How ARRES Helps South Carolina Homeowners Go Solar

What ARRES is and how it works for solar in South Carolina

ARRES stands for the Alternative Renewable and Efficient Energy Sources program, a South Carolina state incentive that reduces the upfront cost of installing solar panels on your home. The program works by offering a tax credit—a dollar-for-dollar reduction on your state income taxes—for a portion of what you spend on a solar system. Unlike a rebate that arrives in the mail, you claim ARRES when you file your taxes in the year after installation is complete.

The credit covers 30 percent of your total installed solar cost, up to a maximum of $3,500 per system. That means if your solar installation costs $10,000, you can reduce your South Carolina state taxes by $3,000 (30 percent of $10,000). If your installation costs $12,000 or more, you hit the $3,500 cap. The credit applies to residential systems only—not commercial or agricultural installations.

ARRES is separate from the federal Investment Tax Credit (ITC), which is a federal incentive that currently covers 30 percent of solar costs with no state cap. You can use both: the federal credit first, then claim ARRES on your state taxes. Many homeowners use the combination to cover 50 to 60 percent of their total system cost through tax credits alone.

Key Takeaways

• ARRES provides a state tax credit worth 30 percent of your solar installation cost, capped at $3,500 per residential system.
• You claim the credit when you file your South Carolina state income taxes in the year after your solar panels are installed and operational.
• ARRES stacks with the federal solar tax credit, so you can use both incentives to reduce your out-of-pocket expense.
• The system must be installed by a licensed contractor and must be your primary residence or a rental property you own in South Carolina.
• There is no deadline to claim ARRES, but you must have a tax liability in the year you claim it—if you owe no state taxes, you cannot use the credit that year.

Who can claim ARRES and what systems may have access to

To claim ARRES, you must own the solar system outright or through a loan. If you lease your panels or use a power purchase agreement (PPA)—where a third party owns the system and you buy the electricity it produces—you cannot claim ARRES because you are not the owner. The system must be installed on your primary residence or on a rental property you own in South Carolina. Second homes and vacation properties do not may have access to.

The solar system must be new, meaning it was not in use before your installation date. Used or salvaged panels do not may have access to. The system must also be installed by a licensed South Carolina contractor; DIY installations are not may be able to access. Once the system is operational and producing power, you can begin the process of claiming the credit on your taxes.

You do not need to be a South Carolina resident for the entire year to claim ARRES, but you must have filed a South Carolina state income tax return for the year in which you claim the credit. If you moved to South Carolina mid-year or moved away, you may still be able to claim it depending on your tax filing status that year—check with a tax professional or the South Carolina Department of Revenue if your situation is unclear.

How to claim ARRES on your state taxes

Start by collecting documentation from your solar installer. You will need the total cost of the system, the date it became operational, and proof that it was installed by a licensed contractor. Your installer should provide an invoice or contract showing these details. Keep this paperwork—you will reference it when you file your taxes.

When you file your South Carolina state income tax return for the year after installation, you will report the ARRES credit on your return. The exact form or line depends on the tax software or tax preparer you use. If you use tax preparation software, the program will walk you through entering the credit. If you work with a tax preparer or CPA, give them the installation documentation and let them know you installed solar; they will handle the credit calculation and placement on your return.

The credit reduces your state tax liability dollar-for-dollar. If you owe $5,000 in South Carolina state taxes and claim a $3,500 ARRES credit, your tax bill drops to $1,500. If the credit is larger than what you owe, you cannot carry the unused portion forward to future years or receive it as a refund—you can only use it against taxes you actually owe in that year.

ARRES and the federal solar tax credit: how they work together

The federal Investment Tax Credit (ITC) is currently set at 30 percent of your total solar installation cost with no upper limit. Because ARRES is a state credit and the ITC is federal, you can claim both. The standard approach is to claim the federal credit first on your federal tax return, then claim ARRES on your state return. Both credits are calculated on the same total system cost, so there is no double-dipping or reduction in either credit's value.

Example: Your solar installation costs $10,000. The federal ITC covers 30 percent, or $3,000. ARRES covers 30 percent, or $3,000 (since $3,000 is below the $3,500 cap). Combined, you reduce your tax liability by $6,000—meaning you cover 60 percent of the system cost through tax credits. You pay the remaining $4,000 out of pocket or through financing.

If your system costs $12,000 or more, ARRES maxes out at $3,500 while the federal credit continues at 30 percent of the full cost. A $15,000 system would yield a $4,500 federal credit (30 percent) plus a $3,500 ARRES credit (capped), for a total of $8,000 in tax credits.

What happens if you cannot use the full ARRES credit in one year

ARRES is a non-refundable credit, which means you can only use it to reduce taxes you actually owe. If your state tax liability is less than the credit amount, the unused portion does not roll over to the next year and you do not receive it as a refund. For example, if you claim a $3,500 ARRES credit but only owe $2,000 in state taxes, you use $2,000 of the credit and lose the remaining $1,500.

This is one reason to think about the timing of your solar installation. If you know you will have a larger tax liability in a particular year—perhaps because of a bonus, a side business, or other income—you might time your installation to claim ARRES in that year. Talk to your tax preparer or CPA about your expected tax situation before you install.

The federal ITC, by contrast, can be carried forward to future years if you cannot use it all in one year, so it is more flexible. But ARRES is a use-it-or-lose-it credit in the year you claim it.

ARRES requirements and documentation you will need

Your solar installer should provide you with a detailed invoice or contract that includes the total system cost, the installation date, the date the system became operational, and confirmation that the work was performed by a licensed South Carolina contractor. Keep this document—it is your proof of the installation and cost for tax purposes.

You will also need to verify that your contractor holds a valid South Carolina license. The South Carolina Department of Labor, Licensing and Regulation (SCDHEC) maintains a database of licensed contractors. If you are unsure whether your installer is licensed, you can search the database or ask the installer directly for their license number.

When you file your taxes, have the installation documentation ready to give to your tax preparer or to reference if you are filing yourself. The South Carolina Department of Revenue may request proof of the installation and cost if your return is audited, so keep all paperwork for at least three years after you claim the credit.

Other South Carolina solar incentives to explore alongside ARRES

ARRES is one piece of the incentive puzzle for solar in South Carolina. The federal ITC is usually the largest incentive available, and some utility companies offer rebates or performance payments for solar installations. Santee Cooper, for example, has offered rebates for residential solar in the past, though programs change. Check with your local utility to see what incentives they currently offer.

Some South Carolina municipalities and counties also offer property tax exemptions for solar installations, meaning the added home value from your solar system is not factored into your property tax assessment. This is separate from ARRES and the federal credit—it is a local tax benefit. Contact your county assessor's office to learn whether your area offers this exemption.

Financing options also matter. If you take out a loan to pay for your solar system, you can still claim both ARRES and the federal ITC on the full system cost, even though you are paying it off over time. Some installers also offer in-house financing or work with third-party lenders. Compare the total cost of financing against paying cash, and factor in the tax credits when you do the math.

Frequently Asked Questions

Can I claim ARRES if I lease my solar panels?

No. ARRES is only for systems you own. If you lease panels or enter a power purchase agreement where a third party owns the system, you cannot claim the credit. Only the system owner can claim ARRES.

What if my solar system is installed in December but does not produce power until January?

The year that matters is the year the system becomes operational and produces power. If your system is installed in December 2024 but does not turn on until January 2025, you claim ARRES on your 2025 tax return, not your 2024 return. Keep documentation from your installer showing the operational date.

Can I use ARRES if I do not owe South Carolina state taxes?

No. ARRES is a tax credit that reduces what you owe. If you have no tax liability in a given year, you cannot use the credit that year, and the unused amount does not carry forward. You must have a tax bill to benefit from ARRES.

Does ARRES apply to battery storage systems?

ARRES covers solar photovoltaic (PV) systems. Battery storage installed as part of a solar system may be included in the total system cost may be able to access for the credit, but check with your installer and tax preparer about how your specific system is classified, as rules can vary.

What if I sell my home after installing solar—do I lose the ARRES credit?

No. Once you claim ARRES on your tax return, the credit is yours. Selling your home does not affect the credit you already claimed. The new owner cannot claim ARRES again for the same system, but you keep the benefit you received.