2025 Minnesota Solar Incentives, Tax Credits, Rebates, & Exemptions

Last updated: January2025

Minnesota may be called the North Star State, but that doesn’t mean there’s room for only one celestial object in the hearts of the state’s citizens. Yes, with the solar incentives available in Minnesota, people from Roseau to Rochester and Luverne to Lutsen can take advantage of solar power and save money. 

The average solar installation in the state is 7.6 kilowatts (kW) in size, consisting of 19 average 400-watt solar panels. That’s enough to make nearly 9,900 kilowatt-hours (kWh) in electricity. 

The pre-incentive cost of that average system is around $22,000, which is enough to make anyone say “Ope!” But solar incentives can reduce the cost by over 46%, and the state’s energy buyback rules under net metering lead to a solar payback time of 11.5 years.

---

Overview of Minnesota solar incentives and rebates

Incentive	Estimated average savings	Eligibility	About
Federal solar tax credit	$6,600	All tax-paying U.S.  citizens	Tax credit equal to 30% of installation costs, applied to federal income taxes
Xcel Solar*Rewards program	$2,900 for an average installation.  $23,000 for income-qualified customers	All Xcel residential customers. Homeowners who receive LIHEAP or WAP assistance can receive the income-qualified incentive	Xcel will pay customers $0.03/kWh for the first 10 years after installation.
Utility rebates	$500 to $5,000 depending on utility	Homeowners who are customers of a participating utility (see below for details)	Rebates available from Austin Public Utilities, Dakota Electric, Minnesota Power, and Owatonna Public Utilities
Property tax exemption	Savings vary	All homeowners	Personal solar energy generating property is exempt from property taxation
Sales tax exemption	$1,500 (avoided cost)	Anyone who pays for a solar installation	All solar energy equipment is exempt
Energy storage	$2,362.50	Anyone who purchases a battery storage system up to 50kWh	Xcel: $175/kWh ($375/kWh for income qualified), up to $5,000 max. Outside Xcel territory: $250/kWh, up to $7,000, or $1,000/kWh up to $15,000 for income qualified. Inside Xcel:

---

Calculate how much you can save with Minnesota incentives

---

Federal solar tax credit

There is no specific Minnesota solar tax credit, but the federal government offers the federal solar tax credit (formerly known as the Federal Solar Investment Tax Credit or ITC). The Clean Energy credit applies to all U.S. residents who own a home on which they install solar panels. 

The credit equals 30% of the cost to install solar and can only be used by homeowners with the tax liability to claim it. 

The average solar panel system in Minnesota will earn a tax credit of about $6,600. But, the value of the solar tax credit can depend largely on system size, which you can see in the following table:

System size	Estimated cost	Tax credit
6 kW	$18,000	$5,400
7.6 kW (Minnesota average)	$22,000	$6,600
10 kW	$28,500	$8,550
15 kW	$40,500	$12,150

Taxpayers can claim the credit in the year after their solar installation is complete. The credit applies to all solar equipment or home battery storage costs but won’t include expenses like structural improvements that aren’t directly associated with generating solar energy.  

Note: Lending companies often require paying the value of the solar tax credit toward a solar loan by 18 months to keep monthly payments low.

Xcel Solar*Rewards program

Xcel Energy convers most of the state of Minnesota, and thanks to laws from the state legislature, they are always looking to incentivize small-scale solar installation owners. The Solar*Rewards program is how they do that. 

If you are approved for the incentive, you receive annual payments of $0.03/kWh for all the energy generated by the system during the first 10 years of operation. Those payments will amount to an average of around $290 per year, or $2,900 total over 10 years.

Funding for the programming is on a first-come, first-served basis, so your solar installer will help you apply, and you’ll find out if you qualify during the process of getting the installation.

Minnesota solar rebates

Some utilities in areas of Minnesota not served by Xcel offer rebate programs to offset the up-front cost of installing solar panels. Customers of Austin and Owatonna Public Utilities, plus Dakota Electric and Minnesota Power, can apply. Funding for these programs generally runs out very quickly.

Details of each program are outlined in the table below:

Utility	Rebate available	Details
Austin Public Utilities	$500	Application form available from the Austin Utilities rebate page.
Dakota Electric	$500	Details available from the Dakota Electric rebate page.
Minnesota Power	Up to $5,000	$0.56/kWh in the first year. Average of $5,000 per home. Funding is extremely limited.
Owatonna Public Utilities	$500	Application form available from the Owatonna Utilities rebate page.

Minnesota solar property tax exemption

When you get solar panels installed on your property, your home value goes up. Thankfully, Minnesota saw fit to exempt that additional value from property taxes in its state laws. 

Our research shows that a solar installation can add 6.8% to the value of a home. This amount will vary based on your individual home, neighborhood, and solar installation.

Solar sales tax exemption

Minnesota has a 6.875% sales and use tax on most purchased goods. If you live in Hennepin County, that gets even higher! Thankfully, the state exempts solar energy equipment from this tax, as long as a buyer completes Form ST3 and the seller keeps it on file.

---

Minnesota net metering and solar buyback plans

Minnesota’s net metering law applies to all utilities and requires them to provide net metering for all solar power systems less than 40 kW. The 40-kW limit should cover virtually all residential solar systems, which typically come in somewhere around 5 kW for a single-family home.

While commercial and industrial customers may not be able to take advantage of net metering, it’s a pretty sweet deal for your residential system. You get compensation for any surplus you generate at the “average retail utility energy rate.” Minnesota has a specific formula for determining what that is, but it basically amounts to the same as the retail rate you pay every month for electricity. Compensation may come as either actual payment (i.e. a check) or a credit on your future bills.

Minnesotans who participate in community solar programs get to use the unique Value of Solar tariff, which values solar energy based on its economic, environmental, and societal benefits as well. Though only available for community solar right now, this methodology for valuing solar energy for its holistic value may become popular for homeowners as more utilities seek to change net metering.

---

Solar battery incentives in Minnesota

Minnesota is now offering incentives for energy storage, with rates that vary depending on whether you are an Xcel Energy customer or not and your income status. The following table outlines the solar battery incentive rates in Minnesota: 

Customer type	Incentive rate	Maximum incentive value
Xcel Energy customer	$175 per kWh	$5,000
Non-Xcel Energy	$250 per kWh	$7,000
Xcel Energy income-qualified	$375 per kWh	$5,000
Non-Xcel Energy income qualified	$1,000 per kWh	$15,000

A typical solar battery like the Tesla Powerwall 3 costs approximately $15,600 installed from Tesla and holds 13.5 kWh of energy. The Xcel incentive for this battery would be $2,362.50, and people outside Xcel territory would get $3,375. For income-qualified homeowners, those numbers would be $5,000 and $13,500, respectively. 

Funding for this incentive program is limited, with $3,480,000 from Xcel and $2,160,000 outside Xcel, but that is enough money for a few thousand of these average-sized systems. We love that MN is now offering some good battery incentives.

---

 Minnesota installation costs

The average cost of solar panels in Minnesota is $22,000 before incentives for a 7.6-kilowatt solar installation. Once you factor in all of Minnesota’s solar incentives, that cost can drop to as low as $11,800 — over 46% lower than the pre-incentive costs.

Average pre-incentive cost: $22,000

Federal tax credit: $22,000 x 30% = $6,600

Xcel Solar*Rewards program payments (over 10 years): $3,600

Total savings: $6,600 + $3,600 = $10,200

Effective system cost: $22,000 - $10,200 = $11,800

But what if you get a battery? Remember the Tesla Powerwall 3 costs about $15,600 on average and also earns you a 30% tax credit ($4,680). The total solar plus storage system would cost $37,600 before incentives, which can offset the cost by a lot. Here’s how the calculations work:

Average pre-incentive cost with battery: $37,600

Federal tax credit: $37,600 x 30% = $11,280

Minnesota Xcel energy storage incentive: $2,362.50

Xcel Solar*Rewards program payments (over 10 years): $3,600

Effective system cost: $37,600 - $11,280 - $2,362.50 - $3,600 = $20,357.50

That’s nearly a 46% reduction in the cost of the system.

---

Do incentives make solar worthwhile in Minnesota?

The solar incentives available for the average homeowner in Minnesota today are quite nice, with the federal tax credit and Xcel incentives adding up to a pretty substantial chunk of change. And if you are an income-qualified homeowner, the available incentives are really huge, and should allow you to get solar panels for a very low cost. 

The average homeowner served by Xcel in Minnesota will see a solar payback time of around 11.5 years, which is excellent compared to the estimated 25-year life of the solar installation. It’s not the best out there, but the state has done a solid job of supporting residents who want to go solar.

The first step in your solar journey is to find the best solar companies in your area and contact them for quotes. It can take several months to go from comparing solar estimates from installation companies to getting the final permission to connect the system to the grid, so be sure to understand which of the incentives listed above may or may not be available at the time of installation.

---

Calculate how much you can save with Minnesota incentives

---

Minnesota solar incentives FAQs