Arkansas solar incentives, tax credits and rebates

Financial resources for going solar in 2024

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After the full federal solar investment tax credit, the average solar energy system costs $19,558 in Arkansas, which is more expensive than the national average of $16,715. Other states have financial incentives to help offset the cost of installing solar panels, but Arkansans only get the federal tax incentive and net metering.


Key insights

  • The average federal tax credit value is $8,382 in Arkansas.
  • There are no state-level solar tax breaks, rebates or loan programs in Arkansas.
  • Arkansas homeowners with solar panels save an estimated $15,567 over 25 years.

Solar incentives in Arkansas

The federal solar investment tax credit (ITC) is the biggest factor in reducing the cost of going solar in Arkansas. If you install a residential solar panel system by the end of 2032, you will receive a federal income tax credit equal to 30% of the system's total cost, including equipment, labor and permits.

The federal solar investment tax credit drops to 26% in 2033 and 22% in 2034.

For example, in Arkansas, systems cost around $27,940 on average. At that price, you can get a $8,382 credit when you file your taxes.

The solar tax credit is not a rebate or refund — you must claim it when you file federal taxes in the year that your solar panel system becomes operational. To do this, you have to complete Form 5695.

The credit is also not refundable, so any unused portion rolls over into the next tax year, which surprised some people we talked to. For instance, a rep told Terry in Vilonia that the tax credit would make solar panel installation more affordable.

“What they left out was that amount does not come all in the first year. Your solar tax credit can only be the amount that you owe for federal that year, which for us was around $5,000,” Terry said. “Lie of omission is not illegal, although, I believe that for some of us on a tight budget need to know all the details.”

» MUST-KNOW: The tax benefits of owning a home: deductions and secrets

What to know about net metering in Arkansas

When your solar energy system makes more energy than your home can use, there are two options. You can save it in solar batteries or sell it to your local electricity company through net metering.

Arkansas overhauled its net metering policy in 2023. The new net energy billing policy doesn't let you bank excess electricity within a billing cycle. Instead, you can use the electricity you generate in real time and sell any extra to the utility grid at a lower rate.

Your system must be 25 kW or less to qualify for net metering in Arkansas. Residents are paid for their excess energy with credits on their power bills. If you don’t use the credits, they roll over to the next bill. After two years, the electric company is required to send you a check for any unused credits.

It’s smart to check with your local utility provider about net metering rates. Another solar customer we talked to, Curt in Benton, was excited to go solar in 2021.

“We were told that the net metering rate would be 1:1, and that the cost for the loan would offset the standard electric bill we were used to paying,” Curt said. “However, we later found out when receiving our bill from the utility company that they do not have a 1:1 net metering rate and instead it is around 40%.”

Solar resources in Arkansas

Below are some additional resources that can guide you through transitioning to solar in Arkansas.

» GREENEST STATES: Arkansas ranks No. 39

Find solar companies in Arkansas

Compare popular solar companies available in Arkansas below. Read our guide to finding the best solar companies for more.

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FAQ

Can I get solar panels for free in Arkansas?

You can lease solar equipment or enter a power purchase agreement (PPA) with little to no upfront costs. Still, neither is totally free. Solar leases generally require a flat monthly fee; PPAs make you pay per unit of electricity.

» FREE SOLAR PANELS: Are they really free?

How can I pay for solar panels?

You can pay for your system outright, but most people finance solar panels. A solar loan works a lot like any other type of loan — there’s an application and approval process, and you pay it back over time (with interest). If you are considering a solar loan, lease or power purchase agreement, always ask:

  • Is there a down payment?
  • How much will I pay per month?
  • Will monthly payments increase, and by how much?
  • Will you put a lien on my house?

» SOLAR PANELS: Lease vs. buy

How much can I save with solar panels in Arkansas?

In Arkansas, the average savings is $15,567 over 25 years. Even if you don’t generate 100% of your energy needs, you can still save a lot of money versus paying traditional utility bills.

Are there any commercial solar incentives in Arkansas?

There are no commercial solar incentives in Arkansas.

» MORE: Commercial solar panels

Is my HOA allowed to restrict solar panels?

There are no laws stopping homeowners associations from restricting solar panels in Arkansas.

Bottom line: How much are solar panels in Arkansas?

Solar is more expensive in Arkansas than in other states, and there aren’t any state-level solar incentives to help lower the cost. Still, you can save around $15,567 over 25 years by going solar. Plus, using the federal solar investment tax credit can help make paying for solar easier.

The ConsumerAffairs Research Team conducted an in-depth analysis to determine how much it costs to go solar in Arkansas and the average solar costs in other states.

Solar costs: Arkansas vs. nearby states

*Before the federal investment tax credit (ITC); **When you pay in full upfront

Article sources

ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:

  1. DSIRE, “Arkansas Solar Programs.” Accessed Nov. 15, 2023.
  2. DSIRE, “Net Metering in Arkansas.” Accessed Nov. 15, 2023.
  3. EcoWatch, “How Much Do Solar Panels Cost in Arkansas?” Accessed Nov. 15, 2023.
  4. United States Environmental Protection Agency, “Summary of Inflation Reduction Act provisions related to renewable energy.” Accessed Nov. 15, 2023.
  5. Solar Energy Industries Association, “Arkansas Solar.” Accessed Nov. 15, 2023.
  6. University of Arkansas System, “Net Metering Policies.” Accessed Nov. 28, 2023.
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