South Dakota solar rebates and incentives: 2025 guide

South Dakotans looking to power their homes with clean, sustainable energy have access to a few cost-cutting solar incentives that can help speed up their payback period. While there aren’t many state-level incentives, the federal solar tax credit and the state’s property tax exemption can still save you thousands on your solar panel system.

As a South Dakota homeowner, the ITC is the most impactful way to bring down your solar costs.

Residential Clean Energy Credit

The Residential Clean Energy Credit, formerly known as the federal investment tax credit (ITC), can reduce your solar panel system's cost by 30%. Your entire system qualifies for this incentive, including equipment, labor, permitting, and sales tax. 

When you file your federal income taxes, you can claim this incentive as a credit towards your federal tax bill. Just keep in mind that to qualify for the ITC, you need to purchase your system either with cash or a solar loan–if you lease your system, you won't be eligible. 

You also need a high enough tax bill, though you can roll over any remaining credit year-to-year until 2035 when the ITC expires. The only time you might be eligible for a direct payment for the ITC is if you're a tax-exempt entity, like a nonprofit organization.

In addition to the great rebates and incentives above, South Dakota offers tax exemptions for solar panel systems. Solar panels generally raise a home's property value, but thanks to South Dakota’s solar property tax exemption, you won’t have to pay the full tax on that added value.

Unfortunately, South Dakota doesn't offer a state-wide net metering program. However, Otter Tail Power Company may allow net metering if you connect your solar panel system to the grid. With net metering, you earn credits when you send excess electricity from your solar panels to the grid. When the sun isn't shining, and you need to pull electricity from the grid, your utility will apply the credits to your bill. Net metering makes it so you will owe very little, or even nothing, on your electric bills with solar panels. 

Some utilities, like Montana-Dakota, dont have net metering and offer net billing instead. Net billing is similar to net metering in that you earn credits when you send excess electricity from your solar panels to the grid. When you need electricity from the grid, your utility applies the credits to your bill. However, the credits are offered at the avoided cost rate, which is usually less than what you pay for electricity.

Without net metering, the best way to get the most value out of your solar panels is to install a solar battery.

Learn more about net metering programs by utility companies in South Dakota.

South Dakota doesn't offer any state-specific battery incentives. However, all batteries above 3 kWh in size are eligible for the 30% federal tax credit. 

Solar batteries paired with solar panels can make good financial sense in South Dakota. They boost energy independence, provide backup power during an outage, and help you keep more of your own (free) solar power.

If you're looking for solar installers in South Dakota, here is the complete list.