Last Updated December2024
Written by
Catherine Lane
You can save $7,300 on average with solar incentives, tax credits, and rebates in Arizona. And these aren’t the only savings you’ll get — Arizonans can save every month on their electricity bills when they go solar.
Navigating solar incentives can be intimidating, and you might need help figuring out where to start. That’s why our solar experts put together this comprehensive guide to Arizona solar incentives to see if solar panels are worth it for you.
Incentive | Estimated average annual savings | Eligibility | About |
|---|---|---|---|
Federal solar tax credit | $6,300 | All tax-paying U.S. citizens | Tax credit equal to 30% of installation costs, applied to federal income taxes |
Residential Solar and Wind Energy Systems Tax Credit | $1,000 | Arizona taxpayers who install solar panel systems | Tax credit equal to 25% of solar costs, up to $1,000 for Arizona taxpayers |
Energy Equipment Property Tax Exemption | $189, varies with property, system, and location | Arizona property owners who install solar panel systems | Solar energy systems are considered to add "no value" to property for property tax assessment purposes |
Solar and Wind Equipment Sales Tax Exemption | Varies | Solar energy equipment purchases | Retailers can deduct the amount received from the sale of solar energy devices from their transaction privilege base |
Mohave Electric Cooperative SunWatts Renewable Energy and Rebate Program | $350 | Mohave Electric customers who install solar panels | Rebate of $0.05 per watt of solar installed up to $2,500. System size cap of 50 kW |
Quick Facts
Value: 30% of solar installation costs
Frequency: One-time tax credit, rollover for five years
How to apply: File IRS Form 5695 with annual tax return
Arizona homeowners are eligible for the federal solar tax credit when they go solar. The credit equals 30% of solar panel installation costs and directly reduces your federal income tax liability. The solar tax credit is one of the most significant clean energy financial incentives available to Arizona residents.
The average solar system in Arizona will earn a federal solar tax credit of $6,300. If you owe less than what your tax credit is worth, you can roll over the remaining credit to next year’s taxes.
Remember that you don’t get the federal solar investment tax credit (ITC) as a lump sum payment; your solar system won’t cost less money upfront. It’s an income tax credit that reduces your income tax liability, so you’ll see the benefits when you file your taxes later in the year.
Quick Facts
Value: 25% of solar installation costs, up to $1,000
Frequency: One-time tax credit
How to apply: File Arizona Form 310 from the Arizona Department of Revenue
Arizona is one of the few states that offers a state solar tax credit in addition to the federal tax incentive.
Arizona’s state tax credit equals 25% of solar power system costs, up to $1,000. Most solar installations will earn the maximum $1,000 incentive. The Arizona solar tax credit will lower your state income tax liability. Much like the federal tax credit, you won’t get these savings until you file your return for the year.
Quick Facts
Value: 100% of system value is exempt from property tax valuation
Frequency: Annual exemption for the system’s lifetime.
How to apply: Submit documentation of costs and equipment to the county assessor no less than 6 months prior to notice of full cash value being issued
One of the biggest benefits of solar panels is that they increase your property value. In fact, our solar experts found that solar panels can increase home value by 6.8% on average.
Normally, improvements like this would increase your property taxes. Thankfully, in Arizona, solar panels add no value to your property for tax purposes.
With the median home value in Arizona sitting at about $441,500 and the effective property tax rate around 0.63%, the solar property tax exemption can save you about $189.
To ensure your system is exempt, contact your county property assessor. You’ll need to provide proof of the total cost of your system. The assessor’s office should provide specific details for your area.
Quick Facts
Value: Solar equipment is exempt from state sales tax
Frequency: One time at time of purchase
How to apply: Equipment sellers collect tax exemption benefits
Solar panel equipment purchased in Arizona will not have sales tax added. There isn’t much you have to worry about as the homeowner for this incentive, as the exemption is given to the equipment sellers. But these savings will likely be passed on to you, making going solar a little cheaper!
Quick Facts
Value: $0.05 per watt of solar installed, up to $2,500
Frequency: One-time upfront payment
How to apply: Submit reservation and application before work begins. Details on Mohave Electric’s website
If you're a customer of Mohave Electric Cooperative, you can take advantage of its SunWatts Renewable Energy and Rebate Program.
Through the SunWatts incentive, you can earn $0.05 per watt of home solar you plan to install, up to $2,500. Arizona's average solar panel system is 7 kilowatts (kW) in size or 7,000 watts. This means the typical Mohave Electric customer can earn about $350 through the rebate program.
Quick Facts
Electric rates average $0.15 per kWh in Arizona
Investor-owned utilities offer Net Billing plans that purchase excess solar energy for less than the full price of electricity.
Some utilities offer different solar buyback plans
Net billing provides lower savings than other types of solar programs but can still reduce electricity bills.
Arizona’s major utilities use net billing to charge solar customers. Under Arizona’s net billing, you’ll be charged the full retail rate of electricity for any energy you take from the grid. If your solar panels generate excess energy at any point, they will be purchased by your utility company at a lower rate.
The following table outlines the solar energy credit buyback rate, or RCP rate, for three of Arizona’s investor-owned utilities:
Utility Company | Solar buyback rate | Estimated retail rate of electricity |
|---|---|---|
Arizona Public Service (APS) | $0.06857 per kWh | $0.15 per kWh |
Tucson Electric Power (TEP) | $0.0570 per kWh | $0.15 per kWh |
$0.0680 per kWh | $0.13 per kWh |
Each utility may have alternative solar plans, so check your provider’s website for more details.
Arizona’s net billing regulations can lower your electricity costs, but the savings are lower than if you had access to full retail net metering.
If you are serviced by an electric cooperative or private utility company, like Salt River Project, you may have access to different solar buyback plans.
There is no statewide solar battery rebate or incentive in Arizona. However, energy storage systems qualify for the 30% federal tax credit as long as the battery has a capacity rating of at least 3 kWh.
A battery like the Tesla Powerwall 3 costs about $16,000 when fully installed, earning it a tax credit of $4,800!
Mohave Electric customers are eligible for a battery rebate from the electric cooperative. Customers who install a battery with a minimum power capacity of at least 5 kWh can earn a $500 rebate. To get this incentive, the battery must have programmable controls, WiFi capabilities, and can’t be charged during on-peak hours.
A solar battery can help you save more money on your electricity bills than installing solar alone. If you have a battery, you’ll get the full value of all the solar energy you produce, and you don’t have to worry about getting partial credit for your kilowatt-hours from net billing. However, the savings might not be enough to cover the high upfront costs of energy storage.
The average cost of solar panels in Arizona is about $21,000 before incentives, based on the average 7 kW installation. This is equal to about $3.00 per watt of solar installed. Once the federal and state solar tax credits are applied, the price drops to about $13,700 to install a solar photovoltaic system in Arizona.
Federal tax credit: $21,000 x 30% = $6,300
Arizona state tax credit: $21,000 x 25% = $5,250 (capped at $1,000)
Total savings: $6,300 + $1,000 = $7,300
Effective system cost: $21,000 - $6,300 = $13,700
Remember that the total amount you pay for solar energy will depend on the number of solar panels you need and the cost of your installation.
Arizona is one of the sunniest states in the U.S., meaning solar panels here can generate a lot of electricity. All that solar energy combined with the federal and state tax credits can reduce your energy costs when you go solar in Arizona.
Consider pairing your solar panels with battery storage to maximize your electricity bill savings. Storing your solar energy and using it later will increase your energy independence and reduce how much power you buy from the utility grid, lowering your electric bill even further.
To make sure you get the best deal on solar panels, you need to find a solar installer that you trust. While the cheapest quote might sound the best, you don’t want to sacrifice installation quality. That’s why our solar experts recommend getting at least three solar quotes. By comparing multiple solar quotes, you can ensure you get the best installation at the right price.
Finding an installer can seem overwhelming. Don’t worry—SolarReviews can help with that. We can connect you with local, pre-vetted solar professionals, making your solar journey as easy as possible. We also have an extensive list of the best solar companies in Arizona with real customer reviews to help you make the right decision for your home so you can worry less about your high electricity bills and more about what matters.
Catherine has been researching and reporting on the solar industry for five years and is the Written Content Manager at SolarReviews. She leads a dynamic team in producing informative and engaging content on residential solar to help homeowners make informed decisions about investing in solar panels.
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