Louisiana Solar Tax Credit: What You Need to Know
Understand the current financial landscape for going solar in Louisiana. This guide clarifies available savings to help homeowners make an informed decision.
Louisiana homeowners considering solar power benefit from the state’s ample sunshine, which presents an opportunity for energy independence and potential long-term savings. Generating one’s own electricity is an appealing way to manage and reduce monthly utility bills. This has made residential solar installations a topic of increasing interest, and exploring the available financial mechanisms is a logical next step.
Status of the State Solar Tax Credit
A state incentive that once made solar adoption in Louisiana particularly attractive is no longer available for new installations. The state previously offered a tax credit that could cover up to 50% of the total cost of purchasing and installing a residential solar energy system. This program was a driver of solar growth in the state.
This specific state-level incentive, known as the Solar Energy Systems Tax Credit, officially expired for systems purchased and installed after December 31, 2017. Homeowners planning a new solar installation today cannot factor this state credit into their budget.
Available Federal Solar Incentives
With the state-specific credit expired, the primary tax incentive available to Louisiana residents is the federal Residential Clean Energy Credit. This program allows homeowners to claim a credit on their federal income taxes for a percentage of the cost of a new, qualified clean energy system. The Inflation Reduction Act of 2022 increased this credit to 30% for systems placed in service between 2022 and 2032.
The federal credit applies to a broad range of expenses associated with the solar installation. Qualified costs include:
- Solar panels or modules, inverters, and mounting equipment.
- Energy storage batteries with a capacity of 3 kilowatt-hours or more.
- Labor costs for onsite preparation, assembly, and original installation.
- Associated wiring and piping for the installation.
To be eligible, the taxpayer must own the solar energy system, as leased systems do not qualify. The system must be new and installed on a home in the United States, which can be a primary or secondary residence. There is no maximum limit on the credit, and if it exceeds your tax liability for the year, the excess amount can be carried forward to future years.
Claiming the Federal Residential Clean Energy Credit
To claim the Residential Clean Energy Credit, a homeowner must complete and file IRS Form 5695, Residential Energy Credits, with their annual Form 1040 tax return. It is important to keep detailed records and receipts of all expenditures related to the solar project, as these figures are required for the form.
On Form 5695, you will enter the total qualified solar electric property costs, which includes all eligible expenses for panels, batteries, and labor. The form then guides you through the calculation to determine the final credit amount.
Once calculated, the final amount is transferred to Schedule 3 (Form 1040) to be applied against your overall tax liability.
Other Louisiana Solar Programs
Beyond tax credits, another financial consideration for homeowners is how they are compensated for surplus energy. Louisiana has moved from a traditional net metering system to a “net billing” policy for all new solar installations. Under this structure, any excess electricity your solar panels generate and send to the grid is credited to your account at the utility’s “avoided cost” rate.
This avoided cost rate is lower than the full retail rate you pay for electricity, which impacts the overall financial return of the system. The previous one-to-one retail credit for net metering is only available for systems installed and operational before January 1, 2020.