Save more than $1,100 on a home solar installation in Idaho
Solar panel costs can be used as an income tax deduction in Idaho.
Idaho has a small but growing home solar industry. As is the case everywhere, the cost of solar panels is cheaper now than ever - and in Idaho, this is helped by generous state tax incentives.
Summary of solar rebates available to Idaho residents:
|Federal tax credit||30% off system price through 2019|
|Idaho State Tax Commission Alternative Energy Device Deduction||Deduct 40% of the system costs from your reportable income in the first year after purchase, and 20% in years 2 through 4. Maximum $5,000 deduction per year.|
Idaho’s solar tax incentive is structured differently than the federal tax credit and other state tax credits. Instead of a straight credit, the incentive is a deduction that is used to reduce your reportable income. In addition, the deduction can be applied every year for four years after your purchase your system.
In the first year, the deduction is calculated as 40% of your total solar system costs, up to a maximum of $5,000. In years 2 through 4, the deduction drops to 20% of your system costs, up to a maximum of $5,000.
Let’s see how this works. Let’s say that your gross system costs are $20,000. (This is your cost before any incentives, including the federal tax credit).
Year 1 rebate:
Years 2-4 rebate:
You can see that with our hypothetical system that cost $20,000, we fell below the $5,000 maximum deduction in years 2 to 4. Your numbers will differ, of course, depending on the cost of your system.
If you add these up, you get a cumulative rebate of $1,177.25 that is paid out over 4 years. Not bad at all!
What qualifies as an alternative energy device?
It was Idaho Statute 63-3022C that most recently signed this deduction into law.
Qualifying devices include:
- A system using solar radiation, wind, or geothermal resource primarily to provide heating or cooling, or produce electrical power, or any combination thereof
- A fluid-to-air heat pump operating on a fluid reservoir heated by solar radiation or geothermal resource, but not an air-to-air heat pump unless it uses geothermal resources as part of the system
- A natural gas or propane heating unit that replaces a non-certified wood stove
- An Environmental Protection Agency (EPA)-certified woodstove or pellet stove meeting the most current industry anstate standards that replaces a noncertified wood stove
A non-certifieed wood stove is a wood stove that doesn't meet the most current EPA standards.
In other words solar thermal, solar photovoltaic, micro wind turbines, and geothermal heat pumps all qualify for the deduction. In addition, EPA-certified wood pellet stoves and even natural gas or propane furnaces that replace a dirty non-EPA certified wood stove that is used for home heating also qualify. Air-source heat pumps do not qualify.
This is also defined on Line 5 of Form 39R of the 2018 Idaho tax return.
Does Idaho have a sales tax exemption for solar panels?
Some states don’t charge sales tax on solar panel equipment. Unfortunately, Idaho isn’t one of them. This means that the statewide 6% sales tax will be charged on your system equipment such as solar panels, inverters, and racking.
Does Idaho have a property tax exemption for solar panels?
In states that have this exemption, the value of a solar panel system doesn’t increase the home assessment for property taxes. While this is a relatively small rebate on a yearly basis, if you add it up over the life of your solar panels, it can really add up to be a significant rebate.
Unfortunately, Idaho does not have a property tax exemption for solar panels.