2022 Tennessee Solar Tax Credits, Rebates & Other Incentives
Here’s a quick look at the solar incentives in Tennessee:
- Federal Solar Tax Credit (ITC)
- Property Tax Assessment
- Additional City & Utility 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.
Shine Solar, LLC
- Many financing options
- Great warranty coverage
- Offers a panel buy-back option
- Outstanding workmanship
- Relatively young company
- Limited brands of solar equipment available
- Solar Panels
- Solar Batteries
- HVAC Services
- Energy-Efficiency Upgrades
Greene Tech Renewable Energy
- NABCEP-certified technicians
- Offers products from leading manufacturers
- Competitive pricing
- Limited information available on website
- Limited warranty coverage
- Solar Panels
- Maintenance & Repairs
- System Monitoring
- Equipment Sales
Homeowners in Tennessee typically pay approximately $2.49 per watt when installing a solar panel system, which is well below the national average. However, residents also have a higher demand for power and relatively high electricity costs, and the average system size required to offset energy needs is 12 kilowatts. That means going solar in Tennessee costs an average of $29,880, which many homeowners have trouble justifying.
Luckily, there are several solar incentives offered by the state and federal governments that make solar energy systems a better investment overall. Below, we’ll be discussing the tax incentives, rebates and other benefits available in Tennessee and how each can ultimately save you money on your solar conversion.
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 Tennessee
The table below provides a quick view of the solar incentives and tax credits available to Tennessee solar customers. We’ll include a brief description of each, and more information will be provided later on.
|Tennessee Solar Incentive||Description|
|Federal Solar Tax Credit (ITC)||The federal tax credit is a substantial solar incentive made available to all Tennessee homeowners by the federal government. This credit is applied to your federal tax liability the same year your system gets installed. The credit amount is 26% of your total solar conversion cost.1 Given the average price of $29,880 to go solar in Tennessee, this credit averages out to $7,769, making it one of the most appealing incentives available in TN.|
|Green Energy Property Tax Assessment||The Green Energy Property Tax Assessment is a means of reducing the property tax burden you’ll experience when you install solar.2 When your property is assessed for tax purposes, your solar panels will naturally add to the taxes because they bump up the value of your home. The Green Energy Property Tax Assessment limits the taxable amount of your solar system. The assessment on the equipment is equivalent to 12.5% of your total system value. This assessment is meant to offset the bump in property taxes from going solar, but your taxes will still increase.|
|Sales Tax Credit for Clean Energy Technology||Tennessee offers a sales tax exemption on solar equipment and conversions, but only for commercial customers.3 If you’re purchasing solar panels for a business, you’ll save the 7% state sales tax on the installation. This comes out to an average savings of around $2,092.|
|Local Solar Rebates & Incentives||In addition to the statewide solar incentives, there are several local benefits afforded by utility companies and individual municipalities. We’ll include more information on some of the programs available below.|
Tennessee Solar Incentives
According to the Solar Energy Industries Association (SEIA), Tennessee ranks quite low in the country as far as solar adoption goes, coming in 34th out of all 50 states. The Tennessee Valley Authority is the country’s biggest public utility company. It has a large foothold throughout the state, and it primarily uses fossil fuels for energy production. Given this power company’s history and pull in the state, it’s not surprising that solar power systems aren’t being incentivized as much as they are in other states.
For example, many other more solar-friendly states provide residents with a state solar tax credit in addition to the federal tax credit to incentivize conversion to solar energy. Tennessee, unfortunately, does not have a state credit.
Still, Tennessee homeowners do have some solar incentives available to them, but the most substantial benefits are afforded by the federal government and local utility companies rather than the state. We’ll discuss all of the statewide and local benefits in TN below.
Green Energy Property Tax Assessment
The Green Energy Property Tax Assessment is similar to the solar property tax exemptions you’d find in other states, but it works a bit differently and isn’t quite as beneficial. In states where a solar property tax exemption is offered, your property taxes won’t increase at all from going solar. Unfortunately, that’s not the case in Tennessee. Instead, Tennessee offers a limited property tax assessment for renewable energy sources, including solar equipment.
When you buy or finance your solar panels, your property value will increase — note that value will not get bumped if you sign a power purchase agreement or enter into a solar lease. When a home improvement like solar conversion increases the value of your home, your property taxes also go up.
The Green Energy Property Tax Assessment guarantees that your solar system will only be partially taxed. The maximum tax rate for your solar system is 12.5%, which means your effective property tax rate will be applied to an average of $3,735. This limits the additional property taxes you’ll encounter when going solar in Tennessee. The Green Energy Property Tax Assessment also applies with different assessment percentages to hydropower, geothermal, wind power, biomass and other clean energy sources.
Many states also offer a sales tax credit to reduce the upfront cost of going solar. Unfortunately, Tennessee does not exempt sales tax on solar equipment for residential customers. If you’re a commercial solar customer, however, you will not have to pay the 7% sales tax on your solar system.
Net Metering in Tennessee
Net metering is a billing policy that helps homeowners offset their electric bills using excess energy production. Contrary to popular belief, you can still be billed for electricity when you have solar panels installed. When your panels fail to produce enough power to support your home’s energy needs, the grid will make up the difference and you’ll be billed for power coming into your home. Through interconnection via your inverter, however, you can also send excess power to the grid when your panels produce more than you’re using. Net metering policies dictate how you’ll be compensated for the energy you overproduce.
Unfortunately, Tennessee does not mandate net metering statewide, which means some customers will not be able to enjoy this billing option. Some local utility companies might provide access to net metering, but the policy could change given that it’s not required statewide.
The Tennessee Valley Authority (TVA) was offering a net metering program to customers via its Green Power Providers program, but that has since ceased and is no longer accepting new applicants. It’s possible that this program will return in the future, though. Given the potential for net metering policies to change without warning, it’s best to check with your utility provider before committing or signing any agreements.
In addition to the incentives mentioned above, some local utility companies and municipalities provide solar and energy-efficiency upgrade incentives and rebate programs.
For example, customers of the Knoxville Utilities Board can qualify for a $400 rebate for installing electric vehicle chargers. Other utility companies might offer some rebates for energy-efficiency upgrades like LED lighting, heat pumps, energy-efficient appliances, new insulation, window and door replacement and more. You can check with your electric company or on the DSIRE database for more information.4
Federal Solar Tax Credit
Last, but certainly not least, Tennessee homeowners can take advantage of the federal solar investment tax credit, commonly abbreviated as “ITC.” The federal tax credit is available to all Tennessee taxpayers who acquire their solar panel system with a cash purchase or via a solar loan program.
The credit is for 26% of your total PV system value, which includes the cost of the panels, solar batteries (if applicable), solar panel mounting equipment, inverters, solar panel installation costs and more. In Tennessee, where most homeowners pay an average of $29,880 for solar panel systems, the federal solar tax credit averages out to $7,769, bringing the average effective total down to a more reasonable $22,111.
The federal tax credit gets applied to your federal income taxes owed for the year you install and commission your photovoltaic system. If you owe less than the ITC, you can rollover any outstanding credit to the following tax year. However, the credit can only be rolled over until the ITC expires, which, currently, it is set to do in 2024.
The federal tax credit will drop to 22% in 2023, meaning the total average credit will dip from $7,769 to $6,574. The ITC will no longer be available for residential customers in 2024, although commercial solar customers can still claim a 10% federal tax credit that year. As such, homeowners in Tennessee are urged to go solar as soon as possible to maximize the available credit for their system.
FAQ: Tennessee Solar Incentives
The EcoWatch team regularly gets questions from Tennessee homeowners about the financial incentives available for going solar in the state. Below are the questions we see most often, along with our responses.
Unfortunately, solar adoption isn’t pushed as hard in Tennessee as it is in other states, primarily because the Tennessee Valley Authority produces most of its energy via fossil fuels and has a massive foothold in the state. While many other states provide a state solar tax credit, Tennessee does not.
However, residents will still have access to the federal solar tax credit, which is a substantial incentive available to all taxpayers who go solar. In Tennessee, the average ITC amount is $7,769, assuming the typical system cost of $29,880.
Yes, there are some solar incentives available in Tennessee in 2022. While there is no state solar tax credit, homeowners can still take advantage of the federal tax credit, which provides a credit in the amount of 26% of your total system value. This averages out to around $7,769.
Tennessee does not have a property tax exemption, but the Green Energy Property Tax Assessment does limit how much of your system value will contribute to a bump in property taxes — a maximum of 12.5% of the assessed value of the system will be taxed.
Some Tennessee customers can also enjoy net metering, which helps offset electric bills by overproducing energy, and others can take advantage of energy-efficiency upgrade rebates. Eligibility depends on your municipality and your electricity provider.
Unfortunately, there are no rebates currently available in Tennessee specifically for solar panels. However, customers of the Knoxville Utilities Board can get a $400 rebate when they install an electric vehicle (EV) charger, which many solar companies in the area can couple with panel installation. Other utility companies might offer local rebates for other upgrades, so you can check with your provider for more information.
Unfortunately, Tennessee does not have a solar property tax exemption, which means installing solar will cause your property taxes to increase. However, the Green Energy Property Tax Assessment limits how much of your system’s value can be taxed.
This tax assessment states that only 12.5% of your total system value can contribute to your home’s assessed value, which is what determines your property taxes. As such, your property value will increase significantly when you buy or finance solar panels, but your property taxes will only jump up slightly.