Key takeaways


rizona is one of the most suitable places in the country to utilize the energy of the sun. The state’s former governor, Janet Napolitano, said that Arizona has the potential to become “the Persian Gulf of solar energy.” According to the Solar Energy Industries Association (SEIA), the state currently ranks 5th in the United States for solar capacity, with almost 6 MW installed.

Arizona is one of the best states for harnessing the sun’s energy

There are approximately 230,000 PV systems in the Grand Canyon State, and this number continues to grow. It's of little surprise that solar rooftops are gaining popularity: with over 300 days of sunshine per year, Arizona holds the title of the sunniest state in the U.S. It enjoys an average of 6.5 hours of peak sunshine daily, whereas an average American household gets only about 4. But even though a sunny climate allows AZ residents to generate plenty of clean solar energy, some might be put off by a substantial initial outlay.

Solar tax credits and other incentives are designed to help homeowners take the leap into solar energy without wrecking their budgets. Every state has its own set of programs, and below we’ll focus on those available in Arizona.

Overview of incentives in the Grand Canyon State

Federal ITC

Before moving to the local incentives, we have to mention the central fiscal stimulus for solar shoppers in the United States: the Solar Investment Tax Credit (ITC). It can be claimed on federal income taxes for 30% of the cost of a photovoltaic energy system installed between 2022 and 2032. Eligible homeowners must claim the ITC using IRS Form 5695 when they file their yearly federal tax return.

Arizona solar tax credit

On top of the federal credit, most residents qualify for the state solar credit. The Arizona energy tax credit is equivalent to 25% of the total cost of a photovoltaic system. However, the amount taxpayers can subtract from the income taxes cannot exceed $1,000.

Homeowners can claim the state tax credit for a PV installation only once. Any unused tax credit may be carried forward for five consecutive years.

Solar equipment property & sales tax exemptions

AZ residents are exempt from paying property tax on their photovoltaic systems. Homeowners pay taxes based on their assessed property value, and solar panels increase this value considerably. The exemption excludes the added value of a PV system from the property valuation. Arizona solar power, leveraging its abundant sunlight for clean energy solutions, shaping a sustainable future.

Additionally, solar energy systems in the state are eligible for a sales tax exemption. This means that in the Grand Canyon State, you won't pay a 5.6% sales tax when purchasing PV panels, an inverter, a solar water heater, or any other equipment you might need.

Solar rebates

Solar rebates are retrospective payments to homeowners made to partly offset the cost of installing a PV system. Arizona doesn't have many rebates available, but some utilities and electric cooperatives still offer quite advantageous rebate programs.

The Aurora inverter is a reliable and efficient device used in solar energy systems to convert DC electricity generated by solar panels into usable AC electricity for homes and businesses.

Bottom line: Arizona energy tax credit & other incentives can radically cut the solar cost

The average solar cost in Arizona currently stands at $2.4 per watt, meaning a typical residential 6 kW system would run you about $14,400. However, by applying for federal credit, Arizona solar tax credit, and other available incentives, you can reduce the cost of your PV installation by thousands of dollars. So check with your PV installer to see if you qualify for any local programs.


Key takeaways

Mar 22, 2023
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