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Residential Alternative Energy Tax Deduction

Savings Category 
Solar - Passive
Solar Water Heat
Solar Space Heat
Geothermal Electric
Solar Photovoltaics
Wind (All)
Geothermal Heat Pumps
Wind (Small)
Maximum Rebate 

$5,000 per year; $20,000 total deduction

Program Info
Sector Name 
Idaho Tax Commission
Program Type 
Rebate Amount 

40% in the first year; 20% per year for next three years

This statute allows taxpayers an income tax deduction of 40% of the cost of a solar, wind, geothermal, and certain biomass energy devices used for heating or electricity generation. Taxpayers can apply this 40% deduction in the year in which the system is installed and can also deduct 20% of the cost each year for three years thereafter. The maximum deduction in any one year is $5,000. The total maximum deduction is $20,000.

Eligible biomass energy devices include a pellet stove or EPA-certified wood stove if:

  • it is in the taxpayer's residence,
  • it replaces an old wood stove that does not meet EPA requirements,
  • the purchase and replacement occurs within the same year, and
  • the old wood stove is dropped off at a Department of Environmental Quality (DEQ)-approved site within 30 days.
    (Also applies to new natural gas or propane heating units that meet these criteria.)

To qualify for the deduction, the home in which the system is intalled must have existed, been under construction, or had a building permit on or before January 1, 2002, and must be located within Idaho. 

The deduction for full year residents is calculated on the Idaho Supplemental Schedule 39R, section B, with the result transferred to Idaho Form 40. For part year and non-residents of Idaho, the deduction is calculated on Idaho Form 39NR, section B, with the results transferred to Idaho Form 43. Forms, instructions, and publications for the current and previous years can be found here