Phoenix Solar Incentives, Tax Credits & Other Rebates [2022 Updated]
In this EcoWatch guide on Phoenix solar tax credit and incentives you’ll learn about:
- Specific solar credits for Phoenix residents
- The federal solar Investment Tax Credit (ITC) for Phoenix residents
- Net metering policies in Phoenix
- Additional city and federal rebates available to locals
This guide has helped thousands of Phoenix homeowners save time and money when going solar by providing them with all of the latest incentives available in the area. Let’s get started!
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How Much Can You Save With Solar Incentives in Phoenix?
Residential property owners in Phoenix usually require an 11.5-kilowatt solar energy system, the cost of which is around $30,015 at the average price per watt in the area. While this is higher than the national average, there are several solar incentives available in Phoenix that can bring down the price you’ll pay for solar.
On average, Phoenix residents can save nearly $12,000 when they take advantage of all of the local perks available.
Of course, the savings you’ll enjoy through solar incentives in Phoenix will vary. The savings above are estimated assuming several things:
- You have a solar panel system size of 11.5 kilowatts (average in AZ) with a total system cost of around $30,015. This would yield a federal Investment Tax Credit (ITC) of $9,004, which is 30% of the total system price.
- You qualify for the Arizona solar tax credit, which provides a credit of 25% of your system value or $1,000, whichever is lower. We assume $1,000 for the purposes of our calculations.
- You avoid sales tax on the average solar system cost of $30,015. This would come out to a savings of around $2,581, on average.
- You file for the property tax exemption, which saves 0.61% of your system total for the first year. This equates to an average of $183 of added property tax avoided.
Your savings can and will vary from the numbers above, so we encourage you to speak with a reputable solar installer in Arizona about available incentives and benefits before committing. Also, keep in mind that these numbers don’t reflect the energy savings you’ll enjoy, which more than doubles the $12,000 estimate above.
We’ll include additional information below about all of the solar perks available in Phoenix, including those that are statewide and those offered by the federal government.
What Incentives or Solar Tax Programs Are Offered in Phoenix for Homeowners?
In the table below, we’ll include a quick look at Phoenix solar incentives, Arizona solar incentives, and nationwide incentives available to Phoenix residents.
In subsequent sections, we’ll provide additional information with tips on how to apply for each of these benefits.
|Phoenix Solar Rebate/Incentives||Description|
|Net billing||Net billing is similar to the more popular net metering policy. It provides some billing credit for unused solar production, although it’s not at the retail rate in Phoenix.1|
|Residential Solar Energy Tax Credit||This is Arizona’s state tax credit for solar. It provides a credit to your income taxes of 25% of your system value or $1,000, whichever is lower.2|
|Solar Equipment Sales Tax Exemption||This exemption means you won’t have to pay sales tax on any of your solar equipment, saving you 8.6% in sales tax on your system.3,4|
|Energy Equipment Property Tax Exemption||This policy exempts you from having to pay higher property taxes based on the value your solar system adds to your home.5 This won’t lower your taxes, but will allow you to avoid increased property taxes.|
|Solar Rights Laws||Phoenix has solar rights laws that prevent homeowners’ associations (HOAs) and other entities from prohibiting solar conversion.6|
|Federal Investment Tax Credit (ITC)||This is the federal tax incentive that credits your income taxes with 30% of your total system cost. This is available to all AZ residents, including those in Phoenix.7|
Net Billing Policies in Phoenix
Net billing is a policy that credits you for the energy you produce with your panels but end up not using yourself. This is a nice benefit because you accrue credits when you’re creating excess energy and call on those credits when your panels produce less energy, like at night or on a rare cloudy day in Phoenix, and you need to pull power from the grid.
Net billing is not as beneficial to solar customers as net metering, which is available in many other states. Net billing provides credit for less than the retail value of the energy you overproduce with your system. It’s still beneficial but not as good as the full retail value.
The average homeowner in Phoenix will see energy savings that pay off their entire system in around 12 years and provide an average of $23,891 in savings thereafter. Net billing is a part of these massive savings.
Check out the video below for more details on Arizona Utility net metering.
Residential Solar Energy Tax Credit in Phoenix
The Residential Solar Energy Tax Credit is the state tax incentive available to all property owners and residents in Phoenix and throughout AZ.
Like the federal tax perk, this applies a credit to your personal income taxes for a percentage of your system total. The maximum is 25% or $1,000, whichever is lower. Since the average system cost in Phoenix is $30,015, most residents will only be able to take the $1,000 credit.
Keep in mind that this is in addition to the federal credit, so you don’t have to choose between the two.
Solar Equipment Sales Tax Exemption in Phoenix
Phoenix residents can also enjoy the statewide exemption for sales tax on solar equipment.
A typical solar system in AZ costs around $30,015. With the sales tax rate in Phoenix sitting at 8.6% — including state, city and county taxes — the sales tax would normally come out to $2,581. Thanks to this perk, you’ll save that money instead.
This exemption applies to most parts of your solar conversion, including:
- Photovoltaic (PV) panels
- Solar batteries — like the Tesla Powerwall
- Solar racking equipment
- Some other energy efficiency upgrades
Energy Equipment Property Tax Exemption in Phoenix
This exemption prevents your property taxes from going up based on the value your solar system adds to your home. Most home improvements that raise your property value also push your property taxes higher. While solar is expected to make your home more valuable, this incentive keeps you from having to pay more in taxes.
The property tax assessment rate in Phoenix is 0.61%, so you can expect to avoid around $183 in taxes based on a system worth $30,000. The panels are assessed in future years according to a depreciation schedule, so the amount avoided each year will be lower. Still, this is a great incentive available in Phoenix.
Solar Rights Laws in Phoenix
Arizona has solar rights laws in place for all residents, including those in Phoenix. These rights stop HOAs and other entities from taking away your right to install and enjoy the benefits of solar panels.
Credit: 8510670 / Pixabay
While this isn’t a financial incentive, it does help guarantee that you’ll be able to enjoy the many other monetary benefits of solar and contribute to the clean energy movement.
Federal Investment Tax Credit (ITC)
The largest solar incentive available in Phoenix is the ITC, which is offered to all U.S. residents by the federal government.
This credit is applied to your income taxes, and it’s calculated by taking 30% of your system installation cost — including panels and battery storage. The percentage was recently extended in the Inflation Reduction Act and will not phase out until 2032.
We would be remiss if we didn’t specify that the ITC is not a rebate that you receive upfront. Rather, the credit — an average of $9,004 in Phoenix — is applied to any federal taxes you owe. Therefore, if you don’t owe taxes or owe less than this amount, you won’t get the full benefit.
With that being said, the government does let you roll over any remaining credit for five years.
How Can Homeowners Redeem Solar Incentives in Phoenix?
In the sections below, we’ll include some brief information on how you can take advantage of each of the incentives discussed above.
How to Enroll in Net Billing in Phoenix
Thankfully, net billing is an automatic process in Phoenix. Once you go solar, you’ll simply start to see credits accrued and applied to your utility bill. Your solar installation company will handle any paperwork.
How to Get the AZ Solar Tax Credit in Phoenix
You can get the state solar tax credit in Phoenix by submitting Form 11153 to the Arizona Department of Revenue. This form is the Application for Approval of Renewable Energy Production Tax Credit. You’ll also need to file Form 310 when you or your accountant files your taxes.
How to Avoid Sales Tax on Solar Equipment in Phoenix
The exemption for sales tax is another perk that you don’t need to apply for in Phoenix. When you buy your solar equipment, no sales tax will be applied to your purchase.
How to Redeem the Property Tax Exemption for Solar in Phoenix
To ensure your solar panel installation doesn’t add to your property taxes, make sure to fill out the Renewable Energy Equipment Property Tax Form 82054. You can submit it to the Property Tax Division of the Arizona Department of Revenue.
How to Take Advantage of Solar Rights Laws in Phoenix
The solar rights laws in Phoenix don’t require any application. These rights are simply enjoyed by all property owners. However, you still will need written permission from your HOA before installing your rooftop solar energy devices.
How to Apply for the ITC in Phoenix
As the most significant incentive program available in Phoenix, the ITC is a crucial perk to apply for. To do so, follow the steps below:
- Ensure you’re eligible — eligibility is based on your income taxes owed, your property ownership and how long you resided in your property in the year of installation
- Submit Form 5695 to the IRS— this is the tax form that is used to claim the ITC
- Add the credit amount to your other tax forms — including your 1040 and your Schedule 3
What Incentives or Solar Tax Programs Are Offered in Phoenix for Businesses?
All of the home solar incentives mentioned above except the Arizona state income tax credit are available to business owners as well. The application process is also the same.
However, there is one additional incentive available to large, industrial international companies that invest in solar and other renewable energy sources: The Renewable Energy Tax Credit for International Operations Centers.
This is a state incentive that provides a credit of up to $5 million per year for five years for investing in self-generation facilities.8
Renewable Energy Tax Credit for International Operations Centers
This tax credit is designed to help international operations centers on the industrial level invest in renewable energy facilities that will supply energy for use within the company. The value of the perk is $5 million per year. There are a few eligibility qualifications that must be met:
- The company must invest $100 million in renewable energy generation facilities each year for 10 years
- The total contribution to these facilities must be $1.2 billion by the tenth year
- The company must use at least 51% of that energy on site
Obviously, this incentive is only available to massive international companies, so most business owners will find more value in the incentives for residential solar customers outlined above.
How Can Business Owners Redeem Solar Incentives in Phoenix?
There are no clear steps online for registering for the Renewable Energy Tax Credit for International Operations Centers. If you believe you qualify, you can reach out to the Department of Revenue directly for more information.
FAQ: Phoenix Solar Incentives
Below, we’ll provide our responses to some of the most common questions we get asked about the benefits of solar in Phoenix.
Phoenix doesn’t have a city-specific tax credit for solar equipment, but the Grand Canyon State does provide one that is available in Phoenix and throughout the state. The perk is in addition to the federal tax credit and provides a credit of 25% of your system total — up to $1,000 — on your income taxes for the year your system is installed.
Yes, there are quite a few solar incentives available in Phoenix in 2022. These include:
- Net Billing — this policy provides you with energy credits for all electricity you produce with your panels but don’t use. These credits can be applied to electric bills in the future.
- State Tax Credit — this is a $1,000 credit to the income taxes you owe, or up to 25% of your system total, whichever is lower
- Sales Tax Exemption — Arizona waives all sales tax on solar equipment
- Exemption for Property Taxes — this exemption means your property taxes won’t go up just because you install solar panels
- Solar Rights Laws — these laws guarantee you can install panels and access sunlight on your property, even in strict HOAs
- Federal solar tax credit — this is a credit to your income taxes of 30% of your system total with no limitations
Unfortunately, there are no rebates available for solar power in Phoenix, and there are no clear plans for the city or local utility companies to begin offering any. However, there are plenty of other solar incentives available to Phoenix residents.
Thankfully, no. Although solar panels increase your home value — which would normally bump up your taxes as well — Arizona provides a tax exemption for property taxes for solar equipment to prevent this from happening.