Don’t miss these major tax savings: Claim your state energy incentives now

Federal energy tax incentives remain intact under the Trump administration, meaning businesses and homeowners can still take advantage of tax credits and deductions for renewable energy projects. At the same time, make sure you don’t overlook state programs that can also greatly reduce your costs.

State-driven incentives add up fast — and disappear just as quickly if you don’t follow the right procedures. One business missed out on a six-figure tax credit simply because it didn’t apply during the right phase of construction.  

Planning and acting early can mean the difference between major tax savings and leaving money on the table. Make sure you understand the energy incentives available in your state before deadlines pass and opportunities slip away.

Maximize your energy tax savings

You can leverage a range of energy incentives across different states, including Arizona, California, Colorado, Illinois, Minnesota and Wisconsin. Some state programs can be combined with federal incentives and local utility rebates. And sometimes, municipal or local building requirements for energy efficiency qualify for state or federal incentives. In these cases, you don’t want to miss your chance to get paid for compliance.

While energy incentives are still available, they can expire or reach capacity — which is one more reason to plan and apply early. For the most accurate and up-to-date information on energy incentives, visit your state’s tax, utility or energy program website or consult a professional energy or tax advisor. The NC Clean Energy Technology Center also maintains a database of state and local incentives.

Incentives vary by state, so it’s important to know what’s available where you live or do business.

Arizona energy incentives

Energy equipment property tax exemption: In Arizona, renewable energy systems and energy-efficient building components are exempt from being added to property valuations for tax purposes, so installing such systems doesn’t increase an owner’s property taxes.

Net billing: Residential and commercial customers with renewable energy systems are credited for excess energy they send to the grid. Solar photovoltaic (PV) systems, wind turbines and other renewable energy generators that connect to the utility grid are eligible. Policies and limits vary among utility providers, although excess solar is typically credited at a lower rate than the retail price.

Property tax assessment for renewable energy equipment: In Arizona, renewable energy and energy storage properties are taxed at a reduced rate — 20% of their depreciated cost — to make investments in these technologies more financially attractive. The exemption covers solar energy devices, wind energy systems and other renewable energy technologies designed for on-site consumption. There are no monetary caps; the exemption applies to the full added value of the renewable energy equipment. Use property tax form TY2026 to determine the cash value of your renewable energy equipment property for tax purposes.

Solar and wind energy systems tax credit: This state tax credit allows taxpayers to deduct 25% of the cost of purchasing and installing a solar or wind energy device from their personal income tax, up to a maximum of $1,000. The credit applies to solar or wind energy devices installed at the taxpayer’s primary residence located in Arizona. Homeowners must own the solar or wind energy device; leased systems or those under power purchase agreements do not qualify.

Solar and wind sales tax exemption: Solar and wind energy devices are exempt from state sales tax. This exemption applies to both the purchase of the equipment and the associated installation services.

For current information on available incentives in Arizona, visit the Governor’s Office of Resiliency.

California energy incentives

Active Solar Energy System Property Tax Exclusion: Qualifying solar energy systems are exempt from being added to property valuates for tax purposes. The exemption applies to both residential and commercial installations and is set to sunset on January 1, 2027. Exclusions apply to solar swimming pool heaters, hot tub heaters, passive energy systems and wind energy systems.

Self-Generation Incentive Program (SGIP): SGIP provides upfront rebates for installing energy storage systems — from home batteries to wind turbines — to encourage energy independence and grid resilience. Rebate amounts vary from $0.15 per watt-hour (Wh) to $1 per Wh, with higher incentives available to lower-income households, disadvantaged communities and areas prone to power outages or fire risk.

The program is open to residential and non-residential customers. Customers apply for the rebate through their utility’s SGIP Program Administrator with proof of purchase and installation. After the system is installed and passes any required inspections, customers receive the incentive as a lump sum.

TECH Clean California Program: This statewide initiative offers financial incentives to reduce the upfront costs of purchasing and installing clean heating technologies, such as heat pumps. It applies to single- and multifamily residences and commercial settings.

To qualify, installations must be retrofits (not new construction) replacing non-heat pump systems, performed by a TECH-enrolled contractor, and the equipment must be ENERGY STAR-certified. Customers must also enroll in a demand response program.

Colorado energy incentives

Colorado Energy Office electrification rebate: This rebate supports homeowners rebuilding primary residences lost in state-declared disasters. It offers up to a $20,000 rebate for constructing high-efficiency electric homes (built to the 2021 International Energy Conservation Code or higher standards). Eligible installations include certified cold climate heat pumps, heat pump water heaters and electric stoves.

The Colorado Energy Office is developing additional rebate programs for homeowners not affected by these disasters.

Electric vehicle (EV) tax credits: Colorado offers state income tax credits for EV purchases or leases. As of January 1, 2025, the state tax credit is $3,500 for the purchase or lease of a qualifying EV or plug-in hybrid EV. An additional $2,500 rebate is available for EVs with an MSRP under $35,000.

Between January 1, 2024, and January 1, 2026, an additional $600 credit is available if the purchaser or lessee assigns the entire allowable credit to a financing entity or motor vehicle dealer, reducing the vehicle’s purchase price at the point of sale.

These credits are available to both individual and business taxpayers.

Colorado sales and property tax exemptions: The state offers a sales and use tax exemption for components used to produce electricity from renewable energy sources, including solar PV systems.

Additionally, residential solar installations are exempt from property tax assessments. The exemption applies to both residential and commercial installations.

Illinois energy incentives

Illinois Shines Program (formerly known as the Adjustable Block Program): The Illinois Shines Program offers financial incentives for residential, commercial and industrial participants that install solar PV systems or subscribe to a community solar project. Participants receive payments in exchange for solar renewable energy credits to help offset installation or subscription costs.

Payments vary based on the system size, location and annual capacity limits. Customers must work with an approved vendor who handles the application process. If the program reaches capacity, new applications may be waitlisted.

Property tax incentive: Solar PV installations are exempt from property tax assessments in Illinois. The exemption applies to both residential and commercial installations.

Smart inverter rebate: In Illinois, investor-owned utility (IOU) providers must offer rebates to customers who install smart inverters as part of their solar energy systems. The rebate is typically $300 per kilowatt (kW) of installed capacity. For example, a 5-kW solar system would qualify for a $1,500 rebate. To claim the rebate, customers must apply with proof of installation and equipment specifications.  

EV rebate program: Illinois offers rebates to residents who purchase new or used all-electric vehicles from licensed Illinois dealers. Rebates are $4,000 for all-electric vehicles and $1,500 for electric motorcycles. Leased vehicles do not qualify. Applicants must reside in Illinois at the time of vehicle purchase and when the rebate is issued, purchase the vehicle from an Illinois-licensed dealer and retain ownership of the vehicle for at least 12 consecutive months.

Minnesota energy incentives

Sales tax exemption for solar systems: Minnesota exempts solar energy systems from state sales tax, reducing the cost of purchasing and installing solar equipment. This exemption applies to both residential and commercial installations and covers components such as solar panels, inverters and mounting systems. Purchasers must provide the seller with a completed Form ST3, Certificate of Exemption, at the time of purchase.

Minnesota EV rebate program: While all funds have been claimed for the current year, Minnesota offers rebates of up to $2,500 for new EVs and up to $600 for used EVs. Remember this for next year, since program funds are limited, and applications are processed on a first-come, first-served basis.

Wisconsin energy incentives

Focus on Energy: Wisconsin’s Focus on Energy program provides rebates for energy-efficient appliances, heating and cooling systems, lighting and renewable energy installations.

Rebate amounts vary. Residential customers may receive rebates ranging from $50 for smart thermostats to several hundred dollars for heating and cooling equipment. Businesses can receive up to $25,000 in incentives for installing solar PV systems.

Net metering programs: Wisconsin requires IOUs to offer net metering programs, allowing customers who generate their own electricity (e.g., through solar panels) to offset their energy costs. Excess energy produced by the customer’s system is fed back to the grid and the customer receives a credit on their utility bill.

Sales and property tax exemptions: Purchasers of solar energy systems are exempt from paying sales tax on eligible equipment. Wisconsin also exempts the added value of a solar energy system from property tax assessments. These exemptions apply to both residential and commercial installations.

What about HOMES and HEAR?

The federal Inflation Reduction Act introduced two energy rebates that are administered at the state level: the Home Efficiency Rebate program (HOMES) and the Home Electrification and Appliance Rebate program (HEAR).

Wisconsin is the only state in this article to fully launch HOMES. Arizona, California, Colorado and Wisconsin currently offer HEAR rebates.

Don’t overlook federal incentives

State incentives are even more powerful when they’re combined with federal energy tax credits. If you’re investing in energy-efficient upgrades or renewable energy projects, make sure you’re taking full advantage of available incentives. In addition to state credits and tax exemptions, you could qualify for federal programs such as:

• Section 179D, Energy-Efficient Commercial Buildings Deduction: This deduction allows commercial building owners and designers of government-owned buildings to claim tax benefits for installing energy-efficient lighting, HVAC, and building envelope improvements.
• Section 45L, Energy-Efficient Home Credit: Homebuilders and developers can receive a tax credit of up to $5,000 per unit for constructing or renovating homes and multifamily buildings that meet certain energy efficiency standards.
• Section 48E, Clean Electricity Investment Tax Credit: Businesses that invest in solar, wind, geothermal and other renewable energy systems can offset a percentage of their project costs through this credit, which can be combined with state and utility incentives.
• Section 30C, Alternative Fuel Vehicle Refueling Property Credit: Businesses that install EV charging stations or other alternative fuel infrastructure can claim a credit of up to 30% of the cost.

These federal incentives remain available under the current administration. However, maximizing their value requires careful planning. Many credits depend on specific project timelines, energy efficiency standards and application requirements.

How Wipfli can help

When it comes to energy tax incentives, it’s worth doing your homework — or asking for help. Combining state, local and federal incentives can significantly lower your costs and boost your return on investment.

Wipfli can help you find federal tax incentives and build a plan to maximize your savings. Visit our energy advisory page to see how much our clients have saved, and take a quick quiz to see if you qualify for federal incentives.