Solar SME, Inc.
Solar Energy in Arizona
Harnessing the Sun in the Grand Canyon State
Arizona, known for its vast deserts, breathtaking landscapes, and abundant sunshine, has emerged as a leader in solar energy use. With its vast stretches of open land and an average of 6.5 peak sun hours a day, Arizona is an ideal place to harness the power of the sun. Smartly, over the last decade homeowners, businesses and utilities across the state have turned to solar power as a clean and renewable energy source. In fact, some of the largest solar installations in the world are in Arizona.
In this guide, we will explore the benefits of going solar in Arizona, as well as the many incentives and rebates available to help individuals and businesses in the state tap into this rich resource to save them money.
Why go Solar in Arizona?
Arizona has over 300 days of sunshine per year on average, making it one of the sunniest states in the U.S. This makes Arizona an ideal location for harnessing solar energy to power homes and businesses. By going solar, Arizonans can reduce their reliance on fossil fuels, lower their energy bills, and contribute to a cleaner, more sustainable future.
Solar Incentives and Rebates for Homeowners in Arizona
Arizona residents are eligible for a 30% federal solar tax credit, a property tax exemption, and a sales tax exemption on solar equipment in addition to the federal solar tax credit.
Arizona State Residential Solar Income Tax Credit
The Grand Canyon State provides a solar tax credit equal to 25% of your solar installation expenses, capped at a maximum of $1,000. Homeowners can request this personal income tax credit during their state tax filing. It’s important to note that individuals who lease solar systems or participate in power purchase agreements (PPAs) are not eligible for this credit.
Incentive Amount:
Maximum of $1,000
Frequency:
One-time tax credit
Energy Equipment Property Tax Exemption
When you install a solar power system, it can increase your home value. However, in Arizona, there’s a property tax exemption to spare you from paying taxes on this added property value. Importantly, this exemption isn’t limited to just solar panels—it also covers energy-efficient upgrades like passive solar technology (such as a Trombe wall), solar pool heaters, solar space heaters, solar thermal electric systems, and solar water heaters.
To benefit from this tax exemption, you’ll need to provide comprehensive documentation of the solar system—or of the other energy efficiency upgrade— including documentation of its purchase, installation, and associated costs to your county assessor.
Incentive Amount:
Full exemption on Property Taxes for the increased value of a solar panel system
Availability:
Ongoing exemption, starting from the date of installation
Solar Equipment Sales Tax Exemption
The Arizona Department of Revenue offers a sales tax exemption for solar energy equipment and its installation, but this applies only when the work is carried out by approved contractors. It’s essential to note that this exemption doesn’t cover items like solar battery storage or other accessories that aren’t integral to the solar power system.
To benefit from this exemption, your solar installer is responsible for registering with the Arizona Department of Revenue (using Arizona Form 6015). As the customer, you typically won’t need to take any specific action in this process; it’s primarily the responsibility of the installer to ensure the exemption is applied correctly.
Incentive Amount:
Complete waiver of sales tax on qualifying solar equipment
Frequency:
One-time exemption from sales tax
Arizona Net Metering
In Arizona, most rooftop solar installations are eligible for the net billing program offered by their utility company. Similar to net metering, net billing enables homeowners to receive credits for excess energy produced by their solar power systems on their electricity bills.
Customers are credited for their excess energy generation at a non-retail rate, in contrast to net metering. For the surplus energy produced by their solar panels—which is worth the wholesale cost for the utility to produce the electricity—customers in Arizona receive the avoided cost rate. Usually, this is much less valuable than net metering at a full retail rate.
Currently, the rates for extra energy produced by your solar panels range from $0.0781 to $0.1045 cents per kilowatt-hour (kWh). The utility company sets this rate. Visit the DSIRE website to find out more about Arizona’s net billing scheme.
Federal Solar Tax Credit in Arizona
Homeowners and businesses in Arizona are eligible for the federal solar investment tax credit, or ITC. This allows you to deduct from your federal taxes an amount equal to thirty percent of the cost of installing solar panels. You are qualified for this credit if you own your solar panel system and are a homeowner, condominium owner, or member of a cooperative housing corporation. Currently, the ITC is 30%. This credit will drop to 26% in 2033 and 22% in 2034 before it expires in 2035 under the terms of the Inflation Reduction Act. Using IRS Form 5695, you can claim your credit on your federal tax return.
Solar Incentives and Rebates for Businesses in Arizona
In addition to incentives for homeowners, Arizona also offers incentives and rebates for businesses looking to invest in solar energy:
Commercial ITC
Businesses in Arizona can take advantage of the ITC as well, allowing them to deduct 30% of the cost of installing a solar energy system from their federal taxes, just as homeowners can. This credit applies to both solar photovoltaic (PV) systems and solar thermal systems.
Modified Accelerated Cost Recovery System (MACRS)
The MACRS allows businesses to recover the cost of solar energy equipment through depreciation deductions. This accelerated depreciation schedule can provide significant tax savings for businesses investing in solar energy.
Solar Grants and Incentive Programs
Some utility companies and organizations in Arizona offer grants and incentive programs specifically for businesses investing in solar energy. These programs may provide financial assistance or technical support to help businesses offset the cost of solar installations.
Let's talk
As a leading solar installation company in Arizona, SolarSME is committed to providing high-quality solar solutions to meet the unique needs of Arizona homeowners and businesses. Ready to harness the power of the sun and start saving with solar energy? contact SolarSME today to schedule a consultation and learn more about the custom solar solutions for Arizona homeowners and businesses.
