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Arizona solar incentives, tax credits and rebates

Resources for going solar in 2023

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Arizona does solar a little differently. Instead of net metering, which lets owners sell excess generated power back to their utility, residents are eligible to enroll in net billing, which is a similar way of crediting solar system owners for excess electricity production. In a net billing setup, however, the credit is not necessarily at the full retail rate.

As for other financial incentives, you can find plenty of tax breaks and rebate programs to make the switch to solar more affordable in the Grand Canyon State.

Key insights

  • You can take advantage of solar tax breaks and rebates.
  • The average federal tax credit value is $4,392 in Arizona.
  • Estimated lifetime savings are $23,891 with solar panels.

Solar incentives in Arizona

The federal solar investment tax credit (ITC) is the biggest factor in reducing the cost of going solar in Arizona. If you install a residential solar panel system by the end of 2032, you can deduct 30% of the system's total cost — including equipment, labor and permits — from your federal taxes. For example, for a $20,000 system, you can get a $6,000 tax credit.

The ITC drops to 26% in 2033 and 22% in 2034.

The solar tax credit is not a rebate or refund — you must claim it when you file federal taxes in the year that your solar panel system becomes operational, and the amount of the credit is deducted from the tax you owe the federal government. To do this, you have to complete Form 5695.

The credit is also nonrefundable — if the amount of your credit exceeds the amount you owe in taxes, the credit carries over to future years.

Arizona solar incentive details

Incentive typeIncentive amountApplicable sectorsFrequencyAdministratorAvailable statewide
Residential Solar and Wind Energy Systems Tax Credit Personal income tax credit 25%, up to $1,000 Residential One-time Arizona Department of Revenue
Solar and Wind Equipment Sales Tax Exemption Sales tax incentive 100% of sales tax on eligible equipment Residential, commercial, installers/contractors One-time Arizona Department of Revenue
Energy Equipment Property Tax Exemption Property tax incentive 100% of increased value Residential, commercial, industrial Yearly Arizona Department of Revenue
Green Building Incentive Financial incentives Varies Residential, commercial On-going City of Scottsdale
Property Tax Assessment for Renewable Energy Equipment Property tax incentive Solar equipment assessed at 20% of depreciated cost Investor-owned, municipal and cooperative utilities Yearly Arizona Department of Revenue
Energy Efficiency Rebate Program Rebate program $0.05/watt, up to 50 kW Residential, commercial One-time Mohave Electric Cooperative, Inc
Renewable Energy Incentive Program Rebate program Up to $2,500 Residential, commercial, government One-time Mohave Electric Cooperative, Inc

Statewide residential solar incentives in Arizona

In addition to ITC, residents can take advantage of financial incentives when they go solar, including income tax credits, sales tax exemptions and property tax exemptions. Keep in mind that these don’t go into effect automatically — there’s almost always a form to fill out.

Income Tax Credit for Solar Devices

Arizona gives you an income tax credit of 25% of the cost of buying solar energy equipment (including solar water heaters, solar space heaters and solar pool heaters), although the credit caps at $1,000. The credit is nonrefundable — if you owe less than $1,000 in state income tax in Arizona, it can be carried forward for up to five years.

No preapproval is required for this individual income tax credit. However, you won’t qualify if you lease the system. See Form 310 instructions for more qualifications and how to file properly to claim the credit.

» MUST-KNOW: Tax deductions for homeowners

Solar and Wind Equipment Sales Tax Exemption

Arizona provides a 100% sales tax exemption (no maximum limit) for solar energy devices and their installation. This includes solar panels, wind generators and solar water heaters. Lithium-ion battery storage technologies are also eligible.

Solar retailers fill out Form 6015 before starting the installation, which lets them reduce the taxable portion of their sales, resulting in lower tax liability for them and cheaper devices for you.

The exemption also covers net billing transactions and the sale of renewable energy credits. Most cities may have their own city privilege tax, so you should also check if it applies to you.

Energy Equipment Property Tax Exemption

Arizona's property tax exemption is for 100% of the increased value after you install solar panels. Established in 2006, it initially applied only to solar energy devices but now includes other renewable energy technologies, combined heat and power systems and energy-efficient building components.

984,047 homes are powered by solar in Arizona.

To qualify, you must give your county assessor documentation affirming the actual purchase and installation — including costs — of the eligible solar equipment.

To qualify for the exemption, property owners must provide documentation confirming the purchase and installation of eligible equipment, including costs, to their county assessor at least six months before the initial valuation year's full cash value notice is issued.

What to know about net metering in Arizona

In 2016, the Arizona Corporation Commission (ACC) voted to replace net metering with net billing. This means that new customer-generators are credited at an avoided cost rate for energy that is exported to the grid.

Although this is often categorized as net metering, the policy adopted by the ACC doesn’t meet DSIRE's technical definition of net metering, as excess generation is no longer netted one-to-one against consumption over the billing period.

The three largest utilities in the state — Arizona Public Service (APS), Tucson Electric Power (TEP) and Salt River Project (SRP) — have compensation rates approved by the Arizona Corporation Commission. Still, how much you can earn back for extra energy production is less than in some other states, slightly decreasing that incentive for Arizonans.

Some APS customers who switched to solar have told us about high fees that add up quickly and connectivity delays. Unfortunately, depending on where you live, you might not have another option.

» LEARN: What is an off-grid solar system?

Helpful solar resources in Arizona

Here are some additional state, city and county resources that can guide you through transitioning to solar in Arizona.

State resources

Utility and local resources

» GUIDE: Solar panel installation

Find solar companies in Arizona

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    What is the tax credit for solar panels in Arizona?

    Arizona has income tax credits, property tax exemptions and sales tax exemptions to incentivize residents to switch to solar.

    How much can I save with solar panels?

    In Arizona, the average savings is $23,891 over 25 years. How much you really save per month depends on the efficiency of your system, whether you finance and other factors. For instance, Lawrence in Scottsdale told us his monthly bill dropped from $300 to $84; Billy in Surprise said his bill dropped from $300 to $50.

    What’s the difference between net metering and net billing?

    Net metering and net billing are two different approaches to compensating solar energy system owners for the electricity they generate and send back to the grid. Both involve crediting solar system owners for excess electricity production, but they have distinct mechanisms and implications:

    • Net metering: Net metering allows solar energy system owners to receive credits at the full retail rate for the surplus electricity they generate and export to the grid. The bidirectional meter measures both electricity consumed from the grid and surplus electricity sent back.

      These credits can offset the cost of grid electricity used when solar panels aren't producing enough power, and any excess credits can roll over to the next billing period if the solar system generates more electricity than is consumed.

    • Net billing: In a net billing setup, solar system owners receive credits for excess electricity, but the credited rate may be lower than the full retail rate. The metering mechanism can be the same bidirectional meter as net metering or a separate one for measuring exported electricity.

      Terminology and policies vary by location, and in some places, net billing might be a specific type of net metering with a lower credited rate.

    Since solar energy policies and regulations can change over time and differ by location, it's crucial to consult local utility companies or relevant authorities to understand the specific net metering or net billing policies applicable in a particular area.

    Are there any disadvantages to going solar?

    Going solar has many financial advantages, like lowering your energy bill, and environmental benefits, like reducing your carbon footprint. But there are also some potential disadvantages:

    • Initial cost: Solar panel systems can be expensive to install. Even though the cost of solar panels has significantly decreased over the years, it still represents a significant upfront investment.
    • Dependence on local utilities metering: Net billing allows homeowners to sell excess electricity produced by their solar panels back to the grid. However, changes to net metering policies or rates can affect the economics of your solar system.
    • Aesthetics and curb appeal: Some people don’t love the way solar panels look on their homes. A Zillow study suggests that solar panels increase property values, but potential buyers might not always be attracted to homes with solar panels, particularly if the panels are aging or if they'd have to take over a solar lease.

    » MORE: Solar energy pros and cons

    Bottom line: How much are solar panels in Arizona?

    The ConsumerAffairs research team conducted an in-depth analysis to determine how much it costs to go solar in Arizona and average solar costs in other states.

    Average cost for a 6-kW solar panel system in Arizona

    Total cost before tax creditsTotal cost after tax creditsCost per watt2022-2032 federal tax credit value (30%)
    $14,640 $10,248 $2.44 $4,392

    Thanks to rebates and other financial incentives, solar panels are cheaper than ever and increasingly popular in Arizona. “When I moved here five years ago, nobody had them. Now, it’s like every other house,” Ray in Queen Creek said.

    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
    1. Database of State Incentives for Renewables & Efficiency, “Arizona Programs.” Accessed July 17, 2023.
    2. Arizona Department of Revenue, “Income Tax Credit for Residential Solar Devices.”
    3. Environmental Protection Agency, “Summary of Inflation Reduction Act provisions related to renewable energy.” Accessed July 17, 2023.
    4. Database of State Incentives for Renewables & Efficiency, “Net Billing.” Accessed July 28, 2023.
    5. Arizona Department of Revenue, “Income Tax Credit for Residential Solar Devices.” Accessed July 25, 2023.
    6. Arizona Public Service, “Renewable Energy Riders.” Accessed July 28, 2023.
    7. Salt River Project, “SRP solar price plans.” Accessed July 27, 2023.
    8. Tucson Electric Power, “What You Should Know About Residential Solar Systems.” Accessed July 28, 2023.
    9. EcoWatch, “Solar Panel Cost in Arizona.” Accessed July 17, 2023.
    10. Zillow, “Homes With Solar Panels Sell for 4.1% More.” Accessed July 17, 2023.
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