Alabama Irrigation Tax Credit (Qualified Irrigation System and Reservoir System Tax Credit)

The Alabama Irrigation Tax Credit is a state income tax credit authorized under Section 40-18-342, Code of Alabama 1975, which allows a credit for certain costs for irrigation equipment, fuel conversions, and reservoirs. Pursuant to Section 40-18-342(f)(1), any agriculture trade or business making qualified costs must file an annual informational report with the Alabama Department of Agriculture and Industries (ADAI) prior to claiming the income tax credit. Only qualified irrigation systems or reservoirs for which the agriculture trade or business has filed an annual information report with ADAI are eligible for the tax credit. An eligible taxpayer may claim one credit for qualifying equipment purchased and installed during tax years 2012 through 2017, one credit for tax years 2018 through 2024, and one credit for tax year 2024 or thereafter. The Alabama Department of Revenue requires completion of a precertification process before the credit can be claimed on a tax return.

Any agriculture trade or business that makes qualified costs for irrigation equipment, fuel conversions, or reservoirs. To be eligible, the business must file an annual informational report (questionnaire) with the Alabama Department of Agriculture and Industries prior to claiming the credit, and a copy of the questionnaire must be provided as part of the Alabama Department of Revenue precertification process.

Complete the Alabama Irrigation Tax Credit Questionnaire and submit it to ADAI - either through the online questionnaire (preferred; no mailing or emailing required) or by downloading the fillable document, completing all applicable fields, and uploading it or emailing it to irrigation@agi.alabama.gov. The deadline to submit the questionnaire is February 27, 2026. A copy of the completed questionnaire must be retained and provided as part of the Alabama Department of Revenue precertification process before the credit is claimed on the tax return.