The Top 3 Arizona Solar Tax Credits for Homeowners

What Arizona Solar Tax Credits are Available?

Solar tax credits exist in many states, including Arizona. This could include federal and state-specific solar incentives that reduce the overall cost of purchasing solar in those areas. Here is a breakdown of some of the ways you can save money.

1. Federal Solar Tax Credit

The largest and often most impactful way to reduce the cost of solar for your home is to take advantage of the federal solar tax credit. The U.S. Department of Energy says that you can deduct up to 30% of the cost of your new solar panel system, including equipment and labor costs. This is a tax credit that reduces your income tax obligation to the federal government. 

This tax credit provides a significant savings opportunity for most people in Arizona because of the state’s highly available solar energy. With so many hours of sunlight each day, most days of the year, making the move to solar in Arizona just makes sense. With no maximum on the amount of money that you can save, the federal solar tax credit is an exceptional way to reduce your overall costs.

2. Arizona State Residential Solar Tax Credit

Another savings opportunity for solar panels in Arizona is the Residential Clean Energy Credit. This is a sales tax savings that is available to most people living in the state. It is a state tax credit, which means it reduces your state income taxes. The value is impressive, with as much as 25% of the total solar panel system’s cost being eligible to reduce your taxes. 

This solar tax savings has a maximum of $1,000 in value. That means that as long as 25% of the cost of your solar panel system is over $1,000, that's how much you can reduce your tax taxes. If you do not have a state liability, though, you cannot obtain a refund from this savings opportunity. 

3. Energy Equipment Property Tax Exemption

Another way you can save money by installing solar panels for your home in Arizona is to use the property tax exemption opportunity. When you invest in solar panels for your home, that will raise the value of your home. Normally, under Arizona law, that means your home’s property taxes will rise as well. That could mean you owe more taxes.

However, Arizona put into place the Energy Equipment Property Tax Exemption opportunity. That means that your taxes do not rise just because of the value increase due to solar panel systems. You do not have to worry about the increase in value impacting your property taxes each year.

You can use these savings for other types of energy efficiency upgrades to your home. For example, it applies to solar panels, as well as solar water heaters, solar pool heaters, solar space heaters, and even passive solar technology. 

For all three of these Arizona solar tax credits available, be sure to speak to your tax professional about your ability to qualify. You also want to be sure you are working with a company that offers a system that meets the qualifications under each of these programs before electing to invest in them.

While not a true tax credit, some residents in Arizona may qualify for a rebate from the state if they purchase solar batteries that meet the requirements set by the organization. For example, you can receive a $500 bill credit with Arizona Public Service’s Storage Rewards program. This allows you to install a solar energy system that will collect your energy needs at your home. The program is available in select areas.

Solar Energy in Arizona

While Arizona solar panels are a great investment in your home just because they will help you to protect the environment, there are actually other benefits to them as well. They can reduce or eliminate your electric costs and add value to your property should you decide to sell it later on. 

However, it is important to understand how much energy solar panels produce in Arizona. Most of the time, the installation of a rooftop solar panel system in Arizona will allow you to qualify for the electric company’s net billing program. This program allows you to earn a credit on your electricity bill whenever you sell the electric company the extra or excess energy that your solar energy system produces. 

Arizona has three large electricity utility companies. That includes APS, Arizona Public Service, TEP, Tucson Electric Power, and SRP, Salt River Project. Each one of these utility companies participates in the net billing program. That means that:

• If you install a qualified solar panel system and remain connected to the grid, you can send extra solar energy to the electric company.
• You are then able to benefit from a solar export credit as a result. This rate is based on the compensation rate that is set by the state’s agency, the Arizona Corporation Commission. That helps to make sure it’s fair. 

As of the start of 2023, you can contact each of these three electricity companies to find out what you qualify for in terms of the current and most up to date rate.

How to get the Most Out of Solar Tax Credits in Arizona 

Arizona solar panels can be an excellent way to save money and to move your home away from the utility company’s high prices (which continue to rise year-over-year in Arizona). There are a few things you can do to help you get the most out of these tax credits and to take advantage of all available Arizona solar incentives.

1. Find the best system for your home

How many solar panels do you need? How much power should you aim to generate? This is a big question here. The average American home needs a 6 kilowatt system, but if you use a lot of energy, such as to keep your home cool on those very hot summer days, you may need more power. The key here is to invest in a system that is as efficient as possible, which will reduce the overall costs later. 

2. Find the best solar power company

The next step is to avoid overpaying for the Arizona solar panels you need. You are likely to pay more if you do not shop around to compare several solar panel companies to each other. Lots of options exist, but not all are affordable. Some companies offer better deals and discounts. You want the best possible price on the solar panel system for your home.

3. Take advantage of all tax credits

Work with your tax professional to determine how to qualify for all of the Arizona solar tax credits listed here. Remember, too, that these incentives could change over time. The solar companies you work for can provide more insight into the most common or best incentives currently available. Just be sure you buy a system that qualifies for it and submit your taxes with proof of your purchase.

4. Reduce the cost of monthly electricity bills 

Solar panels go beyond reducing your utility costs by selling energy back to the grid. You are virtually eliminating the cost of electricity to your home or cutting it significantly, especially if you invest in solar energy batteries. 

You can finance solar panel installation and still qualify for the solar tax credit at the federal and state level. This is a good way to reduce the out-of-pocket expenses you will have going into this process. For example, there are numerous companies that provide solar panel loans with low interest rates. You can obtain these to help you to cover the cost of solar panel installation – and remember, some of that cost will help you to qualify for tax credits to reduce your taxes for the year.

SmartSolar Connects You with the Best Solar Companies in Arizona

To make the most out of solar panels in Arizona, let SmartSolar help you. Use our tools to find the most affordable solar panel system in the state that fits your specific needs and keeps your costs down. Our team is available to answer all of your questions. 

To get started, take the SmartSolar homeowner quiz and receive a quote for solar panel installation.