Arizona Solar Tax Credits and Rebates
A typical 5-kilowatt (kW) cost of solar panel system $10,200 to $13,800. Fortunately, Arizona has many tax credits and solar incentives available to reduce these costs.
Energy Equipment Tax Exemption
Credit type: Statewide tax exemption
Installing a solar power system increases your home’s value, but Arizona offers a property tax exemption so you don’t have to pay tax on this extra amount. Solar panel systems solar and efficiency upgrades are not the only ones covered under this exemption. Here is a list of other included equipment:
- Passive solar technology, like a Trombe fortress
- Solar pool heaters
- Solar space heaters
- Solar thermal electricity
- Solar water heaters
There may be additional equipment considered under this exemption, depending on where you live. Contact your local tax authority to make sure you maximize your savings.
Arizona State Residential Solar Tax Credit
Credit type: Statewide tax credit
The Grand Canyon State offers a solar tax credit of 25% of your installation cost, up to a maximum of $1,000. Homeowners can apply for the credit when they file their state taxes.
These are the solar devices covered by Arizona’s solar tax credit:
- Passive solar building system
- Solar daylighting system
- Solar PV phones
- Solar PV street lights
- Solar PV systems
- Solar swimming pool and spa heating systems
- Solar water heating systems
If the credit exceeds the amount of taxes you owe, you can carry it forward for up to five years. Those who lease their systems or are part of a power purchase agreement (PPA) are not eligible.
Solar Equipment Sales Tax Exemption
Credit type: Statewide sales tax exemption
The Arizona Department of Revenue provides a sales tax exemption for solar energy devices and installation by approved contractors. These are the items that the Arizona Department of Revenue categorizes as solar energy devices:
- Active solar space heating
- Passive solar space heating
- Solar water heating
- Solar photovoltaics
The exemption does not include solar batteries or other accessories that are not part of the initial solar power system.
Most Arizona cities also have a city privilege sales tax, so it’s a good idea to check if it applies to your region. The sales tax exemption for approved retailers currently has no expiration date but may change at some point.
Mohave Electric Cooperative SunWatts Renewable Energy Incentive Program
Credit type: Utility incentive
Mohave Electric Cooperative incentivizes its customers to install solar power systems by providing rebates through SunWatts program. It also offers rebates to customers who install solar water heaters.
Here are the rebates currently offered through the SunWatts program:
- Solar photovoltaic installation: A rebate of $0.05 per watt, up to a maximum of $2,500.
- Solar water heating: A rebate of $0.75 per kilowatt-hour in estimated first-year energy savings
Customers must meet all terms and conditions to qualify for these rebates. You must also submit an application to be considered.