options to help homeowners cut down on the total costs of a solar installation. In our guide featuring the Tennessee solar incentives, tax credits, and rebates, we provide:

  • Why solar installations make sense
  • Rebates to help you save money on your solar energy system
  • Tax incentives that can help make a solar system possible

Before investing in solar power systems for your home, take a look at these money-saving tips so that you don’t miss out on an opportunity.

Why Go Solar in Tennessee?

Tennessee is a bit behind when it comes to solar energy production. Certain cities like Nashville and Knoxville are finding very few people taking advantage of solar initiatives and incentive programs. This has helped to ensure that some new incentives are put together on the DSIRE website to help the homeowner and taxpayer save some money.

One of the issues seen with Tennessee solar power is the high costs from local installers and lower energy costs from the power company. This leaves homeowners with a long wait to recuperate the money they have invested into their solar system. However, the electric bills can be pretty high in Tennessee, thanks to some cool winters and warm summers. Making the investment into solar tends to be well worth it in the long run if you can get the incentives in place upfront.

Tennessee Solar Cost

Installing solar panels in Tennessee will range from around $15,000 to $30,000, depending on the size of your home. In addition, the financial incentives offered by the Federal government will help to reduce costs. The installation cost for solar panels will change based on who does the installation; looking for incentives from the TVA (Tennessee Valley Authority) for net metering is also a way to bring overall costs down.

Some homeowners use solar power as one of their energy sources, and they take advantage of other things like hydropower and geothermal energy in addition. The way in which you power your home or electric vehicles does not have to be 100% solar to see a reduction in costs and an overall increase in green energy.

How much Can You Save on Solar in Tennessee?

Unfortunately, the programs from Tennessee are a bit behind other providers in the country. The Solar Energy Industries Association (SEIA) and Green Power Providers Program are always looking to make sure that, in addition to the Federal Tax Credit, there are other options for homeowners and business owners to save money. The current federal tax credit, saving homeowners 26% on their purchase, could be the best option for Tennessee homeowners on a budget.

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The Best Solar Incentives, Tax Credits, & Rebates in Tennessee

It’s important to look at all solar incentives before your installation. Once the solar panels are installed, and in place, the overall process of getting a tax credit, rebate, or incentive is considerably more involved. Homeowners will notice that the best way to get this done is to follow the guidelines for Photovoltaic (PV system) installation and requirements to ensure the best overall results and chance at saving money.

Incentive Summary End Date
Federal Solar Tax Credit (ITC) Tennessee residents can take advantage of the Federal Solar Tax Credit and get a discount of up to 26% applied to their tax return. If you purchase $20,000 worth of solar panels, you can get a credit for more than $5,000 on your next tax return. Remember, this does require you to come out of pocket first. December 31st, 2023
Net Metering Net metering allows homeowners that create excess energy to use it as a credit on their next electric bill. Not all energy providers need to offer this option to homeowners, so it can be hard to find the proper company that allows net metering. None
Tennessee Property Tax Incentive Property taxes will remain mostly unaffected by the installation of solar panels; this can apply to a new build or a retrofit. Expect costs to increase by a maximum of 12.5% of the total solar panel installation cost. None

Federal Solar Investment Tax Credit (ITC)

The Federal Solar Investment Tax credit is available in all 50 states. The program provides money back to homeowners in the form of a tax rebate. The current percentage on this incentive is up to 26% of the current price of your solar system. The program has homeowners pay for their full installation, and then the credit is earned the following tax year when the tax bill is due.

If no taxes are owed, the credit can carry over on the taxes until it is needed. The credit for the ITS program for solar installation is set to decrease from 26% to 22%. In addition, this is a bill that does have an expiration date of December 2023. If you are interested in trying to save money on a solar system, now is the time to get it done.

Tennessee Solar Energy Tax Credit

Unfortunately, Tennessee does not currently have a state solar energy tax credit. Alternative sources of energy like solar and biomass are a bit behind in the state of Tennessee. This could have to do with the overall fair pricing of electricity in Tennessee and the fact that homeowners and business owners are not as concerned about rising costs.

Tennessee Solar Sales Tax Exemption

The Sales Tax Credit for Clean Energy Technology in Tennessee is currently only in place for commercial customers. Keep checking back to see if things change over time, and the sales tax rate of 7% is yet another savings that homeowners can look forward to.

Tennessee Solar Property Tax Exemption

When you install solar panels on your home, the price of your home can go up. The Green Energy Property Tax Assessment limits the assessment of the equipment installed on your home to 12.5% of the total system value. Essentially this means your property taxes will go up, but they will not be impacted nearly as much as they would have been without this assessment. The installation of solar panels certainly increases the total value of your property, but it’s a nice feature to not have to get punished for this.

Tennessee Net Metering

Tennessee net metering is the process of creating more energy than your home needs and supplying some of that energy back to a utility company. Tennessee has no current requirement for energy companies to offer net metering to its customers. Essentially this means that you are going to have to find a provider that does this. Other states have a mandatory net metering policy.

For some time, the TVA was offering net metering, but their program is currently on hold. The net metering program is a great way to save money and balance your total energy costs. For Tennessee homeowners that can find a provider that allows for net metering, it will be well worth your research and effort. Just keep in mind that net metering policies change quickly, so you will have to stay on top of this.

Commercial Tennessee Solar Incentives

Some programs across the United States and in Tennessee will apply to only commercial settings. Sometimes government or large utility companies can do more for commercial investors as they have very large upfront costs. Luckily there are both tax incentives and savings plans that will help the commercial customers in the state. Keep in mind that these commercial incentives also typically apply to Non-profit organizations, small businesses and schools, and government buildings.

USDA REAP Grant

The United States Department of Agriculture offers a REAP grant or Rural Energy for America program that ensures loan financing and grant funding to agricultural producers. In addition, small rural businesses can also access these resources for installing or upgrading renewable energy systems. The USDA REAP Grant program is in place purely to help people save money; in addition, the ability to get financing is made considerably easier with the USDA REAP grant.

Federal Solar Tax Credit for Businesses in Tennessee

For a federal corporate income tax return, there is a 30% credit against the cost of any system that was placed into the building during that year. This 30% reduction in cost will come back in the form of a tax rebate in the following year. Some companies and organizations that have large tax burdens have used this as a way to save them thousands of dollars.

The Federal Solar Tax Credit is still one of the best ways to save money on solar energy, but these programs are set to expire, and the rate of 30% savings is going down to 10%. If you have a business in Tennessee, now is the time to start looking into which of these programs will be worth the money; the program will not continue past December 31, 2023, unless something changes.

Sales Tax Credit for Clean Energy Technology

Commercial institutions in Tennessee are exempt from paying the 7% sales tax rate on their clean energy purchases. Of course, this program is something that you will need to apply for to receive financial help.

If you have already purchased the system and found out about the sales tax credit, it is reasonable to fill out an application explaining this and see what you can do from a cost-saving standpoint. The sales tax paid can come back to you as a rebate.

Pathway Energy Efficiency Loan Program

Large solar installations can be challenging to afford. In addition to solar rebates, it’s a good idea to look for solar loan programs as well. These loan programs can help ensure that schools, non-profits, and other businesses have an affordable way to finance their green energy initiatives.

The Pathway Energy Efficiency Loan Progam allows for a maximum loan of $5 million dollars, up to 100% of the costs of the solar system. The term of these loans is typically 5-10 years, and interest rates are between 2 and 5%. The key here is that there is no prepayment penalty, and the entire project can be funded through this one loan program.

Key Takeaways: The Best Tennessee Solar Incentives

Tennessee is a state with some work to do when it comes to solar initiatives. The best possible way for Tennessee homeowners to save money on a solar installation right now is to take advantage of the Federal tax rebate. This rebate is currently quite high at 26%, and while this is the case, it’s worth getting what you can out of it. Pay close attention to the initiatives and rebates in Tennessee, as they will likely get better through the years to try and keep up with other states.

Tennessee Solar FAQ

Is solar worth it in Tennessee?

The problem that Tennessee homeowners run into is that the costs of energy in Tennessee are relatively fair when compared to other states. This makes it difficult to afford the high overall costs of a solar panel installation. However, with the change of seasons in Tennesse and the extremes in temperatures, energy costs are quite high overall. A solar system will save you money in the long run if you can find some way to save money on the upfront costs.

How much will my electricity bill go down with solar in Tennessee?

Suppose you have a full solar panel system installed by a professional who can accurately assess your home energy needs. In that case, the electricity bill to power your home could go down to nothing. The solar panel system is designed to significantly reduce or eliminate all electric costs. However, one of the most important things to remember is that a solar system installed in your home does not have to cover all electric bills. Many homeowners start with a few panels and increase through the years as they can afford more.

How much does it cost for solar panels in Tennessee?

Solar panels in Tennessee for a complete single-family home will typically range from around $15,000 to more than $30,000. If you have a large home, the solar panels needed to power it will be considerably more extensive, and the total costs will increase. Installation costs vary between providers, which will have a significant impact on whether or not the system is worth it. Get several quotes for solar panels before deciding on a company.

How many homes in Tennessee have solar panels?

Currently, just over 60,000 homes in Tennessee have solar panels. You will notice that states with better incentives for homeowners have more homes with solar panels. As the incentives in Tennessee get better, hopefully, the number of homes will increase.

Do solar panels increase property taxes in Tennessee?

Solar panels will increase property taxes and home value in Tennessee. There is a bill in place that ensures these upgrades to your home will cost you a maximum of 12.5% of the total installation costs as an increase to your assessed property value. Essentially, the impact will be minimal even though the installation costs are high.

How much can you write off for solar panels on taxes in Tennessee?

The 26% Federal Tax Rebate program is an option for Tennessee homeowners. There is currently no state program to help save any additional money on your solar system.

House Method’s Solar Companies Rating Methodology

At House Method, transparency and trust are our most important values for the reader. That’s why we took the time to create an objective rating system and score each solar energy company/service according to our methodology.

Our research team dug deep into the fine print of contracts, combed through more than one hundred customer reviews, and thoroughly investigated all of each solar energy company’s services, costs, and products. We’ve done the homework for you by researching nearly all of the solar energy companies on the market so you can have the information you need to make the best choice for your home.

We developed a formula to objectively determine the best solar energy companies and give each a score out of 100 based on the following criteria:

Plan Options (30): Do they provide a variety of plan options? We looked at the number of plans each solar energy company offered and the flexibility of adjusting the plan.

Services offered (20): How many services are offered in each plan? We looked at whether the company manufactures its own solar panels, whether it contracts out installation, and what additional products each company offers.

Trust (10): What do customers say after their solar panels are installed? Does this company offer a guarantee? We considered how satisfied customers are post-service if the company does what it says it will, BBB accreditation, and service guarantees.

Prices (10): How reasonable are the costs of the plan or service in comparison to the industry average? We compared the costs of each company to competitors that offer the same solar energy services.

Unique perks (10): Does the company offer discounts or special services such as financial incentives, rebates, or a useful mobile app? We looked for extras each company offers that set them apart from the competition.

Customer Service (10): How is the customer experience when contacting the company? We considered the speed of response, weekend/holiday availability, and ease of communication through phone calls, email, and online chat functions.

Nationwide availability (10): How many states does the company offer its services? Companies that operate nationally and in all zip codes are favored over those with limited availability.

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