Arizona Photo voltaic Incentives (2023 Tax Credit & Rebates)

Arizona is likely one of the sunniest states within the nation, making it nice for photo voltaic, however photo voltaic panels are additionally costlier in Arizona than they’re in most states. Arizonans eat extra power than the residents of different states to fight the state’s excessive summer season temperatures, which implies that photo voltaic programs in Arizona are bigger and value extra, on common.

Fortunately, Arizona residents can offset the upper prices of photo voltaic within the state by profiting from a mix of federal, state, and native photo voltaic incentives. This information covers all the incentive packages Arizonans must find out about to avoid wasting as a lot cash as attainable when switching to solar energy.

How Does Arizona Rank for Photo voltaic Incentives?

The excellent news for Arizonans is that Arizona is likely one of the greatest states within the nation for photo voltaic incentives. The dangerous information is that photo voltaic is sort of costly in Arizona, so it’s important to reap the benefits of all of the financial savings alternatives you’ve got at your disposal.

The fee per watt for photo voltaic is $2.61 in Arizona, barely under the nationwide common price per watt of $2.66. Sadly, Arizona’s common family power consumption is far larger than in most states, which implies the overall price of going photo voltaic can be larger. It prices $30,015 to go photo voltaic in Arizona in comparison with the nationwide common of simply $23,940, each earlier than any incentives.

The desk under summarizes the photo voltaic incentives out there in Arizona that we’ll talk about on this article.

Featured Video: Even With out Incentives, Study How Photo voltaic Vitality Bought So Reasonably priced

Federal Photo voltaic Tax Credit score (ITC) — How It Impacts Arizona Residents

Our take: Each Arizona resident ought to know in regards to the federal funding tax credit score (ITC), which helps you to declare as much as 30% of your photo voltaic system’s whole price as an earnings tax credit score.

Arizonans eat extra power than most different states’ residents, which implies they require bigger programs to offset their month-to-month use. The typical system dimension in Arizona is 11.5 kilowatts (kW), whereas the nationwide common is round 9 kW. With the common price of photo voltaic in Arizona coming in at about $2.61, that places the overall price of photo voltaic panels in Arizona at $30,015.

The federal ITC lets householders declare as much as 30% of the overall price of their rooftop photo voltaic system as a tax credit score. For Arizona, which means potential financial savings of round $9,005, which brings the common whole price within the state all the way down to a way more manageable $21,011.

Sadly, the federal ITC isn’t going to final endlessly, so in the event you’re eager about going photo voltaic finally, you’re higher off doing it quickly. The federal authorities plans to section out the ITC over the subsequent 10 years or so, decreasing the overall quantity you may declare till it does away with this system solely in 2034.

Listed here are the precise dates and eligible percentages as they’re written now:

• 30% of your whole system worth for photo voltaic photovoltaic (PV) programs put in earlier than 1/1/2033.
• 26% of your whole system worth for photo voltaic PV programs put in after 12/31/2032 and earlier than 1/1/2034.
• 22% of your whole system worth for photo voltaic PV programs put in after 12/31/2033 and earlier than 1/1/2035.
• ITC discontinued for programs put in after 12/31/2034.

These are the foundations as of now, however Congress has already prolonged the ITC as soon as earlier than. Initially, the ITC was supposed to start out being phased out in 2024. Nobody is aware of whether or not or not this system shall be prolonged once more, however we suggest putting in photo voltaic panels sooner fairly than later, simply to be protected.

Steps to Declare the Federal Photo voltaic Tax Credit score in Arizona

Claiming the federal ITC in Arizona is easy. Nevertheless, determining what types you want and what info you have to fill out could be complicated. Listed here are the steps you have to take to make sure you get your full tax credit score:

1. Obtain kind 5695 from the IRS web site.
2. Fill out half 1 of the shape to calculate your tax credit score. Photo voltaic programs go beneath “certified photo voltaic electrical property prices.” Your system’s price goes in line 1, and calculations 6a and 6b decide the credit score you obtain.
3. Skip to line 13 except you’ve got different qualifying renewable power additions to your private home or rollover credit score from earlier years.
4. Use the Residential Vitality Environment friendly Property Credit score Restrict Worksheet discovered right here to calculate your tax legal responsibility limitations.
5. Use the data from step 5 to finish the calculations on traces 15 and 16.
6. Don’t neglect to incorporate your tax credit score from line 15 on line 5 of your 1040 once you file your tax return for the 12 months.

This tax credit score solely applies to taxes you owe. In case you owe lower than your credit score quantity, the distinction rolls over to the next 12 months and could be utilized to your tax burden in that 12 months.

Which Photo voltaic Incentives Are Provided on the State-Degree in Arizona?

Arizona has a number of state-level incentives that may assist residents of the Grand Canyon state save much more cash on their photo voltaic panel programs. These state-level packages gained’t prevent as a lot cash because the federal ITC, however each little bit helps in a state like Arizona, the place the price of going photo voltaic is considerably larger than in most states.

Right here’s an inventory of the state incentives out there to all Arizona householders:

• Residential Photo voltaic Vitality Tax Credit score
• Photo voltaic Tools Gross sales Tax Exemption
• Vitality Tools Property Tax Exemption
• Internet Billing

Arizona’s Residential Photo voltaic Vitality Tax Credit score

Our take: Arizona’s largest state-level incentive allows you to declare 25% of your system’s whole price, as much as a most of $1,000, in opposition to your tax burden within the 12 months once you set up the system. You’ll be able to carry any extra credit score to future tax years, as much as 5 years.

Any Arizona house owner who buys a brand new photo voltaic system that comes with no less than a two-year guarantee for panels and a one-year guarantee for different gear, like photo voltaic batteries and electrical car (EV) chargers, is eligible for the Residential Photo voltaic Vitality Tax Credit score. Observe that photo voltaic leases and energy buy agreements (PPA) don’t qualify for this tax credit score since they’re technically not purchases.

The credit score allows you to declare 25% of the overall price of your system, as much as $1,000, to cut back the quantity of taxes you owe for the 12 months through which the system is put in. In actuality, any photo voltaic panel system goes to price sufficient to understand the complete $1,000 financial savings.

Photo voltaic panels qualify for this tax credit score, as do associated photo voltaic applied sciences like photo voltaic water heating, photo voltaic pool and spa heaters, and different clear power know-how like wind generators and wind-powered pumps.

In case your tax legal responsibility is decrease than the credit score quantity for the 12 months you put in the solar energy system, you may roll it over for as much as 5 years.

We don’t see the Residential Photo voltaic Vitality Tax Credit score going away anytime quickly. The Arizona state legislature votes every year on the statute to find out if any modifications have to be made, and there haven’t been any amendments or discussions about decreasing or eliminating it within the final a number of years.

Steps to Declare the Residential Photo voltaic Vitality Tax Credit score

Claiming the Residential Photo voltaic Vitality Tax Credit score is simple and solely requires you to fill out and submit a kind alongside along with your state taxes. Nevertheless, we nonetheless suggest consulting an authorized public accountant (CPA) to make sure you file your taxes appropriately to obtain the credit score.

Right here’s learn how to declare the credit score:

1. Obtain kind 310 from the Arizona Division of Income’s web site.
2. Use traces 1-9 to calculate your credit score for the present tax 12 months.
3. Calculate any carryover from earlier years utilizing traces 10-15, if obligatory.
4. Decide your whole out there credit score utilizing traces 16-18.
5. Connect the shape once you file your state taxes.

We wish to emphasize that hiring an accountant is the easiest way to make sure you file your taxes appropriately and obtain the suitable credit score.

Photo voltaic Tools Gross sales Tax Exemption in Arizona

Our take: Photo voltaic panels and different renewable power residence enhancements are exempt from Arizona’s state gross sales tax of 5.6%. On common, this lowers the price of buying a photo voltaic system by about $1,680.

Arizona has had a photo voltaic gross sales tax exemption since 1997, which implies that residents of the state don’t pay gross sales tax once they buy a qualifying photo voltaic power system. Some states cap the overall financial savings, however Arizona legislators voted to take away the earlier $5,000 most in 2006.

The typical price of photo voltaic panels in Arizona is $30,015 earlier than any incentives are utilized. With no gross sales tax exemption, Arizona householders must pay virtually $2,000 extra when buying a photo voltaic system. Whereas this exemption doesn’t put more cash in your pocket just like the federal ITC, it lowers the up-front prices barely, which is an enormous deal in a state like Arizona, the place photo voltaic is costlier than common.

Steps to Declare the Photo voltaic Tools Gross sales Tax Exemption

As a photo voltaic buyer, all you must do to assert the photo voltaic gear gross sales tax exemption is buy your system from an organization that’s registered with the Arizona Division of Income. Retailers should register with the state to qualify for the exemption, however just about all corporations do, so that you don’t want to fret about discovering a retailer that gives the gross sales tax exemption.

Vitality Tools Property Tax Exemption in Arizona

Our take: This can be a baked-in property tax exemption that stops your property taxes from rising once you set up photo voltaic panels. 

Photo voltaic programs normally elevate the worth of your private home, which might trigger your property taxes to extend with out this exemption. This generally is a great financial savings all through your photo voltaic system’s life span.

Take into account that the common residence worth in Arizona is round $409,000. Photo voltaic panels add an estimated 4.1% to your private home’s worth, in accordance with a research by Zillow. Arizona’s common efficient property tax charge of round 0.6% implies that the everyday Arizona house owner is saving about $2,500 in property taxes over the course of their system’s 25-year life span in comparison with what they’d should pay with out the property tax exemption.

Steps to Declare the Vitality Tools Property Tax Exemption

All Arizona householders are eligible for this property tax exemption for 100% of the elevated worth of their residence as a consequence of a photo voltaic system.

Listed here are the steps you have to take to assert the property tax exemption:

1. Get hold of documentation that experiences the overall price of your photo voltaic system out of your photo voltaic panel set up firm. The corporate ought to provide a ultimate receipt indicating the overall price of set up and gear. Be certain that the documentation contains the set up price.
2. Submit the documentation to your county assessor not more than six months earlier than the discover of full money worth is issued.
3. The particular course of you could comply with varies by county, so test your county’s web site for the small print. Your photo voltaic installer might do that for you as a part of the set up or find a way that will help you receive any obligatory types you have to fill out.

Which Photo voltaic Incentives Are Provided on the Native Degree in Arizona?

Some areas of Arizona even have native incentives that assist its taxpayers save much more cash. Most of those are dealt with by native utility corporations, in order that they aren’t out there statewide, however just a few function on the native governmental degree.

Right here’s a quick rundown of some native incentives out there in numerous elements of Arizona:

1. Mohave Electrical Cooperative Vitality Effectivity Rebate Program. This can be a rebate program supplied by electrical firm Mohave Electrical Cooperative, Inc. This system gives rebates for putting in renewable power programs like photo voltaic PV programs, high-efficiency HVAC programs, and extra. The corporate gives a $0.05 per watt rebate for photo voltaic programs bought from photo voltaic firm SunWatt. The rebate maxes out at 50 kW programs, so it can save you a most of $2,500 by this program. For a median 11.5 kW system, you’ll save $575.
2. Salt River Challenge (SRP) Internet Metering. The Arizona Company Fee (ACC) adopted internet metering in 2008, however the state’s coverage on internet metering doesn’t apply to SRP prospects. As an alternative, SRP prospects are credited on the electrical energy retail charge for any power their photo voltaic programs generate above their consumption in a specific month. Photo voltaic programs can’t exceed 300 kW to be eligible for this system, which shouldn’t be an issue for any householders because the common system dimension in Arizona is simply 11.5 kW.
3. Metropolis of Scottsdale Inexperienced Constructing Incentives. The Metropolis of Scottsdale incentivizes new inexperienced constructing tasks by providing perks like technical help, renewable power system permits, instructional supplies, and a house owner’s guide about energy-efficient dwelling. Whereas none of this stuff are direct monetary incentives, the worth they create long-term within the type of higher power practices might prevent an honest amount of cash. These incentives apply to business and residential tasks however are extra geared towards business builders.

Internet Metering in Arizona — Can You Revenue?

Internet metering is the apply of promoting the extra power your photo voltaic panels generate again to the electrical firm. To be eligible for internet metering, your system should usually be related to the grid.

Arizona is transitioning from internet metering to internet billing, which means prospects are credited on the prevented price charge fairly than the retail electrical charge. The prevented price charge is the amount of cash it might have price the utility firm to generate the electrical energy fairly than the value it expenses its prospects. The prevented price charge is all the time decrease than the retail charge, so this transfer reduces the amount of cash Arizona photo voltaic prospects can save.

The present ACC-approved charges rely on what electrical firm you’ve got. Listed here are the present charges for just a few of the state’s largest utility corporations in cents per kilowatt-hour (kWh):

• Arizona Public Service (APS): 9.405 cents/kWh
• Tucson Electrical Energy (TEP): 7.81 cents/kWh
• UNS Electrical: 9.32 cents/kWh

Notably, SRP prospects are exempt from the ACC’s internet billing charges, as mentioned within the earlier part.

One consequence of the transfer to internet billing is that photo voltaic batteries have develop into extra beneficial. By storing the surplus power manufacturing as a substitute of promoting it again to the grid, you’re successfully saving on the retail electrical charge since you should use the saved power later to keep away from paying for power from the grid. Which means putting in a high-quality photo voltaic battery like a Tesla Powerwall or Enphase IQ battery is commonly a good suggestion.

Battery storage additionally allows you to proceed to make use of electrical energy throughout energy outages, which is sweet to have in Arizona since blackouts have gotten extra frequent.

Steps to Enroll in Internet Metering in Arizona

You don’t should enroll in internet billing your self since your photo voltaic installer will usually do it for you. You may wish to affirm along with your photo voltaic installer, although, that they may fill out the interconnection settlement obligatory for connection to the grid by way of your utility supplier. Your photo voltaic firm additionally connects your system to the grid, which is a prerequisite for enrolling in internet power metering (NEM) or internet billing.

Watch Out For Photo voltaic Incentive Scams in Arizona

Some photo voltaic corporations misrepresent photo voltaic packages to make it look like you’ll save more cash than you really will. Others will overcharge for companies that both don’t price something or gained’t profit you in any method. 

Right here’s a have a look at the most typical scams you may encounter in Arizona:

• Faux incentive scams: Some scammers invent incentives after which cost you to use for them. The scammer will declare you’ll lower your expenses in your electrical invoice or obtain a rebate for putting in a renewable power system. In actuality, they’ll take your cash for the “enrollment charge,” and also you’ll by no means hear from them once more. You’ll be able to keep away from these scams by researching and verifying any incentives with no matter celebration allegedly gives the inducement earlier than giving anybody cash.
• Misrepresented scams: Extra typically, you’ll encounter corporations that declare they’ll prevent more cash than different corporations. These scammers exaggerate how a lot cash you’ll save, making their companies appear extra engaging than the competitors’s. On this article, we offered particular financial savings quantities, so take a step again if one thing seems to be too good to be true.
• Overcharging scams: Whether or not or not you contemplate this a rip-off is a matter of semantics, however it’s one thing you wish to keep away from, it doesn’t matter what you name it. Some installers cost exorbitant charges for putting in photo voltaic programs, insinuating that their system is healthier not directly. Arizona’s common photo voltaic system value is $30,015 earlier than any incentives. In case you get quoted a value properly above this common, guarantee what you’re getting. Do not forget that including additional options to your system, like an EV charging station or photo voltaic battery, will enhance its price, as will shopping for high-efficiency panels.

Backside Line: Do the Incentives in Arizona Make Going Photo voltaic Reasonably priced?

Arizona is likely one of the costlier states for photo voltaic, however it additionally has sufficient photo voltaic incentives to make going photo voltaic inside attain for most householders within the state.

The federal ITC is the largest incentive out there to Arizonans, providing 30% of the whole price of your photo voltaic system as a federal tax credit score. Arizona additionally gives a tax credit score of as much as $1,000 to anybody who purchases and installs a qualifying photo voltaic system. These incentives mix to cut back the common price of photo voltaic in Arizona from $30,015 to simply over $20,000 in the event you owe sufficient taxes to take full benefit of each.

Arizona residents additionally don’t should pay gross sales tax on photo voltaic power units, and their property taxes gained’t enhance once they set up photo voltaic panels. Whereas these aren’t incentives that put cash instantly in your pocket, they do lower the price of going photo voltaic in Arizona by a substantial quantity.

Disclaimer: This text is for informational functions solely. It shouldn’t be relied on for and isn’t meant to offer accounting, authorized or tax recommendation.