Tucson, 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 to offset the upfront cost of going solar.

To qualify for this credit, you must be an individual taxpayer who installs a solar energy device at your residence located in Arizona. The credit is claimed using Arizona Form 310. Keep in mind that because this is a nonrefundable credit, it’s most beneficial if you have sufficient Arizona state tax liability to use the full credit amount. If your credit exceeds your tax liability in a given year, you won’t receive the difference back, so it’s important to understand your tax situation when planning your solar installation.

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 state’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 keeping your property tax bill based on your home’s value without the solar system included. This makes going solar more affordable by ensuring you won’t face increased annual property taxes after your installation.

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 the standard Arizona sales tax (currently 5.6% at the state level) on the cost of solar panels, inverters, mounting equipment, wind turbines, and the labor to install these systems. For a typical residential solar installation costing $20,000, this exemption could save you approximately $1,120 in state sales tax.

This exemption applies to all Arizona homeowners who purchase qualifying solar or wind energy devices and have them installed at their residence. There are no income requirements or application deadlines—the exemption is automatically applied at the point of sale when you purchase eligible equipment. 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. Be sure to confirm the total tax savings with your solar installer, as they should apply this exemption directly to your purchase invoice.

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. 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.

The specific financial benefits vary significantly by utility provider. Arizona Public Service (APS) credits exports at $0.06857/kWh with a 10-year rate lock, though customers face a Grid Access Charge of $0.242/kW DC per month and must switch to a time-of-use rate. Tucson Electric Power (TEP) offers $0.0633/kWh with a 10-year lock, while UNS Electric credits at $0.0755/kWh (also locked for 10 years) but charges a $2.23/month distributed generation fee. Salt River Project (SRP) credits range from $0.02-$0.06/kWh depending on season and rate plan, with credits applied to both volumetric and demand charges. Cooperative utilities like Trico Electric ($0.0368/kWh, 10-year lock) and Mohave Electric ($0.0353/kWh, no rate lock) generally offer lower export rates.

Most Arizona utilities require solar customers to move to time-of-use rate plans, which means electricity costs vary based on the time of day you use it. Export credit rates for new customers can change annually with most utilities, though you’ll be locked into whatever rate is available when you interconnect for 10 years (except with Mohave Electric, where rates can change annually). Any excess credits remaining on your account are typically reconciled annually—most utilities will issue a payment if credits exceed $10-$25, otherwise credits roll over to the next year or you must request payment.