Arkansas Solar Incentives: Tax Credits & Rebates Guide (2022)

By Britt Olizarowicz

Arkansas is a great state to live in as it tends to have a relatively affordable cost of living. However, when it comes to the average cost to install solar panels, some of the rates can be steep. Part of the issue is that the state of Arkansas does not offer very many incentives to help homeowners with the costs of solar panels. Our guide features the best Arkansas solar incentives, tax credits, and rebates and:

  • Why solar installations make sense
  • Rebates to help you save money on your solar energy system
  • Tax incentives that can help make a solar system possible

Even though Arkansas does not have specific state incentives currently, these things can change, so keep checking back to see how federal programs have been updated and enhanced to help you save money.

Why Go Solar in Arkansas?

Arkansas currently ranks 30th in the nation for being solar friendly. Obviously, this is not all that impressive, and the renewable energy sources that homeowners and business owners are looking for are there; they are simply not cost-effective. Electricity rates in Arkansas are still high enough that many people are interested in solar systems, but it just takes a long time to recoup the electricity costs.

However, when you do decide to go solar, there are some impressive net metering policies in place, as well as federal rebates that can certainly help. Even though the cost of solar panels may be high, you will be making a difference in creating greener and cleaner energy and reducing the costs to run and maintain your home.

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Arkansas Solar Cost

Solar costs have gone down slightly in Arkansas over the last few years. The pricing tends to go down as technology improves and becomes a bit more worth it from an energy savings perspective. However, the cost to install an Arkansas solar system is more than $15,000. Some factors will impact this total cost and the cost of your future utility bills.

The size of the home is a significant factor and you can get estimates from your current electric company, like Entergy Arkansas, as to how much you are currently using to power your home. The Solar Energy Industries Association also helps customers get some great estimates as to what a Solar Photovoltaic system will cost in your local area.

Before deciding on financing options or rebates that may be available through your current electric company, it pays to do the research. Some requirements must be in place from the start of the installation of the system and missing out on these incentives is a mistake.

How Much Can You Save on Solar in Arkansas?

Since there is no state initiative to help homeowners save money in Arkansas, you will find that you should still be able to save a few thousand dollars using the federal programs. Again, public utilities and local areas are trying to improve the solar incentives in Arkansas; this will just take some time.

The Best Solar Incentives, Tax Credits, & Rebates in Arkansas

The best solar incentive in Arkansas is by far the Federal Solar Investment Tax Credit. This is a great way to save money on your next tax return, and it will follow you around for several years if you don’t need to claim it all the first year. Here are a few of the other great options for Arkansas homeowners to consider when it comes to savings.

Incentive Summary End Date
Federal Solar Tax Credit (ITC) Arkansas residents can take advantage of the Federal Solar Tax Credit and get a discount of up to 26% applied to their tax return. If you purchase $20,000 worth of solar panels, you can get a credit for more than $5,000 on your next tax return. Remember, this does require you to come out of pocket first. December 31st, 2023
Net Metering Net metering allows homeowners that create excess energy to use it as a credit on their next electric bill. Although net metering is not mandatory in Arkansas, many providers take advantage of it and offer fair rates. None
Commerical Loan Programs For government and commercial solar installations in Arkansas, there are various programs to help improve overall rates and availability of funds. None

Federal Solar Investment Tax Credit (ITC)

The Federal Solar Investment Tax credit is available in all 50 states, Arkansas included. This program will give you a discount on your next federal tax return, a sizeable one and the best option in the state of Arkansas.

Currently, the program allows you a tax credit of up to 26% of the cost of your solar installation. The solar system will need to be paid for out of pocket and in full. Then the credit will return to you as part of a tax return. Although you will have to front the money for this project, it will be returned within a short period of time. Even if your tax burden is not that high for this year, the taxpayer credit will remain in place until you need it.

It’s important to note that this Federal tax credit will drop from 26% to 22% in 2023. Although this may not seem like a big reduction, when the costs of the system are tens of thousands of dollars, it will have a bit of impact.

In addition to decreasing the total amount saved, the bill is set to expire at the end of December 2023. This is undoubtedly a reason to consider installing your solar panels sooner rather than later. The Federal Solar Investment Tax Credit should be combined with other initiatives to keep total costs down.

Arkansas Solar Energy Tax Credit

Unfortunately, Arkansas does not offer a solar energy tax credit specifically for state taxes. This will apply to areas in Little Rock and across the entire state. If Arkansas decided to implement a solar energy tax credit at the state level, it could be combined with the federal as it is in other states.

Arkansas Solar Sales Tax Exemption

There is no tax credit for a residential solar system purchase in the state of Arkansas. This means that you will still be subject to the sales tax rate of 6.50% for all of your purchases towards your new solar power system.

Arkansas Solar Property Tax Exemption

Property taxes will increase with the installation of a solar system in Arkansas. Unfortunately, Arkansas does not do much to help homeowners with these increasing costs. The rate at which your taxes will increase is typically not the full amount of the cost of the system, but you can expect to see about a 4% increase in taxes with this new solar power system in place.

Arkansas Net Metering

Arkansas net metering creates more energy than your home needs and supplies some of that energy back to a utility company. One of the great things about net metering is that it allows you to prepare for a cloudy day or a summer afternoon when you may want to turn down the air conditioner.

The net metering program in Arkansas is pretty good, and the state ensures that companies offer the program to residents. With net metering, expect to see your rates drop considerably as providers have to let you bank your excess energy and use it in the future.

Arkansas net metering is one of the incentives that is helping people become more interested in this solar energy process.

Commercial Arkansas Solar Incentives

Commercial Arkansas solar incentives are not much better than residential, but there are some financing options in place for things like solar panel systems or solar batteries for commercial or governmental institutions.

Solar Incentives for Nonprofits and Businesses in Arkansas

There are no specific solar incentives in the state of Arkansas for nonprofit organizations. However, there are tax relief programs for nonprofits and the commercial incentives and loan funding programs apply to nonprofit businesses as well.

USDA REAP Grant

The United States Department of Agriculture offers a REAP grant or Rural Energy for America program. This is in place to help you secure a loan for renewable energy resources. If you supply your contact information to the USDA, they will help ensure loan financing and grant funding for agricultural producers. The process is laid out clearly for you, but you must do it before the installation of your system.

In addition, small rural businesses can also access these resources for installing or upgrading renewable energy systems. With this USDA REAP grant, you won’t have to search for funding or try to negotiate; simply lay out your plans, and the USDA will tell you what is available. PACE financing is another option that commercial businesses need to look into.

Federal Solar Tax Credit for Businesses in Arkansas

For a federal corporate income tax return, there is a 30% credit against the cost of any system that was placed into the building during that year. This credit is by far the best option when you are looking for large bulk savings. Even though this comes back in the form of a tax rebate, it will be well worth the effort to get this in place.

The Federal Solar Tax Credit is still one of the best ways to save money on solar energy, but these programs are set to expire before 2024. The rate of 30% savings is going down to 10% in 2023, which is a significant decrease. Keep a close eye on the federal tax credit as it is one of the best options that Arkansas residents have.

Arkansas Commercial Net Metering

Net metering is also available at the commercial level for Arkansas businesses and property owners. Net metering for commercial and governmental institutions not only helps with energy efficiency, but it can also make the building more sustainable long term.

Commercial net metering is typically regulated by the state, but then there are different programs with individual utility providers. Before investing in a solar energy system, be sure to look into the net metering policies and how they will impact your spending once the system is in place.

Sustainable Building Design Revolving Loan Fund

For local government, state government, and schools, there is a Sustainable Building Design Revolving Loan Fund. This program is put in place to help make the purchase of these solar systems much more affordable. The system must have a cost of more than $250,000 to be eligible, and this is yet another important way to save money on this renewable energy program.

Key Takeaways: The Best Arkansas Solar Incentives

Installing a solar energy system is a big decision but one that will continue to pay off for years to come. Arkansas homeowners and business owners should be taking full advantage of the federal government initiatives as these are the best that Arkansas has to offer. Hopefully, as other companies start to expand what they are offering to homeowners, there will be more of a push to increase the total savings available on solar panel installation and operation.

Arkansas Solar FAQ

Is solar worth it in Arkansas?

Solar is worth it in Arkansas because of the long-term savings on your electric bill and the ability to produce your own clean energy for your home. The sun is a tremendous resource, and it is underutilized. Solar power initiatives continue to pop up from the federal, state, and local levels, so solar only becomes more and more worth it.

How much does it cost for solar panels in Arkansas?

A complete solar system for a home in Arkansas will typically cost around $15,000 or more. Most homeowners will look into starting with a few panels and eventually building out a complete system. It can take a while to be able to afford the full amount necessary for a complete solar panel installation. However, even a partial installation will save quite a bit of money on your next energy bills.

Can you get solar panels for free in Arkansas?

Solar panels are not offered for free in Arkansas. There are rebates from the Federal government, but you will still need to pay for your entire system.

What solar rebates are available in Arkansas?

Currently, the solar rebates in Arkansas include Federal rebates only. However, these rebates are set to expire in 2024, and unless there is some kind of a change, it will be very hard to save money on your solar panel installation in the state of Arkansas. Keep this in mind if you are currently searching and deciding if it’s time to invest.

How many homes in Arkansas have solar panels?

There are only about 60,000 homes with solar panels in Arkansas. As we mentioned, this state ranks 30th in the nation, so it has fallen behind other states, primarily due to the lack of a state rebate.

Do solar panels increase property taxes in Arkansas?

Solar panels will increase property taxes in Arkansas, and there are currently no incentives to decrease these taxes and make Arkansas solar panels less of a property tax burden. Expect your property taxes to increase slightly when you purchase solar panels.

How much can you write off for solar panels on taxes in Arkansas?

The current Federal ITC programs allow a 26% rebate on the total cost of the solar system. This 26% is being lowered to 22%. At the end of 2023, the program will end entirely.

House Method’s Solar Companies Rating Methodology

At House Method, transparency and trust are our most important values for the reader. That’s why we took the time to create an objective rating system and score each solar energy company/service according to our methodology.

Our research team dug deep into the fine print of contracts, combed through more than one hundred customer reviews, and thoroughly investigated all of each solar energy company’s services, costs, and products. We’ve done the homework for you by researching nearly all of the solar energy companies on the market so you can have the information you need to make the best choice for your home.

We developed a formula to objectively determine the best solar energy companies and give each a score out of 100 based on the following criteria:

  • Plan Options (30): Do they provide a variety of plan options? We looked at the number of plans each solar energy company offered and the flexibility of adjusting the plan.
  • Services offered (20): How many services are offered in each plan? We looked at whether the company manufactures its own solar panels, whether it contracts out installation, and what additional products each company offers.
  • Trust (10): What do customers say after their solar panels are installed? Does this company offer a guarantee? We considered how satisfied customers are post-service if the company does what it says it will, BBB accreditation, and service guarantees.
  • Prices (10): How reasonable are the costs of the plan or service in comparison to the industry average? We compared the costs of each company to competitors that offer the same solar energy services.
  • Unique perks (10): Does the company offer discounts or special services such as financial incentives, rebates, or a useful mobile app? We looked for extras each company offers that set them apart from the competition.
  • Customer Service (10): How is the customer experience when contacting the company? We considered the speed of response, weekend/holiday availability, and ease of communication through phone calls, email, and online chat functions.
  • Nationwide availability (10): How many states does the company offer its services? Companies that operate nationally and in all zip codes are favored over those with limited availability.

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