Tempe, 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 that you can claim on your Arizona state income tax return using Form 310. The credit helps reduce the upfront cost of going solar by lowering your state tax liability.

To qualify, you must install a solar energy device at a residence you own in Arizona. The credit is nonrefundable, which means it can reduce your Arizona state tax liability to zero, but any unused credit amount won’t be refunded to you as cash. You’ll need to complete and submit Form 310 with your Arizona individual income tax return for the year you installed the system. Keep all documentation related to your solar installation, including receipts and proof of installation, as you may need these records when filing your claim.

Arizona’s Property Tax Exemption for renewable energy equipment ensures that installing solar panels won’t increase your property taxes. When you add a solar energy system to your home, the added value from that equipment is exempt from property tax assessment. This means your property tax bill stays the same as it was before installation, even though your home’s actual value has increased.

To qualify, your solar equipment must be used for on-site energy generation or storage. The exemption applies automatically once your system is installed and operational—you don’t need to pay additional property taxes on the value your solar system adds to your home. Arizona property owners must file the appropriate renewable energy equipment property tax form to document their system for assessment purposes. This exemption continues for as long as you own the solar equipment, providing ongoing savings by preventing your property tax from increasing due to your clean energy investment.

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, providing immediate savings on your clean energy investment.

The financial benefit depends on the total cost of your system and your local sales tax rate. Arizona’s state sales tax rate is 5.6%, and when combined with local rates, the total can reach 10% or more in some areas. For example, on a $20,000 solar installation, this exemption could save you between $1,120 and $2,000 or more, depending on your location. The exemption is available to all Arizona homeowners who purchase qualifying solar or wind energy devices, with no income restrictions or application process required. There are no expiration dates currently specified for this exemption, making it a reliable benefit for Arizona residents considering clean energy upgrades.

Net Billing in Arizona is a compensation system where solar homeowners receive credits for the excess electricity their solar panels send to the grid. Unlike traditional net metering where exports are valued at the full retail electricity rate, net billing credits excess solar production at a lower, fixed rate set by your utility company. This means you’ll receive a credit on your bill for every kilowatt-hour (kWh) you export, but at a reduced value compared to what you pay for electricity you consume from the grid.

The financial benefit varies by utility provider. Arizona Public Service (APS) customers receive $0.06857 per kWh exported and are locked into this rate for 10 years, though they must switch to a time-of-use rate plan and pay a Grid Access Charge of $0.242 per kW DC monthly. Tucson Electric Power (TEP) offers $0.0633 per kWh with a 10-year rate lock, while UNS Electric credits $0.0755 per kWh (also locked for 10 years) but requires a $2.23 monthly distributed generation fee. Salt River Project (SRP) credits range from $0.02-$0.06 per kWh depending on season and rate plan chosen. Cooperative utilities like Trico Electric offer $0.0368 per kWh (locked for 10 years), while Mohave Electric Cooperative provides $0.0353 per kWh with rates that can change annually.

Most Arizona utilities require solar customers to switch to time-of-use rate plans, which means your electricity costs vary based on the time of day you use power. At the end of each year (typically after your September or December bill, depending on your utility), any remaining credits exceeding $10-$25 are paid out as a check, and your credit balance resets to zero. If credits don’t exceed this threshold, you’ll need to request a payout or they’ll roll over to the next year. SRP is an exception, allowing credits to carry over indefinitely with no annual true-up.