And Arizona isn’t done. Over the next five years, it’s estimated that solar power will grow by 43 percent in Arizona. You too can take advantage of this growing renewable energy source by working with SolarTech on your next project. We specialize in more than just installing industry-leading solar systems, but making sure you’re capturing all the incentives you qualify for too. Read on to learn more or contact us today to schedule a consultation.

Current State of Solar in Arizona

Arizona has plenty of sunshine for its residents, one of the factors that makes the state so appealing. Additionally, its 300 days of sun each year makes it a prime candidate for solar installations, something that 1.4 million Arizona households are already realizing. What’s more is that solar installations in Arizona are more affordable than ever thanks to various incentives that property owners may be eligible for. This, combined with a projected surge in solar installations over the next five years, has Arizona poised to become even more of a player in renewable energy.

What are the Top Arizona Solar Panel Incentives?

Arizona residents may qualify for several solar panel installation incentives, including:

• • Federal Solar Investment Tax Credit (ITC)
  • Arizona Residential Solar Energy Tax Credit
  • Solar Equipment Sales Tax Exemption
  • Energy Equipment Property Tax Exemption
  • Net Billing Program
  • Utility-specific incentives

Federal Solar Investment Tax Credit (ITC)

The Federal Solar Investment Tax Credit, sometimes known as just the Federal Investment Tax Credit, or ITC, allows property owners to claim up to 30 percent of the cost of solar energy system installation against their federal taxes. For example, if your system costs $10,000 to install, you can claim up to $3,000 of it on your federal income tax filing. Currently, the 30 percent federal tax credit applies for installations made between 2022 and 2032, before it’s reduced to 26 and 22 percent in 2033 and 2034, respectively. It’s expected to expire in 2035 unless Congress renews it.

If you’re an Arizona resident who files a federal income tax, you qualify for this solar benefit. At SolarTech, we’ll help you maximize it.

Arizona Solar Incentives

Residential Arizona Solar Tax Credit

Arizona also has a state solar tax credit – 25 percent of your solar panel system costs up to $1,000 total toward your state income tax. When you combine this state tax credit with the 30 percent federal tax credit, the incentive to transition to solar on your property becomes even more appealing. In addition to the 30 percent tax credit from the federal government, there’s the potential to receive up to an additional $1,000 credit from the Arizona state government. The credit can be claimed for up to 5 tax years.

Solar Equipment Sales Tax Exemption

In Arizona, there’s a sales tax exemption for the retail sale of solar energy devices and installation of such devices and equipment by qualified contractors. That means you won’t pay the standard 5.6 percent sales tax on solar equipment or installation.

Energy Equipment Property Tax Exemption

Rooftop Solar panels, solar pool heaters and other solar-powered appliances all qualify for Arizona’s Energy Equipment Property Tax Exemption, which provides a 100 percent tax credit for any increase in property resulting from the installation of this – and other – energy-efficient equipment. It’s estimated that solar panels can increase property value by 3 to 6.8 percent on average, meaning you’ll be able to benefit from this increase in value.

Net Billing in Arizona

Arizona’s net billing system compensates solar owners for excess solar energy they send to the grid, credits that are often used to offset any future energy costs. Typical credit rates range from $7.81 to $10.45 per kWh that is sent back to the grid. It represents additional potential for solar savings.

Utility-Specific Solar Incentives

Keep your eye out for renewable energy programs and Arizona solar rebates, as utility companies also offer solar incentives. While Salt River Project no longer offers incentives for rooftop installations, it does offer a $250 rebate for the purchase and installation of a demand management system (DMS).

Arizona Public Service also offers a $30 rebate on smart thermostat purchase and installation.

SolarTech works to stay up to date on all utility offers to ensure you maximize your savings potential.

How Arizona Residences Can Maximize Incentives

Looking to get the most return on investment out of your solar installation? SolarTech is here to help in the following ways:

• • • We stay up to date on all incentive opportunities and will assist you with various applications.
    • We optimize system design to ensure that it meets the requirements for maximum incentives.
    • We offer ongoing support for claiming benefits, largely thanks to our expertise in navigating the complex incentive landscape.

FAQs

How do I qualify for the Arizona solar tax credit?

The credit is good for 25 percent of the total system cost, but cannot exceed a total of $1,000. It can be claimed for up to five tax years. You’ll need to complete Arizona Form 301 and include it with your state tax filing.

Can I combine federal and state solar incentives?

Yes! To maximize your incentive potential, combining your federal solar tax credit and state solar sales tax exemption is something that property owners should do following a solar installation.

How does net metering work in Arizona?

Net metering pays Arizona solar power owners to distribute excess energy generated back to the grid, usually to offset future energy costs. Typical credit rates range from $7.81 to $10.45 per kWh.

Are there any income limits for solar incentives in Arizona?

No, there is no income limit for solar incentives in Arizona.

How long do solar panels typically last in Arizona’s climate?

With proper maintenance, solar panel systems can last anywhere from 25 to 30 years under normal operating conditions in Arizona.

Hurry Before it’s Too Late

The solar incentives offered now aren’t likely to be in place forever. In fact, the Federal Solar Investment Tax Credit – which is currently 30 percent of the cost of solar system installation – will reduce to 26 percent for installations starting in 2033 and then 24 percent for installations in 2034. It expires in 2035 unless Congress renews it.

Additionally, there’s a potential for the state government to revisit the state credit. Make sure you’re acting soon to ensure you maximize the benefits of going solar.

If you’re interested in going solar, contact SolarTech today for a personalized assessment of your property. When you schedule a free consultation, we’ll help you understand how much you can potentially save from going solar. You can also use an online savings calculator to ballpark your potential savings.

Steps to Claim Solar Incentives in Arizona

SolarTech will help guide you through the process of claiming each available solar incentive that you qualify for.

If you’re filing for the Federal Solar Investment Tax Credit, you’ll need to fill out IRS Form 5695 with your taxes and include it with your federal taxes. For the state solar energy credit, you’ll need to complete Arizona Form 301 and include it with your state tax filing.

To qualify for the Arizona sales tax exemption, you must ensure that your panels are installed by an approved contractor. It’s the responsibility of the contractor to ensure property owners don’t pay sales tax for this.

To qualify for the property tax exemption, property owners must provide their assessor with documentation on the purchase and installation. This must be submitted within 6 months before the notice of full cash value is issued for the initial valuation year.

Additional Resources for Arizona Solar Incentives

• • • Database of State Incentives for Renewables & Efficiency
    • Arizona Department of Revenue
    • U.S. Department of Energy – Office of Energy Efficiency & Renewable Energy
    • Arizona Corporation Commission
    • Solar Energy Industries Association

While solar energy is indeed an alternative means of power, it stands out as a sustainable option. With many states embracing solar as a reliable and cost-effective alternative energy source, it’s important for residents to be aware of the various incentives that come with making the switch.

Considering the growing solar community, there are compelling reasons to transition to solar power. The U.S. Energy Information Administration predicts a substantial 75% increase in U.S. solar power generation, projecting an ascent from 163 billion kWh in 2023 to 286 billion kWh in 2025.

Investment Tax Credit

One of the most substantial federal incentives for residential solar energy is the Investment Tax Credit (ITC). Originally established in 2005 and extended several times, the ITC allows homeowners to deduct a percentage of their solar system installation costs from their federal income taxes.

For eligibility, the installation of the solar system must be completed within the tax year. Solar PV systems installed in 2020 and 2021 qualify for a 26% tax credit. Congress, in August 2022, extended the ITC to 30% for installations between 2022 and 2032, and those installed on or before December 31, 2019, also retain a 30% tax credit. The credit decreases to 26% for systems installed in 2033 and further reduces to 22% for installations in 2034. Beyond 2034, the tax credit expires unless renewed by Congress.

The ITC has revolutionized the landscape, enhancing the financial feasibility of solar energy for homeowners. By reducing initial costs, it expedites the return on investment for solar installations, making them an appealing choice for a broader spectrum of households.

To be eligible for this tax credit, ensure the following criteria are met:

• Your solar PV system was installed between January 1, 2017, and December 31, 2034.
• The solar PV system is located at a U.S. residence.
• You either own the solar PV system outright (purchased with cash or financed, but not leased or paid for electricity from a solar company), or you bought an interest in an off-site community solar project, with electricity credits not exceeding your home’s consumption.

Additionally, the solar PV system must be new or used for the first time, and the credit is applicable only to the original installation of the solar equipment.

Included expenses cover:

• Solar PV panels or PV cells (excluding the fan powered by them).
• Contractor labor costs for onsite preparation, assembly, or original installation, including permitting and inspection fees.
• Balance-of-system equipment such as wiring, inverters, and mounting equipment.
• Energy storage devices with a capacity of 3 kilowatt-hours or more (for systems installed after December 31, 2022), even if installed in a subsequent tax year.
• Sales taxes on eligible expenses.

Residential Renewable Energy Tax Credit 

Alongside the Investment Tax Credit (ITC), the Residential Renewable Energy Tax Credit is specifically designed for residential renewable energy systems, including solar installations. This credit encompasses 30% of eligible costs for solar property like solar water heaters and solar panels, without any maximum limit. Similar to the ITC, this credit aims to ease the financial burden associated with the initial investment, making the transition to solar energy more attractive to homeowners.

Eligibility for the residential clean energy credit extends to improvements made to your primary residence, whether you own or rent it. The credit is applicable to both new and existing homes within the United States. However, landlords or property owners who do not live in the home are not eligible for the credit.

Expenses eligible for the credit cover various clean energy property types, including solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, and fuel cells. Beginning in 2023, battery storage technology is also included. However, previously owned clean energy property is not eligible. Qualified expenses may encompass labor costs for onsite preparation, assembly, or original installation, as well as piping or wiring for connection to the home. Traditional building components primarily serving roofing or structural functions generally do not qualify, except for solar roofing tiles and solar shingles that generate clean energy.

Homeowners contemplating solar installations are advised to seek guidance from tax professionals to maximize the benefits of these tax credits. This ensures compliance with necessary requirements for claiming these incentives.

Federal Solar Grants and Rebates

In addition to tax credits and depreciation benefits, the federal government offers various grants and rebates to further support residential solar energy adoption. These incentives are often administered by state or local agencies, providing additional financial assistance to homeowners looking to make the switch to solar.

The availability and amount of solar grants and rebates can vary based on geographical location and specific program criteria. Homeowners are encouraged to explore local opportunities and leverage federal support to make their solar investment more cost-effective.

Summary

The federal incentives for residential solar energy play a pivotal role in fostering a sustainable and eco-friendly future. Through mechanisms like the Investment Tax Credit, Residential Renewable Energy Tax Credit, and various grants and rebates, the government encourages homeowners to embrace solar power solutions. These incentives not only reduce the financial barriers associated with solar installations but also contribute to the overall growth of the renewable energy sector.

As we move forward, it is essential for policymakers to continue refining and expanding these incentives to keep pace with technological advancements and the increasing importance of renewable energy. By doing so, we can ensure that residential solar energy remains an accessible and attractive option for homeowners, driving us closer to a future powered by clean and sustainable energy sources.

Do you have questions about how you can take advantage of these Federal Incentives? Schedule a consult with one of our professionals, and we’ll help you get the best deal to go solar for your home!

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About SolarTech

SolarTech is a premier, licensed solar provider for California & Arizona, and an accredited member of the Better Business Bureau. We’ve been providing turnkey solar solutions for residential, commercial, and non-profit customers for over 20 years.

Whether we’re installing a residential solar system or a large multi-array commercial solar project, our mission is to inform our customers so they can make the best economic decisions for their energy lifestyle, lower their utility costs, and make a commitment to a better future with clean energy.

The Sunniest State in the US

Arizona enjoys over 300 days of sunshine annually, making it one of the sunniest states in the U.S. This abundant sunlight makes it optimal for solar energy to thrive, and provide consistent power generation from solar panels, which turns into big savings.

Incentives and Tax Credits

Arizona offers various financial incentives, including tax credits and rebates, to encourage the adoption of solar energy. These incentives can make installing solar panels even more affordable and attractive for homeowners and businesses.

You can learn more about the incentives available to you here.

Quick ROI in Solar Panels

Solar energy can significantly reduce your electricity bills. And with Arizona’s sunny climate, the return on investment for solar panels is the quickest. Over time, you will save a substantial amount on your energy costs every month given the extremely sunny environment providing you with excess energy that you could also store with an Energy Storage Unit, and use during the night.

Environmental Benefits

Opting for solar energy helps reduce your carbon footprint. By using clean, renewable energy, you contribute to a healthier environment and support sustainable energy practices, aligning with the growing trend of eco-conscious living.

Going solar in Arizona is a smart choice for homeowners and businesses alike, being the sunniest state in the US, and providing numerous incentives, solar will help you save money on your electricity bills, increase the value of your property, and reduce your carbon footprint.

If you are interested in learning more about solar energy options in Arizona, contact us today for a free consultation and quote.

Request a Free Quote

About SolarTech

SolarTech is a premier, licensed solar provider for California & Arizona, and an accredited member of the Better Business Bureau. We’ve been providing turnkey solar solutions for residential, commercial, and non-profit customers for over 20 years.

Whether we’re installing a residential solar system or a large multi-array commercial solar project, our mission is to inform our customers so they can make the best economic decisions for their energy lifestyle, lower their utility costs, and make a commitment to a better future with clean energy.

Resources

Arizona Solar Tax Credits and Incentives Guide (2023) | Palmetto

Sunniest States in the US 2023 | Wisevoter

Benefits of Residential Solar Electricity | Department of Energy