Arizona Solar Incentives, Tax Credits and Rebates


Arizona Solar Tax Credits and Rebates

A typical 5 kilowatts (kW) solar panel system costs $10,200 to $13,800. Fortunately, Arizona has a number of tax credits and solar incentives available to reduce these costs.

Exemption from property tax on energy equipment

Type of credit: Statewide tax exemption

Installing a solar power system increases the value of your home, but Arizona offers a property tax exemption so that you do not have to pay taxes on this additional value. Solar panel systems are not the only solar and efficiency upgrades covered by this exemption. Here is a list of other equipment included:

  • Passive solar technology, such as a Trombe wall
  • Solar pool heaters
  • Solar water heaters
  • Solar thermal electric
  • Solar water heaters

Additional equipment may qualify for this exemption, depending on where you live. Contact your local tax authority to ensure you are maximizing your savings.

Arizona State Residential Solar Tax Credit

Type of credit: Statewide tax credit

The Grand Canyon State offers a solar tax credit 25% of your installation costs, up to a maximum of $1,000. Homeowners can claim the credit when they file their taxes with the state.

Here are the solar devices covered by the solar tax credit in Arizona:

  • Passive solar building systems
  • Solar daylighting systems
  • Photovoltaic solar phones
  • PV Solar Street Lights
  • Photovoltaic solar systems
  • Solar 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.

Sales tax exemption on solar equipment

Type of credit: Statewide Sales Tax Exemption

The Arizona Department of Revenue provides a sales tax exemption for solar powered appliances and installation by licensed contractors. Here are the items that the Arizona Department of Revenue classifies as solar-powered appliances:

  • Active solar space heating
  • Passive solar space heating
  • Solar water heater
  • Photovoltaic solar

The exemption does not include solar batteries or other accessories that are not part of the original solar power system.

Most cities in Arizona also have a city lien sales tax, so it’s worth checking to see if this applies in your area. The sales tax exemption for authorized retailers currently has no expiration date, but may change at some point.

Mohave Electric Cooperative SunWatts Renewable Energy Incentive Program

Type of credit: Utility incentive

Mohave Electric Cooperative encourages customers to install solar power systems by offering rebates through the SunWatts program. It also offers discounts to customers who install solar water heaters.

Here are the discounts currently offered through the SunWatts program:

  • Photovoltaic solar installation: A rebate of $0.05 per watt, up to a maximum of $2,500.
  • Solar water heater : A rebate of $0.75 per kilowatt hour of estimated energy savings for the first year

Customers must meet all terms and conditions to qualify for these discounts. You must also submit an application to be considered.

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