2022 Minnesota Solar Tax Credits, Rebates & Other Incentives
Here’s a quick look at the solar incentives in Minnesota:
- Federal Solar Tax Credit
- Solar Energy Sales Tax Exemption
- Wind and Solar-Electric (PV) Systems Exemption
- Additional city and federal rebates
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.
Sun Badger Solar
- Offers products from leading manufacturers
- Competitive pricing
- Offers rewards for customer referrals
- No leases or PPAs
- Relatively young company
- Solar Panels
- Solar Batteries
- EV Chargers
- Maintenance & Repairs
MN Solar and More, LLC
- NABCEP-certified technicians
- Offers rewards for customer referrals
- Excellent reputation
- Limited service area
- Limited information available on website
- Relatively young company
- Solar Panels
- Solar Batteries
- EV Chargers
- Electrical Work
Solar energy is becoming increasingly popular throughout Minnesota, but the cost of converting to this renewable energy source is still prohibitively expensive for many homeowners. The average cost of going solar in Minnesota is $22,720 before any solar incentives are taken advantage of, so most residents look for ways to decrease their costs. This average cost is based on the typical price per watt — $2.84 — and the average system size required in Minnesota — 8 kilowatts.
Thankfully, there are a number of solar tax incentives, rebates and other benefits afforded by the federal and state governments that make clean energy far more accessible for Minnesota homeowners. In this guide, we’ll discuss all of the incentives available in MN, how each incentive can save you money, and what your total costs could look like after all incentives are considered.
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 Minnesota
Minnesota is considered a generally solar-friendly state, so homeowners throughout can expect a decent number of opportunities to benefit from installing a solar panel system. The table below provides a quick view of some of the most appealing incentives available in Minnesota.
|Minnesota Solar Incentive||Description|
|Federal Solar Tax Credit||The federal solar tax credit will reduce your federal income taxes owed by 26% of the total cost of your solar energy system1. In Minnesota, the average credit is a massive $5,907.|
|Minnesota PACE Program||The Minnesota Property Assessed Clean Energy (PACE) program is designed to make securing financing for solar equipment more accessible and affordable overall. Currently, the program is only available for commercial solar customers, but the legislation makes the program a possibility for a residential branch in the future (via the Residential Property Assessed Clean Energy program, or R-PACE).|
|Net Metering||Net metering is a policy that lets you reduce your energy bills using overproduction from your solar system. Each local utility company in Minnesota will have a slightly different net metering program. We’ll provide more information below.|
|Solar Energy Sales Tax Exemption||The Solar Energy Sales Tax Exemption exempts homeowners from having to pay sales tax on their solar equipment and installation. Given the average cost of $22,720 to install solar in Minnesota and the average state sales tax rate of 6.875%, that’s a typical savings of $1,562.|
|Wind and Solar-Electric (PV) Systems Exemption||This is Minnesota’s equivalent of a property tax exemption. Under normal circumstances, your property taxes will increase every time you complete a home improvement that raises your home value. While installing solar panels will boost property value, the exemption prevents your non-educational property taxes from going up as a result. This could save thousands of dollars over the life of your PV system.|
|Local Rebates||Minnesota offers an impressive array of local solar rebates depending on your city and local utility provider. We’ll include some more details below.|
Minnesota Solar Tax Credit
Many states offer a solar tax credit that reduces state income taxes owed, much like the federal solar investment tax credit adjusts federal income taxes owed. Unfortunately, Minnesota doesn’t offer a solar tax credit, but homeowners throughout the North Star State can still benefit massively from going solar.
Minnesota makes up for the lack of a tax credit with a strong net metering program that allows homeowners to reduce their electric bills and even eliminate them entirely with any excess energy their system produces. The favorable net metering policy combined with the abundant sun available makes reducing your electric bill to $0 a distinct possibility, especially if you add a solar battery to your system.
Additionally, Minnesota residents have access to a slew of local solar rebates that reduce upfront costs and make solar energy production even more beneficial. We’ll get into the specifics of these rebates below.
Other Minnesota Solar Incentives
The local incentives available to Minnesotans are some of the most enticing benefits of converting to solar. Below is a brief list of some of the best local incentives offered by local municipalities and local electric providers.
- PACE Program: The Property Assessed Clean Energy (PACE) program in Minnesota is run through MInnPACE. This program makes solar loans more accessible and more affordable, helping to make solar conversions more popular throughout the state. As of right now, the state legislation allows PACE loans for commercial and residential customers, but the residential side of the PACE program (R-PACE) is still under development. MinnPACE currently assists commercial buildings, farms, investor-owned multi-family properties and nonprofit organizations acquire solar systems, energy-efficient equipment, HVAC systems and more.
- XCEL Energy Solar*Rewards Program: This incentive provided by XCEL Energy to all of its customers is an incredible opportunity to reduce your long-term costs of installing solar and start seeing a profit from your system much more quickly. The electric provider offers an annual cash incentive of $0.07 per kilowatt-hour (kWh) that you overproduce with your system for an incredible ten years. That means you could not only eliminate your electric bills but could actually get paid by your utility provider rather than the other way around. This incentivizes larger solar systems, which also benefits the homeowner by increasing the likelihood of reducing your utility bills to $0 per month. The incentive is also higher for low-income homeowners, which is a structure we love to see.
- XCEL Energy isn’t the only utility company providing solar rebates and incentives. We’ll discuss some of the programs offered by other smaller utility providers below.
Minnesota Solar Property and Sales Tax Exemption
Like many other states, Minnesota provides two different tax exemptions related to installing solar to entice homeowners to make the switch to clean energy.
Minnesota property tax exemption: In most cases, a home improvement that raises your property value will also lead to an increase in property taxes. In the case of installing solar panels, which is expected to raise your home value by around 4.1%, according to data from Zillow, this would amount to thousands of dollars in additional property taxes for most homeowners over the life of the system. The property tax exemption prevents your property taxes from increasing after installing a photovoltaic system.
Sales tax exemption: Minnesota has also enacted a sales tax exemption, which prevents homeowners from paying sales tax on their solar panels, solar thermal systems, solar hot water systems and other energy efficiency upgrades. In the case of solar panels, this averages out to a savings of around $1,562.
Net Metering in Minnesota
As mentioned above, net metering is a billing policy that allows property owners to pull energy from the grid and reduce the cost with excess energy production from their solar arrays. Basically, when your PV system is underproducing based on what your home needs, the grid will make up the difference, provided you take advantage of interconnection. When you’re overproducing, the excess will be set to the grid, and your bill will be credited based on the amount of energy you send.
Every utility company has a slightly different net metering policy. Your provider sets the rate at which it will buy back excess energy and how often you’ll be credited — usually monthly or annually. XCEL Energy has one of the best net metering policies. XCEL rolls over “credits” for the excess energy you send to the grid each month. When the total hits $25 or more, the company will send you a check for all overproduction since the last payout.
Depending on where you live in Minnesota, you might be eligible for additional local solar incentives and solar financing options. Below are some additional local incentives for which you might qualify:
SolarSense: SolarSense is a program offered by Minnesota Power to all of its customers. The program provides rebates for solar installations based on your system size, total cost and the number of other residents applying for the program. The maximum allocation of funds for 2022 is over $175,000. If you apply and qualify, you could enjoy a decent rebate to reduce your costs.
Minneapolis Green Cost Share program: The Green Cost Share program is designed to incentivize clean energy production via your solar energy system. The program provides an incentive for every kilowatt-hour produced, at a minimum of $0.20/kWh if you qualify. Right now, single-family homes only qualify if they use a “group buy,” but multi-family properties, commercial office buildings and nonprofits can apply openly. As the name implies, this rebate is only available in Minneapolis.
St. Louis Park Solar Sundown: For residents of St. Louis Park, the Solar Sundown program can reduce your total cost of installing solar by 4% or up to 6% for low-income homeowners. With an average cost of $22,720 to install solar, in Minnesota, that’s a typical rebate of between $909 and $1,363.
Chaska Solar Rebate Program: For residents of Chaska, the Chaska Solar Rebate program could reduce installation costs by up to $2,500 for qualified customers.
Dakota Electric Association: If you’re a customer of Dakota Electric Association, you can take advantage of a $500 solar commissioning rebate. This rebate is offered to all customers who install new PV equipment and put it into commission. The company also provides help with solar financing.
Rochester Public Utilities: This utility company, serving the Rochester, MN area, provides solar electric rebates of $500 for newly installed solar panel systems that are 2 kW or larger. Given the average system size of 8 kW in Minnesota, most RPU customers will be eligible for this rebate.
Owatonna Public Utilities: If you’re serviced by Owatonna Public Utilities, you can apply for a first-come, first-serve $500 rebate through its Conserve and Save program.
Don’t see your utility provider on this list? Reach out to your local utility company to see what solar incentives are available for your Minnesota home.
Federal Solar Tax Credit
One of the most significant incentives for going solar in Minnesota is the federal solar investment tax credit (ITC), which is available to all homeowners and is provided by the federal government. This credit is applied to the federal income taxes you owe for the year in which your solar system is installed and commissioned. The credit will be for a massive 26% of your total system cost, which, in Minnesota, means an average credit of $5,907. Larger systems will yield a higher federal tax credit.
It’s crucial to note that, as of right now, the ITC is scheduled to drop to 22% — still an average credit of $4,998 in MN — in 2023 and will no longer be available in 2024. The sooner you install your solar panels, the higher the federal tax credit is likely to be.
FAQ: Minnesota Solar Incentives
The EcoWatch team gets questions daily from Minnesota residents about the rebate programs and incentives available to them when converting to solar power. Below are some of the questions we see most often, along with our responses.
Minnesota does not have a state solar tax credit. However, residents can still take advantage of the federal tax credit — 26% of the total system cost in 2022 — and the favorable net metering policy and other local solar incentives and rebates still make solar conversion a good option for most homeowners in the state.
Yes, absolutely. Minnesota is a solar-friendly state and is becoming more of a proponent of clean energy every year. MN already has a positive net metering program that incentivizes solar power and provides most homeowners with a better return on investment on solar equipment. Additionally, there are a myriad of local solar incentives provided by individual municipalities and local utility companies that make converting to solar a wonderful and affordable option.
The State of Minnesota doesn’t have any rebates specifically, but many residents can find rebates from their utility providers and local municipalities. Some examples of local rebates include the SolarSense program from Minnesota Power, the St. Louis Park Solar Sundown program and the Chaska Solar Rebate program. Additional rebates can be found above or on the DSIRE database.
No. Normally, any home improvement that increases your property value will also bump up your property taxes. However, even though solar installation will increase your home value, Minnesota State offers a property tax exemption, which prevents your non-educational property taxes from going up as a result of going solar.