Illinois Solar Incentives & Tax Credits for Residents, Businesses

Solar power is booming in Illinois. Total solar capacity in the state is expected to grow more than 1,700% over the next five years. And a big share of that new production will come from solar panels on individual homes and businesses.

To speed up solar adoption, the Prairie State offers a variety of incentives for residents and businesses to go solar. Illinoisans can take advantage of both federal and state tax perks when they install solar. They can also earn credit for the solar energy they produce. And residents who can’t physically install solar panels can enjoy the same financial and environmental perks through community solar.

How much does it cost to install solar panels in Illinois? 

The cost of a solar power system depends on its wattage—the amount of energy it produces. In Illinois, the average cost is between $2.57 and $2.73 per watt. That’s less than the national average, which is around $3 per watt. A medium-sized system of 7.5 kilowatts (kW) will cost somewhere between $19,275 and $20,475. However, a federal tax credit (discussed below) can reduce the price by up to 30%.

Once your panels are installed, they’ll save you money every month on your electric bill. Since the average monthly electric bill in Illinois is around $96, a solar setup can save you up to $1,152 each year. Between that savings and the tax credit, your solar panels will pay for themselves in about 12 years. Over their 25-year lifespan, they’ll save you around $15,000.

What are solar incentives and solar tax credits? 

Savings on electricity are only one of the ways solar panels can put money in your pocket. There are also a variety of federal and state government incentives and tax credits available to sweeten the pot. Solar tax credits take money off your income tax bill when you first install your solar setup. Other solar incentives either save you money when you install solar panels or pay you back over time.  

Are there solar tax credits in Illinois? 

There’s no state tax credit for new solar installations in Illinois. However, Prairie State residents can take advantage of the federal Investment Tax Credit (ITC).

Federal solar tax credit 

Whenever you install a solar power system, you can claim the ITC on that year’s federal tax return. It allows you to deduct 30% of the total cost of your system from your tax bill. That includes all parts of the system—panels, inverter, mounting racks, wiring, and batteries—as well as installation costs.

For instance, suppose you buy a 7.5-kW solar power system for $20,000. You can deduct 30% of that, or $6,000, from your taxes, reducing the cost to $14,000. However, you can only claim the full 30% tax credit if you install your solar panels by 2032. In 2033, the credit will drop to 26% of the total cost, and in 2034 it will fall to 22%. After that, it disappears unless Congress chooses to renew it.

Residential and business solar incentives in Illinois 

Although Illinois doesn’t have a state solar tax credit, it offers a variety of other solar incentives for residents and businesses. Some of these make solar panels more affordable, particularly for low-income households. Others allow you to earn credit for the energy your solar setup produces. All these incentives together can make a new solar installation pay for itself even faster.

Net metering in Illinois 

Sometimes, a rooftop solar power system produces more electricity than you need at that moment. If it’s a grid-connected system, that excess energy goes into the power grid so others can use it. Illinois requires all its public utilities to pay their customers for this excess energy through net metering.

To use net metering, you need a bi-directional electric meter. When your solar panels are producing less power than you need, the meter runs forward in the normal way. But when they’re producing excess power, it runs in reverse. Every kilowatt-hour (kWh) of electricity you send to the grid offsets one kWh of power you’ve used. If you produce more electricity than you use in a given month, you receive credit toward the next month’s bill. This credit can roll over for up to one year.

All customers of public utilities in Illinois are eligible for net metering. Municipal utilities and electric cooperatives may also offer net metering, but you must contact them to check their policies. In either case, your solar installer will typically take care of the paperwork to get you signed up for net metering. However, you should check your utility bills to make sure you are receiving your solar power credits.

Illinois property tax exemption 

Another perk of a solar power system is that it increases your property value. According to Zillow, homes with solar panels sell for an average of 4.1% more than homes without them. The average home in Illinois is worth $252,134, so that’s an increase of $10,337.

Better still, in Illinois, this boost in property value will not increase your property taxes. The average property tax rate in Illinois is 2.07%. That means a $10,337 increase in home value would normally add up to $214 in added property taxes every year. So, over the 25-year lifespan of your solar panels, this property tax exemption will save you around $5,350.

Illinois Solar for All Program  

Anyone in Illinois can take advantage of the federal tax credit to save 30% on a solar setup. But for low-income Illinoisans, solar panels can be free. The Illinois Solar for All (ILSFA) program offers solar panels to qualified residents at no cost.

ILSFA is available to both homeowners and renters whose household income is 80% or less of the Area Median Income. Homeowners who qualify can get solar panels installed at no cost. Renters can apply to be connected with a local community solar project (discussed below).

Nonprofit organizations and public facilities can also take advantage of ILSFA, but the requirements are slightly different. First, they must provide a critical service, such as childcare, healthcare, or job training. Second, they must work in income-eligible or environmental justice communities. Third, they must show that they are actively engaged with the community. And finally, if they are public entities, they must own the building where the solar panels are to be installed.

To apply for ILSFA, follow these steps:

1. Check your eligibility on the program’s website. If you qualify, you can choose between Residential Solar, Community Solar, or Non-Profit and Public Facilities.
2. If you select Residential Solar or Non-Profit, search the ILSFA directory for an approved solar installer. If you choose Community Solar, search the directory for community solar facilities in your area that are accepting new subscribers. Then contact the companies to compare rates.
3. Once you have chosen a solar provider, plan your project. If you are having panels installed, the company will help plan your solar setup and submit the paperwork to ILSFA. For community solar, the company will help you choose the right subscription type and size for your household.
4. Once your new solar setup is in place, sit back and enjoy the savings.

Illinois Shines  

If you don’t qualify for ILSFA, you can still save on the cost of a solar setup through Illinois Shines. Here’s how it works: all renewable power systems generate Renewable Energy Credits, or RECs. A system earns one REC for each megawatt-hour (MWh) of energy it produces. Illinois electric utilities are required to purchase these RECs from any solar power system participating in the Illinois Shines Program.

These payments do not go directly to consumers. Instead, they’re paid to the vendors who install solar power systems. However, vendors can choose to pass along a portion of the money to consumers. Alternately, they can use the incentives to reduce the purchase price or lease price for a solar power system. Community solar projects can also use the money from RECs to reduce subscription costs for their customers.

The benefit you get from your home solar system’s RECs depends on your solar installer. Illinois Shines encourages consumers to shop around for different solar offers and read the terms carefully. Ask the installer directly who will receive the REC payments from your solar panels. If a portion of the RECs will go to you, find out how much it is. Use that information to calculate which solar offer will save you the most money over the long term.

Community solar in Illinois: Solar benefits without rooftop panels

Most Illinois solar incentives and tax credits benefit home or business owners who install solar panels. However, about one-third of Illinois households don’t own their homes. And even for homeowners, installing solar panels doesn’t always make sense. For instance, what if your home is a condominium that doesn’t have its own roof? What if the roof of your home is too small or too shaded to capture much sunlight? Or what if you simply can’t afford the up-front cost of a solar installation (and you don’t qualify for ILSFA)?

The solution for Illinoisans in these situations is community solar. It allows you to subscribe to a share of the energy produced by a solar farm in your area. You would receive a credit directly on your electricity bill, kind of like receiving a reward for supporting renewable energy. Illinois residents can generally save between 5% and 10% on their electric bills with community solar, but sometimes more depending on the solar project.

Since you’re here already, it’s easiest to sign up for community solar with Perch. Just enter your ZIP code on the site, and Perch will match you to a local solar farm. Perch will also analyze your utility bill to help ensure your subscription size is appropriate for your household’s needs, helping you save a consistent and predictable amount over the course of a year.

Is it worth going solar in Illinois?

Based on its climate, you might not think Illinois was a great place to go solar. This northern state only gets about 95 clear days per year and 2,567 total hours of sunlight. But the state’s wide array of solar incentives makes up for the weather. Between the savings on electricity, RECs, and tax perks, solar panels can be a good investment even in this less-sunny state.

However, there’s one important caveat. Solar panels are only a good investment if your home uses at least 500 kWh of electricity per month. That’s fine for most Illinoisans, since the average monthly electricity usage in the state is 728 kWh. But if your usage is lower than that, your panels could take a long time to pay for themselves. In this situation, community solar is a better option. It provides the financial and environmental benefits of solar power with no up-front cost.