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AZ Solar Tax Credit

Arizona is known to be the sunniest state in the USA and has the best conditions for solar panels to produce at maximum efficiency. There us a reason why you are seeing more and more solar panels on rooftops of homes and business. This is because both Federal and to the state of AZ has a great solar tax incentives for homeowners.

There is a Federal ITC which stands for "Investment Tax Credit" is currently set at 26% available for purchased home solar systems installed by December 31, 2022. Originally, Back in December 2020, Congress extended the 26% federal tax credit for solar power until the end of 2022. With the original phase-out schedule, the solar tax credit was decreasing to 22% in 2021, but an extension for homeowners was granted for the 26% ITC until 2024!

AZ Solar Tax Credit

What gives Arizona homeowners a greater advantage than most states to own solar is that there is an exclusive AZ solar tax credit. The Residential Arizona Solar Tax Credit reimburses you 25 percent of the cost of your solar panels, up to $1,000, right off of your personal income tax in the year you install the system.

Equipment and property tax exemptions

Thanks to the Solar Equipment Sales Tax Exemption, you are free from the burden of any Arizona solar tax. Therefore, you aren’t required to pay any sales tax on the purchase of your solar system. Similarly, the Energy Equipment Property Tax Exemption means you won’t have to pay any additional property taxes on the value you are adding to your home by investing in solar panels.

Arizona tax credit forms and instructions for all recent years can be obtained at:

Tax Credit Eligibility

According to the U.S. Department of Energy, to qualify for the solar federal tax credit, you must meet all of the following requirements:

  • You must own your home (renters are excluded, unfortunately).

  • The solar panel system must be new or is being used for the first time.

  • You must own your solar panels.

  • You must have taxable income.

This last point isn’t quite as obvious as it might seem, since some homeowners choose to lease their solar systems through third-party companies. While leasing may make sense in some situations, it means that the leasing company gets to claim the tax credit instead of you. By contrast, homeowners that buy their panels outright or finance them with a loan will get to claim the tax credit.

Purchase vs. the Solar Lease

If you’re a retiree looking to keep your tax liability low, then leasing a system is most likely the best option. However, if you're looking to take advantage of tax breaks and have complete ownership of your system, then making a purchase is the likely solution.

We can help you explore all financing options and help you get started with little to no money out of pocket.

How to claim solar tax credit?

To claim the tax credit, you must file IRS Form 5695 as part of your tax return. You'll calculate the credit on the form, and then enter the result on your individual tax Form 1040.

If in last year’s taxes, you ended up with a bigger credit than you had income tax due, you can’t get money back from the IRS. Instead, you can generally carry the credit over to the next tax year. It’s important to understand that this is a tax credit and not a rebate or deduction. Tax credits offset the balance of tax due to the government (therefore, if you have no tax liability, there is nothing to offset and you can’t take advantage of it). If you failed to claim the credit in a previous year, not to worry! You can file an amended return.

The current residential solar tax credit is set to expire at the end of 2024 after several extensions. So, now is a great time to explore your solar energy options to take advantage of these potential tax credits.

How to get started?

On top of all these AZ solar tax credit and federal incentive programs, our solar plans and home battery services in Arizona start at $0 down. SunPower is the king of solar and leading solar technology since 1985 trusted by millions.

Whenever you’re ready to move forward in shopping with the best solar company in the nation request a quote from us or request a free consultation with us either virtually or in-home with our expert Energy Consultants.

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