Arizona is a great state to go solar. Roofs receive ample sun exposure throughout the year and provide the chance to reduce electric bills. According to the U.S. Department of Energy, the typical rooftop receives roughly 5.6 hours of full sun exposure daily.
Solar panels cost approximately $15,000–$20,000 in Arizona, which is a huge investment. Fortunately, the Grand Canyon State offers several solar programs to reduce these costs. We’ve created this guide to help homeowners understand solar incentives in Arizona. We’ll outline available tax credits, rebates, loans, and other savings opportunities. We’ll also recommend some of the best solar companies in the state.
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What Are the Available Arizona Solar Tax Credits and Rebates?
We’ve highlighted the key tax credits and rebates available in Arizona below.
Net Billing
Most solar owners in Arizona qualify for their utility company’s net-billing program. This is similar to a net-metering program, allowing you to generate credits on your utility bill for unused electricity your solar system generates.
Credits last indefinitely and are paid out annually if they exceed a certain balance. Here’s a breakdown of the current rates for the excess balance needed for a payout:
- Arizona Public Service (APS): $25
- Tucson Electric Power (TEP): $10
- UNS Electric: $10
If you’re not a customer of one of these three utility companies, check with your provider to see what it offers.
More resources: Check out the Database of State Incentives for Renewables and Efficiency (DSIRE) to learn more about net billing in Arizona.
Mohave Electric Cooperative SunWatts Renewable Energy Incentive Program
Mohave Electric Cooperative incentivizes its customers to go solar by providing rebates through its SunWatts program. The company also provides rebates to customers who install wind or solar water heating systems. Here’s a breakdown of the current rebates offered:
- Solar photovoltaic installation: A $0.05 per-watt rebate, up to a maximum of $2,500
- Solar water heating: A $0.75 per-kilowatt-hour rebate of estimated first-year energy savings
Customers must meet all terms and conditions to be eligible for the rebates. They must also submit an application to be considered for the program.
More resources: Visit Mohave Electric Cooperative’s website to find out if you’re eligible or get more information on the Sunwatts program.
Energy Equipment Property Tax Exemption
Though residential solar panels increase your property value, these installations are exempt from property tax in Arizona. Other solar and energy efficiency upgrades are also exempt, including the following:
- Passive solar technology
- Solar pool heaters
- Solar thermal electric
- Solar space heaters
- Solar water heaters
This list is not exhaustive. Contact your local tax authority with questions about solar tax exemptions.
More resources: Read the legislative bill or visit DSIRE for more information about the Arizona Energy Equipment Property Tax Exemption.
Arizona State Residential Solar Tax Credit
Most homeowners in the Grand Canyon State are eligible for the state solar tax credit. This credit provides a state tax deduction equal to 25% of your total solar energy system cost, up to a maximum of $1,000. Homeowners file for the credit along with their personal state taxes.
These are solar energy devices that qualify for the Arizona Solar Tax Credit:
- Passive solar building systems
- Solar daylighting systems
- Solar PV systems
- Solar PV phones
- Solar PV streetlights
- Solar swimming pool and spa heating systems
- Solar water heating systems
Those who owe less taxes than the credit can roll it over for up to five years. However, the amount of credit cannot exceed $1,000. You must own your system to qualify. Homeowners who lease their system or enter into a power purchase agreement are ineligible.
More resources: Visit the Arizona Department of Revenue’s website for more information about the state tax credit.
How Does the Federal Solar Tax Credit Work?
Arizona homeowners can also benefit from the federal solar tax credit, also known as the Federal Solar Investment Tax Credit (ITC). This credit provides a federal tax deduction of 30% of your solar installation costs. However, you don’t qualify for the ITC if you lease your solar power system or are in a power purchase agreement.
Here’s what you need to know about the federal solar tax credit:
- Eligibility: To qualify for the federal tax credit, you must own your solar system. If you lease your system or have a power purchase agreement, you won’t be eligible.
- Tax impact: The credit is not a refund. Instead, it reduces the amount of federal income tax you owe. If your credit is larger than what you owe, it can roll over to subsequent years.
- Timeline: The ITC will reduce to 26% in 2033 and drop to 22% in 2034. It’s set to end in 2035 unless Congress renews it.
Does Arizona Offer Net Metering?
Arizona doesn’t have net metering—where homeowners generate credits at the same rate they pay for power—but its net billing program offers a similar experience. Homeowners with solar panels still receive compensation for generating excess energy, but at a lower rate than the retail rate paid for electricity used from the utility, so credits earned are slightly lower.
Although this may extend the payback period for your system, the initial costs of solar in Arizona are likely to be lower than in areas like California and New York, where solar panels cost more. Net billing in Arizona still lets you make the most of your investment.
What’s the Most Popular Solar Incentive?
We surveyed 1,000 recent solar buyers in early 2024 and learned that 64% used the federal solar tax credit, 32% enrolled in a net metering program, and 30% took advantage of a local rebate program.
Our Conclusion
Solar incentives are a great way to make your transition to solar energy more affordable. We encourage Arizona homeowners to see which of these incentives they qualify for. We also recommend checking with your local government and utility provider to see if other incentives are offered.
Momentum Solar is our top recommendation for solar companies in Arizona. It offers various financing options, with quotes available online.
FAQs About Solar Tax Incentives in Arizona
Does Arizona offer free solar panels?
Some solar companies offer free solar panels with a solar loan to qualifying customers. Most homeowners will need to purchase their solar panels, and this language can often be used as a solar scam.
Does Arizona offer a solar rebate?
Arizona offers a state solar tax credit equal to 25% of your solar installation costs, with a maximum $1,000 tax deduction. Additional solar tax credits are offered on a federal level.
Does Arizona buy back solar power?
The state of Arizona does not buy back solar power. However, Arizona utility companies must offer net-billing programs, which credit you for the excess energy your system produces.
How much does solar power cost in Arizona?
As of February 2024, a typical 5-kilowatt solar system in Arizona costs $9,700–$13,200.* This price range is before incentives.
*Cost data via EnergySage.
Our Rating Methodology
We are committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:
- Solar equipment, installation, and services (25%)
- Warranty and performance guarantees (25%)
- Brand reputation and certifications (15%)
- Financing options (15%)
- Experience (10%)
- Availability (10%)
Total scores are divided by 20 for a final 5-point rating scale.
