​​One of the biggest hurdles to solar energy is the upfront cost of installing solar panels. However, since solar energy is a positive for the homeowner, the local Arizona climate, and the global environment, there are many financial incentives available to those looking to reduce their future energy costs and their carbon footprint.

Here at SouthFace Solar, helping our fellow Arizonans save on their solar installation costs is included in our job description! The federal residential solar tax credit (Section 25D) expired December 31, 2025 and is no longer available for residential buyers.

When you buy residential solar panels in cash or finance your installation with a solar loan, you’ll be eligible for solar incentives. Incentives reduce the upfront cost of your installation so you can break even faster and save more money with solar throughout your system’s lifespan. Solar leases and Power Purchase Agreements don’t qualify for solar incentives, which is one of the many reasons why it’s always best to own your solar panels.

Arizona offers a state income tax credit for residential solar installations: 25% of your system cost, up to a maximum of $1,000 (ARS §43-1083.01). A few important details:

• Owned systems only. Leases and PPAs do not qualify — you must purchase or finance the system.
• Lifetime cap. The $1,000 is a per-taxpayer lifetime limit, tracked since 1995. If you’ve claimed Arizona solar credits before, your available amount may be reduced.
• Carry-forward. If you can’t use the full credit in the year of installation, you can carry it forward for up to five additional years.
• How to file. You’ll claim it on Arizona Form 310 when you file your state income taxes.

Your SouthFace advisor can help you understand how this applies to your situation. For personalized tax guidance, we always recommend consulting your CPA.

Arizona provides a sales tax exemption for solar energy equipment, which means you don’t have to pay sales tax on your solar installation (some costs may not qualify for the exemption). Considering sales tax is 5.6% in Arizona, the exemption saves you a significant amount on your overall solar costs.

Solar panels can increase the value of your home but they won’t increase your property taxes! Arizona offers a property tax exemption for solar energy devices and any other device or system designed for the production of solar energy for on-site consumption. For property tax assessment purposes, these devices are considered to add no value to the property.

Commercial solar energy systems are eligible for excellent tax benefits and incentives.

Commercial solar systems qualify for 5-year MACRS depreciation — Modified Accelerated Cost Recovery System — which lets businesses depreciate the full cost of a solar installation over five years using an accelerated schedule. Instead of spreading deductions across the system’s 20+ year lifespan, you’re front-loading the tax benefit in the early years, which can shift the first-year economics considerably.

Then there’s bonus depreciation. The One Big Beautiful Bill Act, signed July 2025, made 100% bonus depreciation permanent — no phase-downs, no sunset clauses. Businesses can elect to deduct the entire depreciable cost of a commercial solar system in year one. Pair that with the federal Investment Tax Credit (up to 30% of system cost) and you have a tax incentive combination that most capital investments simply don’t come close to.

Every business situation is different. How much you can actually capture depends on your entity structure, tax liability, and how the project is financed. Get your CPA involved early — most are surprised by how well these stack when you actually run the numbers.