Residential solar panels are a big investment for homeowners in Indiana, but the cost of them can be reduced by taking advantage of incentives that include tax credits and rebates. Indiana offers several of these incentives and programs to make your transition to solar energy more affordable. Our guide details the various Indiana solar incentives available, empowering you to make an informed decision and take advantage of the best solar companies.
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What Are the Solar Tax Credits and Rebates Offered in Indiana?
Indiana offers several financial incentive programs for solar system installation. Learn more about these laws and solar rebates below.
Indiana Solar Sales Tax Exemption
Many components of your solar energy system are exempt from sales tax in Indiana. This is because the Indiana General Assembly passed a sales tax exemption policy for electrical generating equipment. According to the law, you don’t have to pay sales tax on your solar modules, racking, or inverters because they’re directly involved in electricity production.
More resources: Database of State Incentives for Renewables and Efficiency (DSIRE) page
Renewable Energy Property Tax Exemption
Solar panels increase your home value by roughly $15,000. However, this additional value is exempt from property taxes in Indiana.
More resources: DSIRE page
Solar Easement Laws
The Indiana state legislation has solar easement laws to ensure solar energy devices and passive solar energy systems have access to direct sunlight. These laws help homeowners work with their neighbors to prevent shading that could affect their renewable energy system’s efficiency. Though Indiana doesn’t have preestablished protections on sunlight, homeowners can enter into voluntary solar easement agreements with their neighbors to guarantee unobstructed access to sunlight. This also prevents homeowners associations (HOA) from trying to block your solar power system installation.
More resources: DSIRE page
How Does the Federal Solar Tax Credit Work?
All Indiana residents can qualify for the federal solar investment tax credit (ITC). This is a deduction on your owed federal taxes that equals 30% of your solar panel installation costs. You apply for this credit during tax time to reduce or eliminate your owed federal taxes. The remaining amount can roll over to the next tax period if needed. The ITC is limited to customers who own their solar systems. This requires a cash purchase or solar loan. For more details, read our guide on the Federal Solar Tax Credit.
Is Net Metering Offered in Indiana?
Net metering is a billing policy that helps homeowners reduce or eliminate their monthly electric bills. This financial agreement lets you pull electricity from the power grid when needed and send excess solar energy back to the grid when you don’t need it. Your utility provider will then apply credits to your utility bill.
Unfortunately, the Indiana Utility Regulatory Commission made net metering for new solar panel installations unavailable in January 2021. However, the state can change its laws around net metering in the future—as it did for residential solar panel owners in 2017—which may result in a grandfathering program.
How Much Do Solar Panels Cost in Indiana?
The average 6-kilowatt (kW) solar panel system costs about $17,640* before applying tax incentives or rebates. When you receive a solar quote, the solar installer may base the price on wattage, with a $3–$4 per watt average. Going solar in Indiana is more expensive than average, with a 6-kW system typically costing $21,780. Applying for the federal solar tax credit adds $6,534 in savings, equaling a total system cost of $15,246.
Your overall solar cost and potential return on investment (ROI) depend on your solar financing option. Learn about each payment method below.
- Cash purchase: An outright cash purchase of the system is the most cost-effective option, leading to the quickest ROI. A cash purchase eliminates possible interest rates, credit checks, and loan fees. It also qualifies you for solar incentives because you fully own the system.
- Solar loan: A solar loan is the second-best payment option. You still own the system but avoid paying a large sum of cash. These loans work like home or auto loans, where you pay for the system monthly over a fixed period. Be aware that you’ll pay more over time than an outright purchase due to interest rates.
- Solar lease: A solar lease is better for homeowners who don’t qualify for loans or have enough up-front cash. However, a solar lease disqualifies you from using any tax incentives and doesn’t increase your property value because you don’t technically own the system.
- Power purchase agreement (PPA): This option is a billing arrangement in which you pay for your monthly energy use. Your solar installer and utility company set up a PPA so it’s as if you’re still paying your regular energy bill. Some PPAs also include system maintenance and repairs. This option disqualifies you from any tax incentives.
*Cost figures are based on a 2023 report from EcoWatch.
Is Going Solar in Indiana Worth It?
Though more expensive than average in Indiana, going solar is still worth it in the state due to the massive amount of money you’ll save on energy costs over time. The average solar payback period is between 9 and 12 years, while solar systems typically last 25–30 years. Unfortunately, Indiana has no quality net-metering program, but solar panels still provide financial savings, increase home value, and have a positive environmental impact with increased energy efficiency.
We recommend consulting a professional solar installer to explore available incentives and assess your clean energy needs.
Our Conclusion
Solar panel costs are higher than average in the Hoosier State, but the transition is worth it to decrease your electricity bills and boost your home’s value. As electricity rates increase, you’ll save even more with a solar system. We suggest consulting an expert to understand your solar project’s pros and cons and find the best solar panels possible.
FAQ About Solar Tax Incentives in Indiana
Can a house run solely on solar panels?
Yes, you can use solar energy to power your entire house, especially when you use a solar battery to provide electricity during low sunlight hours and power outages. Some people have used expansive solar panel systems to go off the grid completely.
Does Indiana have solar net metering?
No, Indiana currently does not feature a solar net-metering program. The state has passed laws recently that eliminate Indiana homeowners’ access to net metering.
Is it unhealthy to live near a solar farm?
Electricity from solar panels and transmission to the power grid emits extremely weak electromagnetic fields. The American Society of Clinical Oncology (ASCO) reports that exposure to low-level electromagnetic fields has no evidence that it harms human health, so you’re safe if you live near one of Indiana’s solar farms.
Our Rating Methodology
We are committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:
- Solar equipment, installation, and services (25%)
- Warranty and performance guarantees (25%)
- Brand reputation and certifications (15%)
- Financing options (15%)
- Experience (10%)
- Availability (10%)
Total scores are divided by 20 for a final 5-point rating scale.
