In an effort to promote clean energy adoption, several U.S. states offer residents tax credits for going solar. These incentives may be available in addition to the Residential Clean Energy Credit, a federal income tax credit worth up to 30% of the total cost of an eligible system.
Eligibility Note: The federal Residential Clean Energy Credit and most state tax credits are only available to customers who own their solar energy system.
For Third-Party Owned systems, including those installed under a Palmetto LightReach Power Purchase Agreement (PPA) or Lease, tax credits are generally claimed by the third-party system owner. The exception is New York’s State Tax Credit, which may be claimed by the homeowner if the system is installed on their primary residence.
This article provides general information on which states offer a state income tax credit, along with links to required forms and instructions. Palmetto customers who installed an owned system in a state offering these credits will have already been sent detailed instructions along with their contract.
In each state described below, the incentive is a tax credit, not a rebate or refund. You must have state income tax liability to be eligible; however, many states allow unused credits to be carried forward to future tax years if the full credit cannot be claimed in the year the system was installed.
Disclaimer: This content is for educational purposes only. Palmetto does not provide tax, legal, or accounting advice. Please consult your own tax, legal, and accounting advisors.
Arizona
Arizona offers eligible solar owners a state income tax credit worth 25% of the total system cost up to a maximum of $1,000. Arizona Form 310 and instructions for completing can be found on the Arizona Department of Revenue’s website below.
New York
New York offers eligible solar owners a state income tax credit worth 25% of the contracted value of the system up to a maximum of $5,000. This credit is non-refundable and can only be used to offset existing state tax liability. If a customer does not have enough tax liability to redeem the entire credit in year one, it can be carried over for up to five tax years.
Form IT-255 and instructions for completing can be found on the New York Department of Taxation and Finance’s website below.
Massachusetts
Massachusetts offers eligible solar owners a state income tax credit worth up to 15% of the total cost of their solar energy system up to a maximum of $1,000. The required tax form, Schedule EC, and instructions can be found on the Commonwealth of Massachusetts’s website below.
New Mexico
New Mexico offers eligible solar owners a state income tax credit, the New Solar Market Development Income Tax Credit (SMDTC), worth 10% of the total system cost up to a maximum of $6,000 per project. To secure the credit, a complete application before the annual $12 million budget is fully allocated. Once the program budget has been fully allocated for that tax year, no new credits will be granted. The program budget status is publicly tracked on this dashboard.
In order to qualify for the tax credit, you must apply for and obtain a Certificate of Eligibility through the New Mexico Energy, Minerals, and Natural Resources Department (EMNRD). While Palmetto does not have all the information required to file this application on customers’ behalf, we will ensure projects meet all the technical program requirements and issue a partially completed application to the customer of record once the system has been granted Permission To Operate (PTO). Customers must then complete and submit an application with all the required information online to the New Mexico Energy Conservation and Management Division (ECMD).
The application and instructions can be found on the New Mexico EMNRD’s website below.
Once you submit your application, the New Mexico ECMD will review the application. If approved, you will receive a Certificate of Eligibility via email that you must submit with your state income taxes for the tax year in which your system was turned on. You must obtain a Certificate of Eligibility to qualify for the tax credit.
South Carolina
South Carolina offers eligible solar owners a state income tax credit worth 25% of the total cost of their solar energy system up to a maximum of $35,000 over 10 years. The maximum credit amount that a homeowner can receive each year is less than $3,500 or 50% of their annual state tax liability. If homeowners cannot claim their full tax credit in the first year, they will have up to 10 years to do so. The required form, SCH. TC-38, and instructions for completing can be found below on the South Carolina Department of Revenue's website.