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
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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.
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.
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.
Unlike many other states, Michigan does not have a statewide solar tax credit. Instead, the state incentivizes solar conversions by providing homeowners with an abundance of affordable solar loan options. Through the PACE Loan Program and the Michigan Saves Home Energy Loan Program, most property owners will be able to secure financing at a reasonable interest rate and with beneficial loan terms to make going solar an option. Although these won’t change the upfront cost of consumer energy conversions, they will help you save in the long run.
Yes, absolutely. Michigan currently has two loan programs operating in 2022: the Michigan Saves Home Energy Loan Program and the PACE Loan Program, both of which make energy-efficiency upgrades — including photovoltaic systems — more widely available. These act as incentives in some cases, because you can start enjoying energy savings without shelling out thousands of dollars upfront for the equipment.
While Michigan doesn’t have a statewide net metering program, you might be eligible for net metering via your electric company. Some utilities have their own net metering policies, although none buy back overproduced energy at retail rates. Still, net metering is available in 2022 in Michigan and could help you eliminate your electric bills.
Finally, homeowners in the Great Lakes State can take advantage of a property tax exemption and the federal solar tax incentive. The former prevents your property taxes from going up even though solar panels boost your home value. The latter provides a federal tax liability credit in the amount of 26% of your total solar energy system cost, which averages out to $5,114 in Michigan.
Unfortunately, there aren’t any statewide rebates available for solar power or related home improvements in Michigan. However, some utilities offer rebates for energy-efficiency upgrades like LED lighting, insulation, energy-efficient appliances, solar water heaters and more. You should check with your utility provider or the DSIRE database for more information on rebates for which you might be eligible.
Thankfully, no. We get this question quite often because most homeowners understand that home improvements that bump up home value will also increase assessed value and, as a result, their property taxes. While solar panels do make your home more valuable, Michigan has a property tax exemption that prevents your taxes from going up just because you installed solar panels. Your property taxes will still be determined based on your assessed value, but that value won’t include any benefits afforded by your solar panels.