Commercial Solar Incentives & Tax Credits for Arizona Businesses
Installing commercial solar panels is a smart move for all types of businesses and organizations. With a commercial solar array, your business can generate its own electricity, reducing operating costs and increasing profits.
If you’re interested in solar for your business in Arizona, you may be eligible for incentives like tax credits and grant funding that can significantly reduce your installation costs.
In this guide, we break down the best commercial solar incentives available in Arizona in 2025 to help you decide whether solar is worth it for your business.
Tax Credits & Incentives for Commercial Solar Panels in AZ
Investment Tax Credit
The Investment Tax Credit (ITC) is a federal incentive for commercial solar installations. With the ITC, your business can claim a tax credit worth 30% of its total solar installation cost. There’s no limit to the tax credit, so no matter how much you spend on solar, you will be able to reduce your tax liability by a full 30% of your costs. This is a one-time credit that you will claim for the tax year in which your solar panels were installed.
Production Tax Credit
The Production Tax Credit (PTC) is another federal tax credit for commercial solar panels. But, unlike the ITC which is calculated based on your installation costs, the PTC is calculated based on how much electricity you generate. You’ll receive a base credit of 2.75 cents per kWh for all the electricity your solar panels produce during the first 10 years of your system’s operation. The PTC is claimed annually for ten years and is adjusted every year for inflation.
ITC vs PTC: Which Is Right for Your Commercial Solar Installation?
In most cases, you cannot claim both the ITC and the PTC—you have to pick one. So, which is the better option? Most Arizona businesses will benefit more from the ITC. It reduces your upfront costs, making solar more affordable, and is usually the best option for small and mid-sized installations. The PTC, on the other hand, can be a better option for large arrays that are expected to generate a lot of power. When you go solar with SouthFace Solar & Electric, we’ll help you decide which tax incentives make the most sense based on your system’s overall cost, size, and expected output.
Elective Pay / Direct Pay ITC for Non-Profits
Tax-exempt organizations can benefit from the solar tax credit! Thanks to a new direct pay (also called elective pay) option, tax-exempt organizations that install solar panels can receive a direct payment worth 30% of their total solar installation costs. This option is available to state and local governments, Tribal governments, non-profit organizations, public schools, hospitals, houses of worship, and more.
Arizona Commercial Solar Tax Credit
Arizona businesses can claim a state income tax credit in addition to a federal tax credit for commercial solar installation. Commercial solar panels are eligible for the Commercial/Industrial Solar Energy Tax Credit in Arizona, which is worth 10% of your total costs, up to $25,000 per building and $50,000 per business.
Modified Accelerated Cost Recovery System (MACRS) for Commercial Solar
MACRS is a tax depreciation method that helps businesses recover their investment in certain property, like a commercial solar installation, through annual deductions. Commercial solar panels are eligible for a 5-year cost recovery period. This is a great way for businesses to accelerate their return on investment. Just keep in mind that if you use MACRS and claim the ITC, you will have to reduce the project’s depreciable basis by one-half the value of the 30% ITC.
MACRS Bonus Depreciation
Bonus depreciation allows businesses to claim a deduction for a larger portion of their investment in solar panels in the first year instead of spreading the deductions out over 5 years. Bonus depreciation allowed businesses to take a 100% deduction in the first year for solar systems installed between 2017 and 2022. After 2022, bonus depreciation entered a step-down schedule of 20% per year. In 2025, businesses can claim a 40% bonus deduction in year one. It will drop again to just 20% in 2026 before being phased out entirely in 2027.
Grants & Rebates for Commercial Solar Installation in AZ
USDA REAP Grants
The USDA’s Rural Energy for America Program (REAP) offers grants and guaranteed financing to help agricultural producers and rural small businesses go solar. You can combine a REAP grant and the 30% ITC to cover 80% of your solar installation costs!
- Loan guarantees on loans up to 75% of total eligible project costs
- Grants for up to 50% of total eligible project costs.
- Combined grant and loan guarantee funding up to 75% of total eligible project costs
Right now, the USDA has paused applications for REAP grant funding due to a federal order. If applications reopen, we will update our site’s content.
Arizona Utility Rebates for Commercial Solar Installation
Some utility providers and electric cooperatives in Arizona offer rebates for commercial solar installation. For example, the Mojave Electric Cooperative offers a rebate of up to $2,500 for small commercial solar panel installations. When you go solar with SouthFace Solar & Electric, we will identify all local rebate opportunities available in your location to make sure you receive every incentive dollar you’re eligible for.
How Much Can Your Business Save with Commercial Solar Incentives?
Ready to explore commercial solar for your business in Arizona? SouthFace Solar & Electric can help. As a local solar company, we know what incentives are available for solar installation in AZ and how to claim them. Our team is here to answer your questions and help you decide whether solar panels make sense for your business.
