Arizona Solar Tax Credits & Incentives for 2024

Solar panels can eliminate your electric bills, saving you hundreds of dollars every month. And that’s not their only financial benefit. You can also receive significant tax incentives when you install solar panels for your home or business in Arizona.

SouthFace Solar & Electric can help you take full advantage of the solar tax credits and incentives available to you! We are a local Arizona solar installer that’s committed to bringing more power to you, and that starts with optimizing your solar financing and incentive options.

In this guide, we break down all the tax incentives available for residential and commercial solar installation in Arizona.

Federal Solar Tax Credit

Amount: 30% of solar installation costs

Eligibility: Residential and commercial installations

There’s no state solar panel tax credit in Arizona, but there is a federal solar tax credit that Arizona homeowners, businesses, and non-profits can take advantage of. The federal solar tax credit is worth 30% of your solar installation costs with no maximum limit. You can apply the solar tax credit to your federal income taxes, significantly reducing what you owe. The tax credit is, essentially, a 30% discount on solar panels.

You can claim the federal tax credit for a residential or commercial solar installation in Arizona and it will be applied to your federal income taxes. Tax-exempt organizations may claim a 30% direct payment instead of the tax credit.

Arizona State Solar Tax Credit

Amount: 25% of solar installation costs, up to $1,000

Eligibility: Residential installations

Arizona offers a state solar tax credit that can be claimed in addition to the federal solar tax credit. The Arizona solar tax credit is worth 25% of your solar installation costs, with a limit of $1,000. Most solar customers are able to claim the full credit and save $1,000 on their taxes. You can claim the AZ solar tax credit when you file your state taxes for the year you install your solar energy system.

Solar Battery Tax Credit

Amount: 30% of solar battery installation costs

Eligibility: Residential and commercial installations

Solar panels aren’t the only clean energy technology that qualifies for the tax credit. You can also claim a 30% federal tax credit for solar battery storage, whether it charges from a solar panel system or from the grid. To be eligible for the tax credit, the battery must have a capacity rating of 3 kWh or greater. Most solar batteries have a 10 kWh capacity rating, so you don’t have to worry about meeting this threshold.

MACRS Depreciation 

Amount: No limit 

Eligibility: Commercial installations 

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method that allows businesses to recover some of their investment in a solar energy system. Commercial solar panels are eligible for a cost-recovery period of five years, reducing your tax liability and increasing your return on investment. If you claim the solar tax credit, however, you must reduce the project’s depreciable basis by half the value of the 30% tax credit, allowing you to deduct 85% of your tax basis instead of the full 100 percent. 

Arizona Solar Sales Tax Exemption 

Amount: 100% of the applicable sales tax 

Eligibility: Residential and commercial installations 

When you install solar panels in Arizona, you won’t have to pay sales tax. Solar panels are exempt from sales tax in Arizona as long as they’re installed by an approved contractor. You have to file paperwork to get your sales tax exemption, but you won’t have to worry about that when you go solar with SouthFace Solar & Electric—we’ll take care of it for you. 

Arizona Solar Property Tax Exemption 

Amount: 100% of the property tax increase 

Eligibility: Residential and commercial installations 

Installing panels can increase your property’s value but it won’t increase your property taxes. Solar panels are exempt from property tax evaluations in Arizona and they will not be included when your property value is assessed. 

Ready to Go Solar? 

There has truly never been a better time to install solar panels. The solar tax credit is the highest it’s ever been and there are excellent incentives available to make your solar installation more affordable. At the same time, electricity costs are rising fast. SouthFace Solar & Electric can help you take control of your electric bills with a grid-tied or off-grid solar panel installation. We install custom systems that cover 100% of your electricity consumption. Don’t wait! Go solar now and be in control of your energy future.