Phoenix, AZ Solar Panels

Arizona’s Credit for Solar Energy Devices is a state tax credit that rewards homeowners who install solar panels at their Arizona residence. This is a nonrefundable credit, which means it can reduce your state tax liability to zero, but any unused credit amount won’t be refunded to you as cash.

To qualify for this credit, you must be an individual taxpayer who installs a solar energy device at your primary or secondary residence located in Arizona. The credit is claimed using Form 310 when you file your Arizona state income tax return. Since this is a nonrefundable credit, it’s most beneficial if you have sufficient Arizona state tax liability to offset. Keep in mind that specific dollar amounts, percentage rates, and carryforward provisions may apply, so you’ll want to review the current year’s Form 310 instructions or consult with a tax professional to understand the exact benefit available for your installation year.

Arizona’s Property Tax Exemption for renewable energy equipment allows homeowners to exclude the added value of their solar energy system from their property’s assessed value for tax purposes. This means that while your solar installation increases your home’s actual value, you won’t pay higher property taxes because of it. The exemption applies to solar panels, inverters, batteries, and other equipment that’s part of your renewable energy system.

To qualify, your solar equipment must be installed and operational on your property. You’ll need to report your renewable energy equipment using the Arizona Department of Revenue’s Property Tax Form (Form 82054REE) to ensure the exemption is properly applied. This exemption continues for as long as you own the equipment, providing ongoing savings by preventing your property tax bill from increasing due to your solar investment. The financial benefit varies based on your system’s value and local tax rates, but it protects you from paying additional property taxes on what could be a $20,000-$40,000 increase in your home’s value.

Arizona’s Solar and Wind Sales Tax Exemption removes 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 (currently 5.6% at the state level) on the cost of solar panels, inverters, mounting equipment, wind turbines, and related components, or on the contractor’s labor to install these systems. This exemption applies at the point of sale, providing immediate savings when you purchase your renewable energy system.

All Arizona homeowners are eligible for this exemption when purchasing qualifying solar or wind energy devices and having them professionally installed. There are no income requirements, and the exemption applies to both new and existing homes. The exemption is ongoing with no expiration date, so you can take advantage of these savings whenever you’re ready to install solar or wind energy at your home. Keep in mind that while the state sales tax is exempted, local city and county sales taxes may still apply depending on where you live, so your total savings will vary by location.

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 rate, net billing programs credit exports at a lower, predetermined rate set by each utility company. This means you’ll pay the standard retail rate for electricity you use from the grid, but receive a reduced credit rate for the solar energy you export back to the grid.

The specific financial benefits vary significantly by utility provider. For example, Arizona Public Service (APS) customers receive $0.06857 per kWh for exports and are locked into that rate for 10 years, though they must also pay a Grid Access Charge of $0.242 per kW DC monthly. Salt River Project (SRP) customers receive between $0.02-$0.06 per kWh depending on season and time-of-use rate plan. Tucson Electric Power (TEP) credits exports at $0.0633 per kWh with a 10-year rate lock, while UNS Electric credits at $0.0755 per kWh (as of October 2023) with a 10-year lock and a $2.23 monthly distributed generation fee. Cooperative utilities like Mohave Electric and Trico Electric offer lower export rates (ranging from $0.0353 to $0.0368 per kWh in 2024).

Most Arizona utilities require solar customers to switch to time-of-use (TOU) rate plans, which charge different prices for electricity based on the time of day. The export credit rates are typically locked in for 10 years from your interconnection date, providing rate certainty, though some utilities like Mohave Electric update rates annually. At the end of each year (or billing cycle, depending on your utility), any excess credits on your account are either paid out if they exceed a minimum threshold (usually $10-$25), or they roll over to the following year. It’s important to understand your specific utility’s net billing structure, as the financial benefits and requirements can significantly impact your solar savings.