Tennessee Solar Incentive Programs

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Tennessee experiences a diverse climate with approximately 205 sunny days annually, providing a decent amount of sunlight for solar energy initiatives. While it may not be among the sunniest states, Tennessee’s weather conditions still present opportunities for viable solar power projects. The state actively supports renewable energy through various incentives and programs aimed at encouraging solar adoption.

Tennessee Tax Incentives

Tennessee offers two tax incentives for solar panel installations. All types of renewable energy equipment are eligible for a partial property tax exemption, and business-owned systems can also receive a sales tax credit however there are no solar rebates in Tennessee as of 2023 .

Furthermore, In addition to the state incentives, there are also federal incentives available to Tennessee residents:

Federal Incentives

Federal Investment Tax Credit (ITC)

Commercial solar energy systems can take advantage of the Federal Investment Tax Credit 48E, which provides a tax credit of 30% of the total cost of the system, provided prevailing wage and apprenticeship requirements are met. 

Residential systems can no longer claim any federal solar tax credit, as the One Big Beautiful Bill eliminated it for systems installed after January 1st, 2026. 

Commercial Depreciation

Commercial asset owners can write off 100% of a project’s value in depreciation in the first year. The One Big Beautiful Bill reinstated the 100% bonus depreciation, while simultaneously eliminating the Modified Accelerated Cost Recovery System (MACRS) that previously depreciated solar energy systems over 5 years. 

The depreciable basis of a project is reduced by half of the ITC value when combined with the 30% ITC. Here’s a quick example:

• Project cost = $800,000
• 30% credit = $240,000
• Reduced depreciation basis: $800,000 – ($240,000 / 2) = $680,000

A company’s tax rate is then taken into account to calculate the exact amount they’re able to write off. 

Further information and programs can be found at the Programs.Dsireusa.org