Goodyear, AZ Solar Panels

Arizona offers a state tax credit for homeowners who install solar energy systems at their primary or secondary residence in the state. This is a nonrefundable tax credit, meaning it can reduce your Arizona state income tax liability to zero, but any unused credit amount cannot be refunded to you as cash. The credit applies to solar energy devices installed at your Arizona home, helping offset the upfront cost of going solar.

To qualify for this credit, you must be an individual taxpayer who installs a solar energy system at your Arizona residence. The credit is claimed using Arizona Form 310 when you file your state income tax return. Since this is a nonrefundable credit, it’s most beneficial if you have sufficient Arizona state tax liability to use the full credit amount. Keep in mind that specific credit amounts, carryforward provisions, and detailed eligibility requirements are outlined in the form instructions, so review those carefully or consult with a tax professional to understand how this credit applies to your situation.

Arizona’s Property Tax Exemption for renewable energy equipment allows homeowners to install solar panels and other renewable energy systems without increasing their property taxes. When you add solar to your home, the added value from your solar equipment is exempt from property tax assessment, meaning you won’t pay additional property taxes on the increased value that solar brings to your property.

This exemption applies to solar photovoltaic systems, solar thermal systems, and other renewable energy equipment installed on residential properties. The exemption continues for as long as you own the equipment, providing ongoing savings throughout your system’s lifetime. To claim this benefit, you’ll need to report your renewable energy equipment using the Arizona Department of Revenue’s Property Tax Form (Form 82054REE). This exemption works alongside your solar investment by ensuring that while your home’s value may increase with solar, your property tax bill stays the same.

Arizona’s Solar and Wind Sales Tax Exemption removes the state sales tax from the purchase and installation of solar and wind energy equipment for your home. This means you won’t pay Arizona’s sales tax when you buy solar panels, wind turbines, or related equipment, and you also won’t pay sales tax on the contractor’s labor to install these systems. This exemption applies at the point of sale, reducing your upfront costs immediately.

The financial benefit depends on the total cost of your system. Since Arizona’s state sales tax rate is 5.6%, plus any applicable local taxes, this exemption can save you hundreds or even thousands of dollars on a typical residential solar installation. For example, on a $20,000 solar system, you could save over $1,100 in state sales tax alone. The exemption is available to all Arizona homeowners who purchase qualifying solar or wind energy devices, with no income restrictions or application process required. Your solar installer should automatically apply this exemption when processing your purchase, so be sure to confirm that sales tax isn’t included in your final contract price.

Net Billing in Arizona is a compensation structure where solar homeowners receive credits for the excess electricity their system sends to the grid. Unlike traditional net metering where exports are valued at the full retail electricity rate, net billing credits exports at a lower, fixed rate set by your utility company. This means you’ll save the most money by using your solar energy as it’s generated rather than sending it to the grid.

The financial benefit varies significantly by utility provider. Arizona Public Service (APS) credits exports at $0.06857/kWh and requires customers to switch to a time-of-use rate, plus pay a Grid Access Charge of $0.242 per kW DC monthly. Salt River Project (SRP) offers credits between $0.02-$0.06/kWh depending on season and rate plan. Tucson Electric Power (TEP) provides $0.0633/kWh, while UNS Electric credits at $0.0755/kWh with a $2.23 monthly distributed generation fee. Cooperative utilities like Mohave Electric, Trico Electric, and others offer rates ranging from $0.0353 to $0.0755/kWh. Most utilities lock customers into their export rate for 10 years upon interconnection, though rates for new customers can change annually.

Solar homeowners with APS, TEP, UNS Electric, Mohave Electric, and Trico Electric should note that excess credits are typically settled annually (usually after the September or December billing period). If your accumulated credits exceed a threshold (typically $10-$25 depending on your utility), you’ll receive a payout and your account resets to zero. Credits below this threshold roll over to the next year unless you specifically request payment. SRP customers benefit from indefinite credit rollover with no annual true-up. Most utilities require solar customers to move to time-of-use rate plans, which means your electricity costs will vary based on when you use power throughout the day.