One of the best ways to cut the cost of putting solar panels on your home is to take advantage of Arizona's solar tax credit incentives. Many people can benefit from investing in solar panels, but the cost can sometimes be off-putting. With solar tax credits, Arizona residents can upgrade how they power their homes, cut their energy bills, and help the environment.
SmartSolar can help you if you need help figuring out where to begin when applying for solar tax credit incentives in Arizona. They can provide you with an estimate for the cost of solar panel systems and explain how you can save more with solar energy.
What are Solar Incentives?
Even though the price of solar has gone down a lot in the last ten years, it is still a big investment for homeowners and business owners who want to save money on their electricity bills. The federal government, state and local governments, and even some utilities offer incentives to make it easier and cheaper to put solar panels on your roof and get clean energy for your home. These incentives are meant to get more people to use solar energy. You can save up to 50% on the cost of solar energy thanks to these energy savings, which typically come in the form of tax breaks, rebates, or performance-based incentives.
Take the SmartSolar Quiz to find the solar panel solution that’s right for your home.
What Arizona Solar Incentives Are Available?
Arizona solar incentives can help you install a solar panel system for your home without paying the sometimes high cost of solar panel systems. Incentives like the following could reduce how much you owe on your next energy bill.
1. Renewable Energy Production Tax Credit
Arizona’s Renewable Energy Production Tax Credit allows for individuals and corporations. The generator must also have been installed by January 2021, generate 5 megawatts of power, and be located on Arizona land, either leased or owned by the property owner. Those who install a solar panel system could get a tax credit based on how much it is worth.
For those who qualify for the Renewable Energy Production Tax Credit, it can provide a tax credit – a reduction in state income taxes owed – at 25% of the total cost of the solar panel system. This provides a maximum of $1,000 in tax credit.
This tax credit is available for up to five years, although the overall credit amount cannot be more than $1,000. To receive the tax credit, you must owe state taxes.
2. Energy Equipment Property Tax Exemption
Another possibility is the Renewable Energy Equipment tax exemption. This tax incentive considers the value a solar panel adds to your home.
Most of the time, installing a solar panel system on a home will increase the property's value. Since the state uses property value to determine how much taxes a property owner should pay, the increase in property value from solar panels could seem problematic. However, with this tax incentive, that's different.
The tax incentive allows you to be exempt from paying taxes on the value the system adds to your home. This particular type of solar tax incentive applies to a wide range of technologies, including:
- Solar panels
- Passive solar technology
- Solar thermal electric
- Solar space heaters
- Solar water heaters
- Solar pool heaters
- Other solar-powered appliances
If you have any of these systems in your home, which have increased your property's value, this tax incentive could save you some money.
3. Solar Equipment Sales Tax Exemption
The Solar Equipment Sales Tax Exemption is another way to reduce costs when installing a solar panel system in Arizona. This is a simple incentive that you get right away. In short, it is a sales tax exemption for purchasing solar energy devices. That means that, unlike other energy systems, you do not have to pay sales tax on the qualified solar energy devices. It also does not require the payment of taxes on the cost of hiring professional installers to put your system in place. That means that you do not pay sales tax on this installation service.
4. Inflation Reduction Act
The Inflation Reduction Act is a federal tax incentive program that could help you to upgrade to solar with some tax savings. With this program, you can take up to 30% of the total cost of putting solar panels on your home off your federal income tax bill.
Here is how it works. This is a tax credit. That means you can take this credit if you owe federal taxes for the year you install solar panels on your home. Up to 30% of the cost of the solar panels, along with the cost of solar panel installation and associated charges, can be deducted from the tax you owe. It reduces your tax liability dollar-for-dollar by up to that 30%. However, the percentage differs based on the year you install the solar panels.
There is no dollar amount limit on this tax credit. However, it can only be used up to the amount of your tax liability (you cannot get a refund from just this tax credit). You can use this tax credit for the following:
- Solar photovoltaic panels (PV panels)
- PV cells for an attic fan
- Permitting fees, including developer costs and inspection fees
- Contractor labor for permitting, assembly, and installation
- Storage batteries and storage systems for solar energy
- Sales tax on eligible expenses
- All of the equipment you need to set up the solar panel system, including inverters, wiring, mounting, and more
This federal tax credit remains in place for the coming years. However, the sooner you take that credit by installing a solar panel system for your home, the better.
Should You Install Solar Panels in Arizona?
Ultimately, deciding to install a solar array or solar panel system for your home (or your business) depends on what you believe is worthwhile. There are numerous benefits to moving towards solar.
Reduce or eliminate your energy costs
Installing a solar panel system will help eliminate your energy costs. You will no longer need to pay for electricity from utility companies. Instead, your panels will generate their electricity from the sun.
In many ways, a solar panel system will pay for itself over time. That is because you could see a significant monthly reduction in the money you owe to the utility company. If you want to save money, invest in solar.
Arizona has ample sunlight
As one of the top 5 states for solar energy, there is no doubt you will have access to ample solar rays to help power your home. Solar panels only work when they directly interact with the sun's rays. When your home is in Arizona, that means up to 7 hours of direct sunlight each day. During the rest of the time, your home's energy will rely on the stored power generated by your solar panels during the day.
Most people also remain connected to the utility grid. That way, if your system does not work to produce enough solar energy, you can still count on having power available to you.
Solar panels are more affordable than ever
Solar panel costs in Arizona continue to fall, making them more affordable and efficient overall. Many property owners will find installing solar is easier than it used to be.
What if you want to avoid paying that high upfront cost? You have two options to prevent this:
- Solar leases: You do not pay for or own the equipment in a solar lease. Instead, you lease it from a solar energy company and pay for the energy you use. That way, you don't have to worry about maintenance costs. Keep in mind you may not qualify for tax incentives, then.
- Solar loans: Solar financing allows you to purchase and own your solar panel system, but you will not have to pay it all upfront. You still qualify for most tax incentives this way, but you will need to pay interest on the loan.
You don't want to be reliant on the utility company
Solar energy is accessible in Arizona. However, there is a continued increase in the cost-utility companies charge for electricity produced traditionally. In other words, as the utility company's costs rise, you will have to pay more if you continue to pull electricity from that system.
With a switch to solar, you no longer depend on the utility company to meet your needs. You can know you'll have access to the energy you need at a fraction of the cost.
How SmartSolar Can Help You
Arizona solar panel incentives are readily available and worth taking advantage of if you are ready to save money. Not only does this reduce your costs, but over the long term, it can boost the value of your home and help ensure you control access to power for your home.
Take the SmartSolar Quiz to find the solar panel solution that’s right for your home.