Hawaii offers a tax incentive to residents who install solar power systems, making the technology more accessible by lowering the installation cost. This guide outlines the process for claiming the Hawaii solar tax credit, from eligibility to filing.
What is the Hawaii Solar Tax Credit
The state-sponsored incentive is officially named the Renewable Energy Technologies Income Tax Credit (RETITC).1Department of Taxation. Renewable Energy Technologies Income Tax Credit (RETITC) – HRS §235-12.5 This credit is administered by the Hawaii Department of Taxation and is distinct from any federal solar incentives. Its purpose is to make investing in solar energy more affordable, promoting the state’s goal of energy independence. The RETITC directly reduces a taxpayer’s state income tax liability, offering a dollar-for-dollar reduction in taxes owed. The legal foundation for this credit is established under Hawaii Revised Statutes §235-12.5.2Justia. Hawaii Revised Statutes § 235-12.5 (2024) – Renewable energy technologies; income tax credit.
Who is Eligible for the Credit
Eligibility for the RETITC extends to individuals and corporate taxpayers who are subject to Hawaii’s income tax. This includes residents who have a state tax liability and are the “economic owner” of the system, meaning they paid for it, even if it is installed on a property they do not own. The credit applies to systems installed on residential properties, including a taxpayer’s primary residence. If a single system has multiple owners, they are entitled to a single tax credit, which must be divided among them based on the portion of the cost each owner paid.
Qualifying Solar Energy Systems
The RETITC applies to specific types of solar energy technologies. The most common qualifying installations are new photovoltaic (PV) systems that generate electricity and solar thermal systems used for heating water. To be eligible, the system must be placed into service in Hawaii during the taxable year for which the credit is being claimed. Solar energy systems used to heat swimming pools are not eligible for the credit. For photovoltaic systems on a single-family home, the total output capacity is limited to 5 kilowatts (kW) per system to qualify for the credit.
Calculating Your Credit Amount
The credit is calculated as 35% of the actual system cost, which includes the price of the equipment and all installation labor. For a photovoltaic (PV) system, this is capped at $5,000 per 5 kW system. If a system is larger than 5 kW, it is treated as multiple systems; for example, an 8 kW system would be considered one 5 kW system and one 3 kW system, with each eligible for a separate credit calculation. For a solar thermal water heating system, the credit is capped at $2,250 per system.
While the credit is non-refundable for most taxpayers, it can reduce your tax liability to zero, and any unused portion can be carried forward for up to five years. You may elect to have the credit be fully refundable if your Hawaii adjusted gross income is $20,000 or less ($40,000 for joint filers), or if all of your income is from retirement sources that are exempt from Hawaii income tax.
Required Information and Forms for Claiming the Credit
Before filing, you must gather specific information about your solar installation, including the total actual cost, the date it was placed in service, and its technical specifications, such as the size in kilowatts. You will also need the name, address, and Hawaii General Excise Tax (GET) license number of the company that installed your system. The central document for claiming the credit is Hawaii Form N-342.3Department of Taxation. Form N-342, 2024, Renewable Energy Technologies Income Tax Credit You must use a separate Form N-342 for each qualifying system, entering the installer’s information in Part I and the system’s details in Part II.4Department of Taxation. Form N-342 Instructions, Rev. 2024 Keep detailed records related to your solar installation, including all contracts, invoices, and proof of payment, as the Department of Taxation may request them later to verify your claim.
Steps to Claim Your Hawaii Solar Tax Credit
Once you have completed Form N-342, attach it to your annual Hawaii state income tax return, as it is not filed separately. The specific return it accompanies depends on your filing status; for most individuals, this will be Form N-11. For nonresidents and part-year residents, it is Form N-15, while businesses use forms such as N-20, N-30, or N-35. The deadline for claiming the credit is the same as the deadline for filing your state income tax return. For the 2024 tax year, the filing deadline is April 21, 2025, but taxpayers should verify the current year’s deadline with the Hawaii Department of Taxation.5Office of the Governor, State of Hawaiʻi. News Release 2025-01 Tax Filing Tips – Department of Taxation