Besides the many other good reasons to go solar, state and federal tax credits can reduce total system ownership costs. Some of these have “sunset" dates, so if you've been considering solar, now is an excellent time. Combined incentives on residential systems can offset 40 percent or more of total system cost, greatly speeding your payback.
We're solar installers, not accountants, so this information is presented in good faith to the best of our knowledge. We recommend you consult with your own tax professional as needed.
The federal Residential Renewable Energy Tax Credit (often called the “ITC”) is one of the best incentives currently available for solar. It allows you to take 30% of the solar system cost as a tax credit off your personal income tax return. It can be on a primary or secondary residence, or for a commercial building.
If you have sufficient tax liability, you can take the entire credit in one year. Otherwise, it's possible to carry the remaining tax credit amount to a following year.
You'll take this credit when you file taxes for the year in which your solar electric system is installed and placed in service.
In 2015, Congress extended this credit through December 2021. The credit will reduce to 26% in 2020, and to 22% in 2021. Beyond 2021, the credit will be 10% for commercial systems, and 0% for residential systems.
The system needs to be placed in service by December 31 of the tax year in which the homeowner plans to use the credit.
For the Residential Tax Credit: Use IRS Form 5695
For the Commercial Tax Credit: Use IRS Form 3468
More information on the Federal Investment Tax Credit.
The state of Arizona offers a one-time 25% personal tax credit for the installation of a qualifying solar energy device on a primary residence. The credit must be taken in the year that it is installed, and the maximum credit cannot exceed $1,000 total for all devices. Again, any amount greater than your tax liability that first year can be carried forward up to five years until exhausted.
For businesses, Arizona offers a 10% tax credit for installation of qualifying solar energy devices, with a cap of $25,000 per building, and $50,000 in each year.
More information on the Arizona Tax Credit for homes.
More information on the Arizona Tax Credit for businesses.
Arizona state law dictates that your property taxes will not increase as a result of installing a photovoltaic system.
Arizona law protects private property solar access by nullifying homeowners association covenants restricting solar energy systems. HOAs cannot require changes to system design that increase system cost or reduce system performance.