2022 Arkansas Solar Tax Credits, Rebates & Other Incentives
Here’s a quick look at the solar incentives in Arkansas:
- Federal Tax Credit
- Net Metering
- PACE Financing
- Additional City & Utility Rebates
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Arkansas is not one of the top states for solar, but residents are seemingly warming up to the idea of installing home solar power systems. Data from the Solar Energy Industries Association shows there’s been a steady increase in residential installations since 2016.1
A reason solar might not be taking off as quickly in Arkansas compared to other states is because the state doesn’t offer much when it comes to solar incentives, aside from a pretty solid net metering program that can help lower residents’ electric bills. However, Arkansas is still a pretty attractive state for solar, because sunshine is abundant and the cost of solar panels in Arkansas is relatively low and continually dropping.2 Those facts, coupled with rising standard electricity rates, could incentivize more Arkansans to switch to renewable energy sources.3
You may be installing solar panels to capitalize on these energy savings, or perhaps you’re seeking energy independence from utility companies. Whatever your reason for going solar, we want to make sure you’re taking advantage of all the solar incentives available to Arkansas residents.
Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.
Current Solar Rebates, Tax Credits and Incentive Programs in Arkansas
Here are the solar rebates and incentives Arkansas residents can take advantage of in 2022:
|Arkansas Solar Incentive||Description|
|Federal Solar Tax Credit (ITC)||The federal solar investment tax credit, or ITC, allows homeowners to claim 26% of their system costs as a credit against the federal taxes they owe. The credit is set to reduce to 22% in 2023 and will be eliminated for residential systems in 2024 unless it is extended by the federal government.4|
|Net Metering||Arkansas has solid net metering policies, which enable homeowners to send the excess energy their solar energy system generates back to the local power grid in exchange for credits from their utility companies.5 These credits can be put toward future utility bills.|
|PACE Financing||Property Assessed Clean Energy (PACE) financing allows property owners to cover the upfront costs of energy improvements.6 While it may not reduce the price of your solar system, it will provide you more time to pay them off so you can use some of the savings from your electricity bills to pay for your system.|
Federal Solar Tax Credit
Arkansas homeowners who install solar panels or solar batteries are eligible for the federal solar investment tax credit, or ITC. You can claim the ITC on your federal tax filing, and it deducts 26% of the total cost of the system from the taxes you owe.
With the average cost of a solar panel system in Arkansas at about $27,940, the federal tax credit can lead to a savings of about $7,264.
The ITC was first developed through the Energy Policy Act of 2005, under the Bush administration. Initially, it was set to last for just two years, but due to its success has continually been extended for solar panel installations. It’s important to note that, unless Congress extends the credit, it is set to phase out by the end of 2023.
To be eligible for the solar tax credit, homeowners must meet the following criteria:
- You have installed a residential solar energy system at any point from 2006 through the end of 2022.
- You have placed the solar energy system in a residential location. It does not have to be your primary residence.
- You own the solar energy system, either having paid for it in cash or by taking out a solar loan. Homeowners who lease solar panels are not eligible to claim the ITC.
Other Arkansas Solar Incentives
Arkansas does not currently offer a statewide solar tax exemption for sales tax or property tax. However, some municipalities may have local property tax abatements, so you should check your local government’s website for additional information.
Unfortunately, Arkansas also doesn’t offer a dedicated state rebate for solar panel installations. That said, some solar companies in Arkansas may offer their own incentives or equipment rebates. Always check with your installation provider to see if you’re eligible for any additional rebates or financial incentives for your renewable energy system.
When it comes to solar incentives in Arkansas, the state rides on having a very solar-friendly net metering policy, as well as financing options, which we’ll discuss below.
Net Metering in Arkansas
Arkansas has a very solar-friendly net metering policy, ensuring customers are credited for their excess energy at full retail rate (rather than avoided cost rate, as some states have).7 Arkansas’ net metering policy is as good as net metering gets!
With net metering, any kilowatt-hours (kWh) your solar panel system produces and sends to the grid will offset the kWh supplied to you by your utility provider. If you send just as much energy to the grid as you consume from the grid, your utility will grant you a Net Excess Generation (NEG) credit.8
You can use NEG credits to offset your energy bills during months when your solar energy output is less than your energy consumption. If you don’t use your credit within 24 months, you can choose to have your electric utility purchase those credits back from you at their avoided cost rate, plus any additional sum determined by the Arkansas Public Utilities Commission.9
PACE Financing Arkansas
Advance Arkansas PACE is a nonprofit that offers loans to homeowners through Property Assessed Clean Energy (PACE) financing.10 PACE financing allows homeowners to take out low- to no-interest loans for energy efficiency and renewable energy projects. These loans can be paid back with an assessment added to your property taxes. In Arkansas, solar photovoltaic (PV) systems, as well as solar thermal water heating systems and other upgrades, are eligible for PACE financing.
Energy Efficiency Rebates in Arkansas
While Arkansas doesn’t offer many solar rebates, many of its utilities do offer rebates for energy-efficiency upgrades. For instance, utility company Entergy Arkansas offers rebates ranging from $10 to $175 for things like pool pumps, efficient washing machines and LED lighting.
FAQ: Arkansas Solar Incentives
Here at EcoWatch, we get many questions from Arkansas homeowners looking for information about electricity rates, warranties, interconnection and other solar-related topics. Here are some of the questions we see regarding Arkansas solar incentives and rebates.11 We recommend checking out DSIRE to see what Arkansas rebates or incentives may be available to you.
No, as of 2022, Arkansas does not have a solar tax credit. However, all Arkansas homeowners are eligible for the federal solar tax credit.
The only solar state incentive for Arkansas is net metering at the moment. No word on if the state is planning to add additional incentives throughout the year.
Arkansas does not offer a property tax exemption for solar, so adding a solar PV system will likely increase your property taxes. However, the benefit here is that adding solar panels boosts your property’s value. On average, your solar energy system raises the value of your home by about 4.1%.12