The Utah State Solar Tax Credit and How to Claim It
Navigate the Utah solar tax credit process to lower your system's cost. Understand the key requirements and financial details for your state tax return.
The state of Utah encourages the adoption of renewable energy through its Renewable Energy Systems Tax Credit. This incentive allows homeowners and businesses to recover a portion of their installation costs through a state tax credit. While the credit for residential solar photovoltaic systems has changed significantly, other opportunities still exist.
Eligibility for the Credit
To qualify for Utah’s renewable energy tax credit, the taxpayer must have a tax liability in Utah and the system must be new and installed on a residential or commercial unit within the state. Used or refurbished equipment does not qualify.
While residential solar photovoltaic (PV) systems installed after December 31, 2023, are no longer eligible for this state credit, other technologies still qualify. For residential properties, these include geothermal, wind, hydropower, and biomass systems. Commercial installations have a broader range of eligible technologies, including solar PV, wind, geothermal, hydro, and biomass. These remaining credits are set to expire for any system placed in service after January 1, 2028.
Calculating Your Credit Amount
For qualifying non-solar residential systems, the credit is 25% of the reasonable costs of the system and its installation, with a maximum credit of $2,000. Reasonable costs encompass the price of the equipment itself along with the labor charges for its installation.
For commercial systems, the credit is 10% of the eligible system costs, with a cap of $50,000 per installation. For example, if a business installs a qualifying system for a total cost of $75,000, the calculation is $7,500. Since this is below the cap, the business could claim the full credit. If the system cost were $600,000, the credit would be limited by the $50,000 cap.
Required Information and Forms
You will need detailed records of the total system costs, including itemized invoices for equipment and installation labor. You also need the date the system was placed in service and the contact information for the installation company.
The primary document is Utah Form TC-40E, Renewable Residential and Commercial Energy Systems Tax Credits. This form is not for self-completion; instead, it must be certified by the Governor’s Office of Energy Development (OED). Taxpayers apply to the OED, which reviews the project’s eligibility and costs. Upon approval, the OED issues a stamped TC-40E that verifies the approved credit amount. You must keep it and all supporting documents in your records.
How to Claim the Credit
The credit amount approved by the OED is used to reduce your Utah state income tax liability or, in some cases, provide a direct payment. The specific action involves transferring the certified credit amount to your main Utah income tax return. For individual filers, this is Form TC-40. You will report the renewable energy credit on the associated schedule for tax credits, using code 21 for residential credits and 39 for commercial.
Special Considerations
The residential credit is nonrefundable, meaning it can only reduce your tax liability to zero. If the amount of your credit is greater than the taxes you owe, you will not receive the excess as a refund. However, the state allows you to carry forward any unused portion of the residential credit for up to four subsequent years. In contrast, the commercial credit is refundable, meaning if the credit amount exceeds the business’s tax liability, the excess is paid directly to the taxpayer.
If you sell the residence or the energy system itself, the right to claim any remaining credit may be transferred to the new owner. For leased systems, the lessee can claim the credit only if the lessor provides an irrevocable written statement transferring the right to the credit.