Indiana Solar Incentives (Rebates, Tax Credits & More in 2023)

The table below includes all of the solar perks available in your area, along with a description of how each works and the estimated amount of money it will save you in the conversion process.

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

The federal solar credit is offered to all solar customers by the federal government. The program was initiated in 2005, and at that time, the credit sat at 30% of the system value you had installed. Originally, the credit rate was set to dip to 26% in 2022, 22% in 2023 and then be non-existent in 2024 and beyond.

In August of 2022, the Inflation Reduction Act (IRA) was signed. This piece of legislation extended the credit for ten years and pushed the 2022 credit rate back up to 30%. This new rate applied to systems installed after August in 2022 and retroactively to those installed before that in 2022.

The new schedule for rate changes is as follows:

• 30% for systems installed between 2022 and 2032
• 26% for systems installed in 2033
• 22% for systems installed in 2024
• 0% for systems installed in 2025 and after

The credit gets applied to the income taxes you owe, so it can only be taken advantage of if you owe the credit amount or more when you file. However, unused credit above and beyond what you owe can be carried over for five years in total.

Given the average system size of 9.5 kW in the area and the local cost of panels — an average of $2.68 per watt — a typical credit will sit at $7,638.

How to Claim the Federal ITC in Indiana

Filing for the federal credit is a simple and quick process. If you use a tax software to file your taxes, you should get prompted to answer questions about solar installation or energy efficiency upgrades. Make sure to answer that you have carried out home energy efficiency improvements and then follow the on-screen prompts.

If you file your taxes manually, you can follow the below steps to make sure you get access to the federal credit.

• Step 1: Print out IRS form 5695 from the Internal Revenue Service’s website.
• Step 2: Fill out the form when you’re ready to file your taxes. You’ll need information about your system and the solar contractor that installed it. This process should take just a few minutes as long as you have the information handy.
• Step 3: File the form alongside your taxes, or provide the completed form to your accountant for filing.

EcoWatch’s Opinion on the Federal ITC in Indiana

In our opinion, the federal credit is the single most important perk you can take. It takes just a few minutes to apply for, and you get a massive value averaging over $7,500. In many cases, that value will be realized within a year of your home solar conversion, making it a fast way to effectively save money on your PV equipment.

We would be remiss if we didn’t explain that this is not a solar rebate program, and you’re not guaranteed to get that $7,500 back. The credit is applied to your income tax liability, so if you don’t owe $7,500 to the government for income taxes over five years — an average of $1,500 per year — then you won’t be eligible for the entire credit.

What You Should Know About the Renewable Energy Property Tax Exemption

This exemption prevents your property taxes from increasing in response to installing solar panels. Usually, a home improvement like solar conversion that increases your home value will cause a bump in your taxes. This is because taxes are based on your entire property value, and solar is expected to push your home value up by about 4.1%.¹

This policy exempts the value added by your panels from taxation, so you should see no resulting change to your taxes — keep in mind that your taxes can go up for other reasons.

Although the amount this perk saves you will vary based on a few factors, the average lifetime savings are around $3,819. This assumes the average state property tax rate of 0.75%, a typical system cost of $25,460 and a system lifespan of 20 years.² The annual savings should be around $190, although this doesn’t take depreciation into account.

How to Claim the Property Tax Exemption in Indiana

Property taxes are assessed based on your property’s inherent value and the estimated value added by any improvements. Typically, your tax assessor will base improvement value on the permits that are filed for the work being done.

Thankfully, this perk is automatic and requires no effort on your part to take advantage of. Your assessor will acknowledge that your panels add value to your home but will ignore the assessed value of the system automatically when determining your property’s assessed value.

EcoWatch’s Opinion on Indiana’s Property Tax Exemption

Exemptions for property taxes for solar equipment are outstanding perks, in our opinion. Not only do they save a few thousand dollars, on average, over the life of your system and reduce the financial burden of converting to solar, but they also require no time or effort to take advantage of.

What You Should Know About the Sales and Use Tax Exemption in Indiana

In an effort to keep the cost of solar equipment down and promote the adoption of renewable energy, the state waives all sales tax on PV equipment. This is an upfront savings that will be reflected in your total cost to convert to solar power.

With an average sales tax rate of 7% throughout the state, the typical savings you’ll see on a system totaling $25,460 will be around $1,782.³

How to Claim the Sales and Use Tax Exemption in Indiana

The sales tax exemption is another automatic perk that will be applied without you having to fill out any forms or take any action. When your solar installer provides you with an installation cost, sales tax simply will not be included.

EcoWatch’s Opinion on Indiana’s Sales Tax Exemption

As we mentioned above, automatic solar perks are outstanding because they save you money without having to do anything. While the average savings using this perk are just $1,782 and lower than what most other benefit programs will save you, it’s still an outstanding value, especially since it requires no effort on your part.

Net Metering in Indiana

Net energy metering (NEM) is an important incentive program throughout the U.S. Through interconnection, this perk guarantees that you earn credits for excess power your system produces and sends to the grid. The credits will reduce energy bills in the future if your production ever falls below your consumption.

Net energy metering provides a few key benefits to solar customers:

• It helps maximize your energy savings by offsetting electricity costs for when you need to pull power from the grid
• It helps you pay off your panels more quickly so that you can realize greater long-term savings
• It helps you maximize the financial benefits you get from your panels and increases the overall value of your system

The savings you’ll see from net energy metering are difficult to calculate because they depend on your energy efficiency, your monthly utility bills, the size of your system and more. However, the average savings homeowners in your area see from converting to solar total around $21,944 after the panels pay for themselves. NEM can help you reach those savings.

Net energy metering is mandated by the Indiana Utility Regulatory Commission (IURC), the equivalent of the Public Utilities Commission (PUC) in other states.

However, the IURC doesn’t require a specific credit rate for excess kilowatt-hours (kWh). As such, most electric companies use a wholesale rate that is less beneficial than the full retail rate. Still, NEM is a hugely positive perk.

We should mention that net metering programs across the country have been going through some changes in recent years. Unfortunately, many states have seen net metering credit rates decrease to the wholesale rate that’s common in Indiana. Other states have seen the net metering policy disappear entirely.

There are no plans in place for Indiana net metering to go away, but it’s possible that this will happen in the future. Systems installed before any changes, however, will be unaffected in this case. 

How to Enroll in Net Metering in Indiana

Net energy metering requires a simple application with your utility company, but any of Indiana’s reputable solar companies will tackle the application process for you. We recommend you follow the below steps to make sure you take advantage of this perk.

• Step 1: First, we suggest you contact your utility provider to confirm that you have a bidirectional meter installed. This is required for interconnection. Most electric companies have upgraded their meters already. If yours hasn’t been upgraded, your provider should install a new one at no cost to you.
• Step 2: Choose a reliable solar installer and ask them to confirm that they will handle the NEM application process for you. Most companies in the area will.
• Step 3: Continue with the installation process.
• Step 4: Check your electric bills following the installation to confirm that your credits are being accrued. You may not see a negative balance if your energy consumption outpaces your production, but you should see evidence of the credits.

EcoWatch’s Opinion on Net Metering in Indiana

Net metering is one of the most beneficial perks for solar customers, especially in Indiana, where monthly consumption and the average electricity rates are both above the national averages.⁴

Not only does net energy metering help you maximize the value of your panels and your energy savings over time, but the process is more or less automatic for most homeowners. We would love to see a higher credit rate closer to the retail rate for energy, but even the typical wholesale rate available in the state is beneficial.

Local Solar Incentives in Indiana

Aside from the federal and state perks mentioned above, there are a handful of local benefit programs that you might be able to take. Eligibility depends on where you live and which utility company services your home. We’ll list the local financial incentives and explain each briefly below.

• Northern Indiana Public Service Company (NIPSCO) Feed-In Tariff: This is the equivalent of Solar Renewable Energy Certificates (SRECs) in other states, but it’s available to NIPSCO customers only. Solar power systems between 5 kW and 10 kW (most in your area) earn credits between $0.15 and $0.17 per kWh generated, regardless of how that energy is used. Solar panel systems above 10 kW are credited with between $0.13 and $0.15.⁵ Availability is limited.

• Indiana Michigan Power Energy Savings Rebate Program: This rebate option is not for solar, specifically, but you can get between $25 and $350 back for other energy efficiency upgrades, like heat pumps and smart thermostats.

• NineStar Connect’s Residential Energy Efficient Equipment Rebate Program: For NineStar Connect customers only, this perk provides cash-back incentives of up to $1,500. It applies to heat pumps, geothermal heat pumps and more.

• Tipmont REMC Energy Efficiency Equipment Rebate Program: This perk is for Tipmont REMC customers installing energy efficiency upgrades, like smart thermostats and efficient water heaters. Rebates sit between $50 and $100.

You can check the Database of State Incentives for Renewables & Efficiency (DSIRE) for updates to these programs. You can also get information there about perks for commercial solar customers, nonprofits and more.

Which Tax Incentives Are The Best In Indiana?

At this point, we’ve discussed all of the incentives available in your area, regardless of their overall value. Below, we’ll include what we believe are the top three perks you should not pass up when converting to solar.

The Federal Solar Energy Tax Credit

The federal credit is the single most important solar incentive to take, in our opinion. It’s a breeze to apply for, it’s available to all residents and it provides an average potential value of over $7,600. Especially since there aren’t many other solar perks available, this value is too good to pass up.

Net Energy Metering

The other perk we suggest taking for all customers is net energy metering. This benefit program is also available to all residents, although the credit rate for excess energy can vary. The application process is typically handled by your solar panel installation company, and the savings the perk helps you achieve are outstanding.

What Indiana Homeowners Need To Know About SRECs

SRECs — Solar Renewable Energy Certificates or Solar Renewable Energy Credits — are credits provided for each kWh a solar system generates. The credit is separate from net metering credits, and it gets applied to your account whether the kWh is sent to the grid or used on-site.

Unfortunately, SRECs are not a statewide program, and there is no open SREC market. However, customers of NIPSCO do have access to a feed-in tariff that works similarly to SRECs.

Are SRECs Taxable in Indiana?

Yes. If you’re a customer of NIPSCO and take advantage of the feed-in tariff, you will need to report the earnings as income and pay taxes accordingly.

What’s The Near-Term Outlook For More Incentives In Indiana?

At this time, there are no plans in place for new perks or for existing incentives in Indiana to get upgraded. The state currently has an optional RPS goal to generate 10% of its electricity via clean energy sources by 2025. Voluntary RPS goals still incentivize electric companies to offer more solar perks, but they don’t require them to.

If the state upgrades its RPS goal to a mandatory one in the near future, we could see an increase in incentive availability or overall quality. However, there is no evidence that a mandatory RPS goal will be set anytime soon.

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