Arkansas Solar Tax Credit

13 Dec 2023
3 min
Beginner

Andrey GorichenskiAuthor

If you're considering going solar in Arkansas, understanding the Solar Tax Credit is important. This incentive can cut your expenses by a third! Let's delve into how to claim the Solar Tax Credit in Arkansas in 2024.

What is the Solar Tax Credit?

The Solar Tax Credit, also known as the Investment Tax Credit (ITC), is a benefit from the US government to encourage investments in solar panels. It allows individuals and businesses to deduct a percentage of the cost of these systems from their federal income taxes, reducing the overall tax bill for those venturing into solar energy.

How does the solar tax credit work?

The ITC lets owners of solar energy systems claim a tax credit equal to 30% of the system's cost. For instance, if you install a $10,000 photovoltaic (PV) system, you can subtract $3,000 from your income taxes, bringing the net cost down to $7,000. This 30% credit rate is effective until December 31, 2034, after which it gradually decreases to 26% in 2033 and 22% in 2034. If the tax credit is more than your income taxes, the extra credit can be carried over to the next year, ensuring the full benefit of the 30% incentive.

How do I get a solar tax credit in Arkansas?

To qualify for the Solar Tax Credit in Arkansas, you must own the solar energy system (not lease it) and ensure it is installed in the United States. Additionally, the system should be new or used for the first time.

To claim the credit, keep detailed records of all expenses related to the solar system installation, such as receipts and invoices for solar panels, inverters, mounting equipment, and labor costs. While you won't need to submit these records with your taxes, it's a good idea to keep them safe in case of an audit.

April 15

National Tax Day

You can claim the Arkansas Solar Tax Credit by completing IRS Form 5695 and attaching it to your federal income tax return. Include your residential energy credit information on Schedule 3 (Form 1040), and make sure to file your tax return by the applicable deadline.

Need help? Follow our guide!

We cover filling out the forms for claiming ITC step by step

Step-by-step guide

Benefits of the Arkansas Solar Tax Credit

The Solar Tax Credit in Arkansas reduces the cost of a solar installation by a third, covering not only the solar panels but also equipment, shipping, and labor expenses. The best part is that there's no limit to how much you can claim back.

Besides the federal solar tax credit, Arkansas offers its own state-level incentives and rebates for solar installations, making it even more affordable. Check out our guide on Arkansas solar incentives for more details.

Andrey Gorichenski

Senior Editor

Andrey had been a news editor and freelance writer for a number of medias before joining A1SolarStore team. Climate change and its impact on people's lives has always been among his interests and it partially explains his degree in Philosophy and Ethics.