In This Guide: Incentives, Tax Credits, and Rebates | Federal Solar Tax Credit | Our Conclusion | FAQs
Arizona is one of the best states to go solar. It has the country’s second-largest number of solar installations, with more sun exposure than any other state and ample opportunities to save.
Solar panels cost an average of $15,000 to $20,000 in Arizona, which is a significant investment. Fortunately, the Grand Canyon State offers several tax credits to reduce these costs. This guide covers the available tax credits, rebates, and incentives. It also highlights the top professional solar companies to kickstart your solar journey.
Arizona Solar Tax Credits and Rebates
We’ve highlighted the key tax credits and rebates available in Arizona below.
Most solar owners in Arizona qualify for their utility company’s net-billing program. This is similar to a net-metering program, allowing you to generate credits on your utility bill for unused electricity your solar system generates.
Credits last indefinitely and are paid out annually if they exceed a certain balance. Here’s a breakdown of the current rates for the excess balance needed for a payout:
- Arizona Public Service (APS): $25
- Tucson Electric Power (TEP): $10
- UNS Electric: $10
If you’re not a customer of one of these three utility companies, check with your provider to see what it offers.
More resources: Check out the Database of State Incentives for Renewables and Efficiency (DSIRE) to learn more about net billing in Arizona.
Mohave Electric Cooperative SunWatts Renewable Energy Incentive Program
Mohave Electric Cooperative incentivizes its customers to go solar by providing rebates through its SunWatts program. The company also provides rebates to customers who install wind or solar water heating systems. Here’s a breakdown of the current rebates offered:
- Solar photovoltaic installation: A $0.05 per-watt rebate, up to a maximum of $2,500
- Solar water heating: A $0.75 per-kilowatt-hour rebate of estimated first-year energy savings
Customers must meet all terms and conditions to be eligible for the rebates. They must also submit an application to be considered for the program.
More resources: Visit Mohave Electric Cooperative’s website to find out if you’re eligible or get more information on the Sunwatts program.
Energy Equipment Property Tax Exemption
Though residential solar panels increase your property value, these installations are exempt from property tax in Arizona. Other solar and energy efficiency upgrades are also exempt, including the following:
- Passive solar technology
- Solar pool heaters
- Solar thermal electric
- Solar space heaters
- Solar water heaters
This list is not exhaustive. Contact your local tax authority with questions about solar tax exemptions.
More resources: Read the legislative bill or visit DSIRE for more information about the Arizona Energy Equipment Property Tax Exemption.
Arizona State Residential Solar Tax Credit
Most homeowners in the Grand Canyon State are eligible for the state solar tax credit. This credit provides a state tax deduction equal to 25% of your total system cost, up to a maximum of $1,000. Homeowners file for the credit along with their personal state taxes.
These are solar energy devices that qualify for the Arizona Solar Tax Credit:
- Passive solar building systems
- Solar daylighting systems
- Solar PV systems
- Solar PV phones
- Solar PV streetlights
- Solar swimming pool and spa heating systems
- Solar water heating systems
Those who owe less taxes than the credit can roll it over for up to five years. However, the amount of credit cannot exceed $1,000. You must own your system to qualify. Homeowners who lease their system or enter into a power purchase agreement are ineligible.
More resources: Visit the Arizona Department of Revenue’s website for more information about the state tax credit.
Federal Solar Tax Credit
Arizona residents can also take advantage of the federal solar tax credit, also known as the Federal Solar Investment Tax Credit (ITC). This credit provides a federal tax deduction equal to 30% of your solar installation costs. As with the state tax credit, you don’t qualify for the ITC if you lease your solar power system or are in a power purchase agreement.
The ITC will reduce to 26% in 2033 and drop to 22% in 2034. It’s set to end in 2035 unless Congress renews it.
It’s important to note that the ITC is a tax credit, not a tax refund; it reduces the amount of taxes you owe rather than providing a payout. The credit will roll over to the next year if your annual taxes are less than the ITC.
Solar incentives are a great way to make your transition to solar energy more affordable. We encourage Arizona homeowners to see which of these incentives they qualify for. We also recommend checking with your local government and utility provider to see if other incentives are offered.
Use our tool below to find out which solar companies service your area. Here are some of our top recommendations:
FAQs About Solar Tax Incentives in Arizona
Our Rating Methodology
The This Old House Reviews Team is committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:
- Solar equipment, installation, and services (25%)
- Warranty and performance guarantees (25%)
- Brand reputation and certifications (15%)
- Financing options (15%)
- Experience (10%)
- Availability (10%)
Total scores are divided by 20 for a final 5-point rating scale.
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