2022 Michigan Solar Tax Credits, Rebates & Other Incentives

Here’s a quick look at the solar incentives in Michigan:

  • Federal Solar Tax Credit (ITC)
  • Michigan Home Energy Loan Program
  • Property Tax Exemption
  • Additional City & Utility Rebates
Ecowatch Author Karsten Neumeister

By Karsten Neumeister, Solar Expert

Updated 5/19/2022

Why You Can Trust EcoWatch

Our solar experts have sifted through hundreds of local governments and utility companies’ websites to find accurate information about current solar incentives in each state. We’ve also unbiasedly ranked and reviewed hundreds of solar installers to empower you to make the right choice for your home.

How Much Can You Save With Solar Incentives in Michigan?

In this article, we’ll discuss the solar incentives and rebates available to Michigan homeowners. When you’re ready to speak with a qualified professional, follow the links below. Each of these companies can help you identify and apply for incentives available in Michigan.

Jump to Section:

  1. Solar Rebates, Tax Credits and Incentive Programs in Michigan
  2. Net Metering in Michigan
  3. Federal Solar Tax Credit
  4. FAQ: Michigan Solar Incentives
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The cost of solar panel systems in Michigan is at an all-time low, averaging just $2.81 per watt. With the typical system size requirement sitting at just 7 kilowatts, Michigan homeowners pay an average of $19,670 to go solar. While this is well below the national average, it’s still high enough to turn some homeowners away from this renewable energy source.

In an effort to reduce the financial burden of going solar and make the process more appealing to homeowners, the federal and state government provide some solar incentives. Below, we’ll discuss all of the incentives, rebates and tax credits you can take advantage of in Michigan.

Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.

Current Solar Rebates, Tax Credits and Incentive Programs in Michigan

We’ll dive into how each of the solar incentives in Michigan works and how each affects your total cost of going solar. The table below provides a brief overview of the incentives first to give you a quick rundown of how you can save money on your solar panel installation.

Michigan Solar Incentive Description
Federal Solar Tax Credit (ITC) The federal solar tax credit is available to all Michigan homeowners and totals 26% of your entire solar system cost.1 The credit amount varies, as it’s based on your system cost, but the average Michigan homeowner will get a credit of around $5,114. This amount is applied to your federal income taxes owed for the tax year in which your system is turned on.
Michigan Saves Home Energy Loan Program  Making solar financing widely available to all residents is a lofty goal, but the Michigan Saves Home Energy Loan Program is helping achieve it. The program offers loan assistance by working with third-party lenders to reduce interest rates and negotiate favorable terms.2 It’s available for a number of energy-efficiency upgrades, including solar photovoltaic equipment.
Alternative Energy Property Tax Exemption Solar panels increase your home value, and most other home improvements that do the same thing will also cause your property taxes to go up. The Alternative Energy Property Tax Exemption prevents this from happening by exempting the value your solar panels add from property taxation.3 Over the lifespan of your solar system, this can rack up massive savings.
Michigan Local PACE Program The Property Assessed Clean Energy (PACE) Program offered by the State of Michigan helps homeowners complete energy-efficiency upgrades on their homes at no upfront cost.4 Homeowners who qualify can get financing for upgrades — including some solar equipment — and can repay the loan over a period of five to 20 years.

Michigan Solar Tax Credit

Some states have a state solar tax credit in addition to the federal solar tax credit to make converting to clean energy even more appealing. Unfortunately, there is no Michigan state tax credit for solar PV system installations. The federal solar tax credit — which is available to all MI homeowners — is a substantial tax credit that can effectively reduce your cost of going solar quite a bit. The federal tax credit will be discussed in greater detail below.

Other Michigan Solar Incentives

According to the Solar Energy Industries Association (SEIA), Michigan is more solar-friendly than about half of the U.S.5 To that end, the state provides some local incentives to homeowners converting to solar. We’ll discuss all of the statewide incentives available below and in the following sections.

Michigan Saves Home Energy Loan Program

While Michigan doesn’t have a state solar tax incentive, it makes solar conversions more appealing by providing a wealth of solar loan options that are highly accessible and make going solar more affordable. The Michigan Saves Home Energy Loan Program is designed to make energy-efficiency upgrades easier and cheaper to finance by reducing upfront costs, bringing down interest rates and getting more favorable loan terms for homeowners throughout the state. 

The program covers many different upgrades, including new roofing, solar photovoltaic panels, insulation, high-efficiency faucets and toilets, windows, air sealing, efficient HVAC equipment and water heaters, solar batteries, and even electric vehicle charging stations. 

To take advantage of the Michigan Saves program, you’ll first have to use the program website to find an eligible solar panel installation company or energy-efficiency expert. You’ll then apply for financing for your project directly through the MI Saves site. You’ll be connected with a lender that will provide you with the best terms available for your project.

Michigan Solar Property & Sales Tax Exemption

Installing solar is almost always a sound investment in Michigan, but many homeowners worry that their property taxes will increase as a result. This would normally be a legitimate concern because home improvements that increase home value also affect your assessed value and property taxes, and installing solar panels will bump up your property value.

However, Michigan offers homeowners the Alternative Energy Property Tax Exemption, which prevents any addition to your assessed value due to installing solar panels from affecting your property taxes. This gives property owners the best of both worlds: a boosted home value and no corresponding spike in property taxes. Over the years this exemption is in effect, you could stand to save thousands of dollars.

The property tax exemption is especially effective at incentivizing home solar options in areas like Detroit and Ann Arbor, where the effective property tax rate is relatively high.

Many states also offer a sales tax exemption to prevent homeowners from having to pay sales tax on solar equipment. Unfortunately, Michigan does not exempt solar equipment or installation services from sales tax, so you’ll still have to pay sales tax on top of the total solar power system cost.

Net Metering in Michigan

Net metering is a policy that incentivizes homeowners to convert to solar energy by increasing the chances of eliminating electric bills. Solar panels will almost never produce enough energy to disconnect entirely from the grid unless you have an off-grid system designed with plenty of battery storage. As such, most residential solar customers are tied to the grid via interconnection.

When your panels don’t produce the energy your home needs, as would be the case at night or when it’s extra cloudy, you can pull energy from the local power grid. When your panels produce more than you’re using, as would be the case on a bright, sunny day, you can send the excess back to the grid. Through net metering, you can receive credits for your extra energy from your utility provider, and these can be used to offset your future electric bills.

Net metering is not mandated by the Michigan Public Service Commission, but many public utilities still offer it to customers. However, the ones that do have net metering programs typically buy energy back at an electricity rate that is below retail value, which is still good but less beneficial than full-retail rates. Some companies adopted a new in-flow/out-flow billing plan in 2016 that is still somewhat beneficial but not nearly as good as a net metering policy at retail energy costs.

It’s best to check with your electric company before committing to its net metering program. The policies for net metering can vary quite a bit between electric companies, so make sure you understand your utility’s program.

Local Incentives

Finally, the Michigan Property-Assessed Clean Energy (PACE) Program is a financing initiative aimed at making solar loans more affordable and more widely accessible. PACE works directly with homeowners to provide low-APR financing, no-money-down options and more to keep clean energy an option for all Michigan residents.

You can begin the process of going solar by contacting a solar installer — it’s best to opt for one of the most reputable solar companies in Michigan — and getting a system designed and quoted for your home. You’ll then need to find a lender to fund your solar project unless you’re paying cash. You can choose any lender you want, and most solar installers will either work with third-party lenders or have financiers they can recommend to you.

Once you contact a lender, you can contact Lean & Green Michigan (LGMI), the authority responsible for the PACE Program. LGMI will then coordinate between you, your installer, and your lender to get you the best deal on your interest rate, loan term and down payment requirements.

You should check with your local government to see if it provides PACE financing, as not all municipalities do.

Federal Solar Tax Credit

The federal solar investment tax credit (ITC) is an incentive provided by the federal government to all homeowners throughout Michigan. The credit gets applied to your federal income tax liability for the same tax year in which your system is installed and commissioned. The credit is worth a massive 26% of your total solar panel system installation costs. In Michigan, where most homeowners pay an average of approximately $19,670 for their solar arrays, the federal solar tax credit will usually be around $5,114.

Homeowners in Michigan are urged to install solar panels in 2022 to take full advantage of the ITC, as it’s scheduled to drop to 22% — from an average of $5,114 to an average of $4,327 — in 2023. Unless Congress chooses to renew the bill that established the credit, the ITC will no longer be available in 2024 for residential customers. Commercial solar customers can still get the ITC in 2024, although the credit will be for just 10% of the system cost.

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FAQ: Michigan Solar Incentives

The EcoWatch team gets questions all the time from Michigan homeowners exploring solar incentives and looking to save money on their solar installations. Below are the questions we see most frequently from individuals in the area.

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Karsten Neumeister

Solar Expert

Karsten Neumeister is a solar energy specialist with a background in writing and the humanities. Before joining EcoWatch, Karsten worked in the renewable energy sector of New Orleans, focusing on solar energy policy and technology. A lover of music and the outdoors, Karsten might be found rock climbing, canoeing or writing songs when away from the workplace.