Minnesota Solar Incentives, Tax Credits and Rebates

What happened to the federal solar tax credit?

The federal solar investment tax credit (ITC) previously allowed homeowners to claim 30% of installation costs from their federal taxes. It was phased out with the One Big Beautiful Bill Act (OBBBA) in 2025.

Homeowners who installed solar systems before the deadline may still claim the credit, but systems installed in 2026 or later no longer qualify.

Are there any solar incentives in Minnesota?

You might be eligible for rebates and performance-based incentives. There is also a 100% sales tax exemption and a 100% property tax exemption for homeowners going solar.

SolarSense rebates

SolarSense is a rebate program that helps lower the upfront cost of installing solar panels, but it’s only available to moderate-income households (under 150% of area median income). The rebate is based on how much energy your system is expected to produce and can cover up to $5,000 or 60% of costs. Funding is limited and awarded by lottery each year, so you’re not guaranteed to receive it even if you apply.

Solar*Rewards® program

Xcel Energy’s Solar*Rewards® program pays you ongoing money for the solar energy your system produces, rather than just a one-time rebate. You earn about $0.03 per kWh each year for 10 years, and you can also get bill credits through net metering when your system produces extra energy.

If you qualify as a lower-income household, you may also get a large upfront incentive to reduce installation costs. However, funding is limited and often fills quickly.

Solar loan programs in Minnesota

Minnesota Housing Finance Agency (MHFA) and Minnesota Department of Commerce partner with the Center for Energy and Environment to offer solar loans up to $60,000. Loans have relatively low rates and long repayment terms. Plus, there are no income limits or prepayment penalties.

Federal solar loan programs

Energy Efficient Mortgages allow homeowners to finance energy-saving upgrades, including solar systems, as part of their mortgage, often with support from federal programs like FHA or VA.

• FHA Energy Efficient Mortgages are available to many homebuyers. This lets you add money to your mortgage for energy upgrades. The upgrade cost must be less than the expected energy savings. A home energy assessment is required first.
• VA Energy Efficient Mortgages are available to military service members, veterans and reservists. This lets you add up to $6,000 if energy savings justify the cost.
• Conventional Energy Efficient Mortgages are offered by private lenders (not government-backed). You can borrow up to 15% of a home’s value for energy upgrades. This may help borrowers qualify by adjusting debt-to-income rules.

Property tax exemption

A solar property tax exemption means that, for tax purposes, the addition of a solar energy system won’t cause an increase in your property’s assessed value. Essentially, your property tax bill won’t go up because your solar panels increase the market value of your home. It doesn’t actually make going solar cheaper up front.

It also applies to commercial and industrial projects. Instead of paying standard property taxes, large solar systems (over 1 MW) pay a production tax based on how much electricity they generate — $1.20 per megawatt-hour — while smaller systems are exempt. If multiple systems on nearby properties exceed 1 MW combined, they may still be taxed like commercial property. The tax revenue is mostly distributed to local governments, with 80% going to counties and 20% to cities and townships.

Additional solar incentives in Minnesota

• Solar for Schools: Minnesota gives funding to schools to install solar panels, helping them save on energy costs while also using solar as a teaching tool for students. Since it started in 2022, the program has helped many schools go solar and expand renewable energy use across the state.
• Property Assessed Clean Energy financing: PACE financing through MinnPACE is available for commercial, industrial, nonprofit or multi-family property owners.
• SOLARCHOICE is Austin Utilities’ community solar program, which means you can benefit from solar energy without installing panels on your roof. Instead, you buy a share of a larger solar project, and you get monthly bill credits based on how much energy your share produces. It’s a good option if your roof isn’t suitable for solar or you don’t want installation, but you still want some savings and more predictable energy costs.

What to know about net metering in Minnesota

Net metering is a system of give-and-take between you and your utility company. It lets you access power from the grid when your panels don’t generate enough electricity. It also lets you earn credits for sending excess solar energy to the grid.

In Minnesota, you earn a bill credit for every kilowatt-hour of surplus electricity you contribute. You can apply these credits toward your electricity costs during periods of lower solar production.

At the end of the year, remaining credits may be paid out at the utility’s avoided-cost rate, which is usually lower than the retail rate. However, some Minnesota utilities have a “use it or lose it” policy. Policies vary by utility, so check your utility’s tariff to see whether credits roll over or are paid out.

Did you know?

As system sizes get larger, compensation rules can change. For systems between 40 kW and 1 MW, some utilities may compensate excess generation at avoided-cost or other non-retail rates.

Solar panel costs in Minnesota

Average solar panel costs in Minnesota generally range $16,397 to $32,794.

System size is a major cost factor of going solar. A typical Minnesota household needs about a 7.6 kW solar panel system, which costs $24,928 on average. Depending on your energy needs, you might need a smaller or larger system.

Your total price also depends on whether you add battery storage to your system. Solar batteries cost $7,000 to $18,000, which can nearly double the total system price.

Average solar panel costs by system size in Minnesota

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