Arizona is the sunniest state in the US which is great news if you are considering installing a solar panel system. This renewable energy resource is abundant in our state and is waiting for you to take advantage of it. There is no down payment required for installation and you can save a significant amount of money compared to getting your power from an electric company. Even better, there are solar tax credits that you can take advantage of to further increase your savings.
More information about solar tax credits and incentives:
Federal Solar Tax Credit
The federal residential solar energy credit is a tax credit that can be claimed on federal income taxes for a percentage of the cost of a solar system paid for by the taxpayer.
To qualify for the credit, the installation of the solar system must be complete during the tax year.
For solar energy systems installed in 2020 and 2021, taxpayers can claim a 26% tax credit. In August 2022, Congress passed an extension of the ITC, increasing the credit to 30% for systems installed between 2022 and 2032. Systems installed on or before December 31, 2019, were also eligible for a 30% tax credit.
The credit will decrease to 26% for systems installed in 2033 and 22% for systems installed in 2034. Unless Congress renews it, the credit will expire in 2035.
This extension encourages homeowners to act quickly and take advantage of the full 30% tax credit, which is available through 2032.
The way this incentive works is that it reduces your personal income tax bill dollar-for-dollar. This is different from a tax rebate because the credit you receive for a given tax year is dependent on your federal tax liability, whereas this is not the case for a rebate. However, if your taxes were already paid throughout the year through withholding from your paychecks, you can receive the tax credit amount as a refund, as long as it is still less than your total tax liability. If your tax liability is lower than the credit, it can roll over for up to five years.
To qualify, you must install the panels during the tax year where you want credit. You also need to own the panels, either outright or with a solar loan, and need to own the property where the panels are installed. The requirements are the same for a commercial tax credit.
Arizona Solar Tax Credit
In addition to the federal ITC, the State of Arizona offers an income tax credit. This is for 25% of the cost of your system with a cap of $1,000. The eligibility requirements are the same as for the federal tax credit and like the federal credit, the amount can roll over for up to five years if it exceeds your personal tax liability.
Energy Equipment Property Tax Exemptions
Beyond the tax credits, there are exemptions that reduce the taxes you will be liable for when installing solar panel systems. One of these is that in Arizona, your property tax will not increase when you install a solar energy system.
Solar Equipment Sales Tax Exemption
In Arizona, you do not need to pay any sales taxes for a new solar power system. This exemption applies to all eligible equipment for your residential solar panels.
Don’t Wait to Make the Switch
Between the tax incentives and energy savings, there is no better time to install new solar panels. If these benefits aren’t enough to convince you, we even offer six months of payments on us.
