Residential Alternative Energy Tax Deduction
Administered by Idaho Tax Commission
Idaho taxpayers can deduct 40% of the cost of a solar, wind, geothermal, or certain biomass system from state income tax in the install year, then 20% per year for three more years. The deduction is capped at $5,000 per year and $20,000 total. Full-year residents claim it on Schedule 39R section B (transferred to Form 40), while part-year and nonresidents use Form 39NR section B (transferred to Form 43).
Customers who install eligible solar, wind, geothermal, or certain biomass systems can recover 40% of the cost as a state income tax deduction in year one, plus 20% annually for three years, up to $5,000 per year and $20,000 total. Pellet or EPA-certified wood stoves qualify only if they replace a non-compliant wood stove in the customer's residence in the same year and the old stove is dropped off at a DEQ-approved site within 30 days; new natural gas or propane heating units can qualify under similar criteria. Customers claim the deduction themselves on Idaho tax forms, so provide clear cost documentation.
This is a personal income tax deduction for residential taxpayers, covering solar, wind, geothermal, and certain biomass devices used for heating or electricity generation, with no separate program funding. The deduction is 40% of system cost in the install year and 20% per year for three following years, capped at $5,000 annually and $20,000 total. Full-year residents file Schedule 39R section B with Form 40, and part-year or nonresidents file Form 39NR section B with Form 43; biomass stove claims require replacement of a non-compliant stove with DEQ-approved disposal within 30 days.
Program details
- Program ID
- 137
- Last updated
- 3/27/2026
Eligibility
- Sectors
- residential low income residential
- Technologies
- solar - passive solar water heat solar space heat geothermal electric solar photovoltaics wind (all) biomass geothermal heat pumps wind (small)
Program summary
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.)
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.
Contact & resources
- Contact email
- taxrep@tax.idaho.gov
Please verify current program details with the administering agency before making any financial decisions.
