Idaho Financial Incentives for Renewable Energy: State Income Tax Deduction and Production Incentives

Idaho homeowners who are thinking about installing a solar, wind, or other type of renewable energy system can count on financial incentives to help offset the cost. You can claim a deduction on your Idaho state income tax return and can claim a refund of the state sales tax. If you connect your system to the grid you can earn credits against your electric bill for the excess energy you generate. And you can sell the Green Tags associated with your renewable source electricity.

Income tax deduction

You can claim a deduction on your Idaho state personal income tax return for the cost of an alternative energy system that you use to provide heating or cooling, to produce electrical power, or any combination. Eligible systems include solar, wind, geothermal heat pumps, a natural gas or propane heating unit that replaces a wood stove not certified by the Environmental Protection Agency (EPA), and EPA certified wood or pellet stoves that meet the most current industry and state standards.

You can claim 40% of the cost the year you install the system and 20% in each of the next three years, up to a maximum deduction of $5,000 per year, and $20,000 overall. The deduction is claimed on Form 39R, Idaho Supplemental Schedule, and the total subtractions from Form 39R are carried forward to line 12 on Form 40, Idaho Individual Income Tax Return.

Sales tax refund

You can obtain a refund of the Idaho sales tax you pay on equipment and machinery you use in a renewable energy system, including solar, wind, hydroelectric, geothermal, biomass, and landfill gas. To qualify for the refund, your system must have a capacity of at least 25 kW of electricity.

You must first pay the sales and use tax on the purchase. Then, after the utility company or the Idaho Public Utilities Commission certifies that your project will generate at least 25 kW, you can file a refund request with the Idaho State Tax Commission. You can download the Sales Tax Refund Claim Form on the Idaho State Tax Commission website at http://tax.idaho.gov.

Net metering

When you have a renewable energy installed and connected to the grid, you can take advantage of net metering to receive credit on your electric bill for the excess electricity your system generates. The Database of State Incentives for Renewables and Efficiency reports that Idaho does not currently have statewide net metering rules. But Avista Utilities, Idaho Power, and Rocky Mountain Power have all developed a net metering rate approved by the Idaho Public Utilities Commission.

Net metering is available to customers who generate electricity using solar, wind, hydroelectric, or biomass systems, or fuel cells. Residential systems are limited to 25 kilowatts. Avista Utilities credits the excess electricity to the customer's next bill at their retail rate. At the beginning of the calendar year the excess balance is granted to the utility company. Idaho Power and Rocky Mountain Power also credit the excess electricity generation at their retail rate and carry the credit forward to the next month.

Solar photovoltaic and wind system production incentive

If you install a solar photovoltaic or a small wind system at your home in Idaho, you can take advantage of a production incentive offered by the Northwest Solar Cooperative. In an arrangement with the Bonneville Environmental Foundation and the Three Degrees Group, you can earn $0.02 per kWh of electricity you generate. This production incentive is currently available through December 31, 2009 and may be renewed for another three-year term.

The Northwest Solar Cooperative, a non-profit service managed by Cascade Solar Consulting, purchases the rights to the environmental attributes called "Green Tags" of the electricity you generate using renewable sources. It aggregates them and sells them to 3 Degrees Energy, who sell them to wholesale customers and consumers who want to purchase electricity from renewable sources. As indicated by Cascade Solar Consulting, Green Tags are a separate marketable commodity representing offsets to greenhouse gas production. They can be sold by owners of renewable energy systems including solar photovoltaic and wind.

To qualify for this production incentive, the solar or wind system must be located in Idaho, Montana, Oregon or Washington, and must be connected to the grid. According to the Database of State Incentives for Renewables and Efficiency, systems with a capacity of up to 50 kW are automatically approved, and systems over 50 kW are approved on a case-by-case basis.

If you would like to sell your Green Tags you need to become a member of the Northwest Solar Cooperative by printing, filling out and signing the 3 Degrees Application/Contract and sending it to Cascade Solar Consulting. You can download the form from the Cascade Solar Consulting website at www.cascadesolar.com.

Sources:
Cascade Solar Consulting, LLC - Green Tags: www.cascadesolar.com
Database of State Incentives for Renewables and Efficiency - Idaho Homeowner Incentives for Renewables & Efficiency: www.dsireusa.org
Idaho State Tax Commission - Form 39R Instructions: http://tax.idaho.gov