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The solar incenvice in Tennessee 2024

Updated Dec 29, 2024

  • You'll pay an average of $12,567 to install a 5 kilowatt solar panel system in Tennessee, before incentives.

  • The federal investment tax credit (ITC) lowers that price by 30% of all your solar equipment and installation costs.

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What solar incentives are available in Tennessee?

As a homeowner in Tennessee, you have access to several different tax incentives that make solar panels more affordable. Solar incentives are available at both the federal and state levels to help you save thousands on your investment in solar energy.

Solar Calculator is here to help you take the next step in your transition to renewable energy. Below, we’ll discuss some of the different ways you can make solar more affordable.

Federal solar incentives

As part of the Inflation Reduction Act of 2022, congress passed several clean energy provisions to reduce energy costs. Among those provisions was an extension and upgrade of the Federal Investment Tax Credit (ITC).

Federal Investment Tax Credit

The Federal ITC allows you to claim 30% of your total equipment and installation costs on your federal taxes. There is no minimum or maximum amount you can claim and it includes equipment, installation, permitting, and even battery storage.

The ITC will remain at 30% until December 31, 2032. After that it will be reduced to 26% until December 31, 2033, then to 22% the following year. The ITC is currently set to disappear in 2035 unless it is renewed.

Who is eligible for the Federal ITC?

Most homeowners will qualify for the Federal ITC, but not all. You must meet the following criteria to claim your 30% tax credit:

  • Your solar system must have been installed between January 1, 2017 and December 31, 2034.
  • You must own the property on which the system was installed. That means no leased properties such as apartments or townhomes.
  • The property must be located within the U.S
  • You must own the entire solar system. Equipment acquired through a lease or Power Purchase Agree (PPA) is not eligible.
  • The equipment must be purchased new. Used equipment is not eligible.
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    The Federal ITC will also cover the following expenses:

  • Solar panels and cells
  • Wiring, inverters, and mounting equipment
  • Cost of labor
  • Energy storage devices
  • Sales tax
    •

    Homeowners save around $10,000 on average with the Federal ITC. But that number can be higher or lower depending on your total expenses.

    How to claim the Federal ITC

    Claiming your Federal ITC couldn’t be easier. All you have to do is fill out IRS form 5695 and submit it with your tax return. You can consult with a tax professional for more assistance.

    Local solar incentives

    Can you claim multiple tax incentives in Tennessee?

    Yes. You are allowed to claim multiple solar incentives for the same installation. However, you can only claim each incentive once. For more guidance on how to claim your solar tax incentives, talk to your installer or consult with a licensed tax professional before submitting your tax forms.

    Does Tennessee offer tax exemptions?

    Property Tax Incentive

    Grant Program

    Energy Standards for Public Buildings

    Interconnection

    Sales Tax Incentive

    Loan Program

    Industry Recruitment/Support

    PACE Financing

    Rebate Program

    Building Energy Code

    Solar/Wind Access Policy

    What is the best way to pay for solar?

    Cash payments

    Paying cash upfront is easily the simplest and most cost-effective route — if you can afford it. It lets you maximize your total savings by avoiding interest rates and other fees. You also don’t have to worry about making monthly payments. But the downside is you have to spend a lot of cash at once which isn’t an option for everyone.

    Pros
  • No interest payments makes this less expensive in the long term
  • It provides a higher return on your investment
  • You hit your break even point faster
  • You are eligible for tax incentives
    •
    Cons
  • It requires a large initial investment
  • There is an opportunity cost if you decide to wait and save
  • You may become cash poor
    •

    Financing

    Financing solar panels is probably the most common payment method. You get to own the system — as opposed to leasing — but you don’t have to spend all your cash at once. And although you do have to pay interest, you can secure a fairly low interest rate as long you have good credit.

    Pros
  • It doesn’t require a large lump sum
  • You can space your payments out over time
  • You are eligible for tax incentives
    •
    Cons
  • It costs more over time
  • Interest rates may be high
  • You need good credit
  • The payback period is longer
  • It takes longer to break even
    •

    Solar leases and PPA agreements

    If purchasing solar equipment isn’t an option for you, a lease or a PPA may be worth exploring. This is where you are essentially “renting” the equipment for a fixed rate each month. And although you don’t have ownership of your system, there are other benefits such as maintenance and servicing agreements.

    Pros
  • There is no upfront cost
  • You are not responsible for maintenance
  • Contract terms are flexible
    •
    Cons
  • You do not own your solar system
  • You will not be eligible for tax credits or exemptions
  • It is a long term commitment
  • You save less than if you own the system
  • Rates may increase
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    Going solar doesn’t have to break the bank

    Going solar is becoming more affordable than ever. And thanks to a variety of solar incentives in Tennessee, you can save thousands more on your investment.

    Want to get an idea for what it will cost you to go solar? You can use our solar cost calculator to generate a customized estimate instantly. We take into consideration a wide range of criteria including location, electric bill, roof size, and other factors. Try it out today and start planning for your future.

    Learn more about solar

    Check out some of our latest blog posts below.