Income Tax Subtraction for Energy Efficient Residencies

Program Type Personal income-tax deduction
Technologies Energy-efficient properties
Amount $5,000
Required Documentation Qualifying energy rating from a certified home energy rater
Official Web Site                                                                             

Anybody who sells a qualifying energy efficient home in Arizona can get a personal income tax deduction for 5 percent of the selling price of the home, up to $5,000, in the year the home is sold. What “qualifying” means is that the residence must be rated at least a score of 90 points on a home energy rating. A rating of 90 points, by the way, indicates that the residence is at least 50 percent more energy efficient than the 1995 Model Energy Code.

It’s pretty complicated to figure out, but homeowners probably don’t need to worry about it, since the certification needs to be done by a certified home energy rater

If the home you’re selling is given a score of 90 points or more by the home energy rater, file a deduction with your state income taxes of 5 percent of the selling price (no more than $5,000), keeping in mind that the definition of “selling price” excludes fees, taxes, or any other costs beyond the actual sticker price.

Arizona Utility Incentive Programs

Program Type Utility rebate

Solar: Photovoltaics, solar hot water, solar space heating and cooling, solar thermal process heat, solar pool heating, daylighting. Wind, landfill gas, biomass, geothermal electric, geothermal heat pumps, anaerobic digestion, small hydroelectric, and other distributed generation technologies.


For residential customers, from $1.50 to 20 cents per watt DC for photovoltaics

Required Documentation Forms as required by your utility company
Official Web Sites


Utilities in Arizona offer incentives for solar and other renewable energy technologies. Such incentives include upfront rebates for installing such systems, which can include solar, wind and other forms of renewable energy generating equipment. To find out about the latest rebate and incentive levels, it’s best to check with local utilities and installers. As of October 2012 the rebate level for solar technologies is generally below $1 per watt and could fall further. That’s down from up to $3 a watt as recently as 2010. But over that period of time the cost of photovoltaics, for instance, has dropped basically keeping the costs of solar at similar levels since the incentives were higher. In addition, under the state’s net-metering law utilities are required to net meter systems and carry any net-excess generation (more energy produced than used) over to future months for a year at which point the customer is issued payment or reimbursement for overall net excess generation over the period. Customers are credited at the avoided cost-rate for the utility.


Here’s a quick look at three of the state’s larger utilities and their incentive programs as of October 2012:


Unisource Energy Services’ Residential Incentives were depleted as of April 2012. That being said it offers rebates on a yearly basis, so it could reopen incentives in 2013. By the end of the $1.7 million round of funding its rebate levels fell to 50 cents per installed watt. What the levels will be in 2013 were not announced.


Salt River Project’s rebate level for systems up to 5 kilowatts in size is offering rebates of 50 cents per DC watt. The utility has plans to drop that level to as low as 30 cents per watt as it meets certain benchmarks in 2012. 


Arizona Public Service is the state’s largest utility. At this point it offers up to $1.50 per installed watt for residential systems. However, that rate is for non-grid-connected PV arrays. Residential PV arrays connected to the grid are offered a much lower rate of 20 cents per installed kilowatt.

Solar and Wind Sales Tax Exemption

Program Type Sales tax exemption

Solar: Photovoltaics, solar space heating passive and active, solar hot water, solar thermal electric, solar pool heating, daylighting and wind.

Amount All sales tax on the equipment
Required Documentation None
Official Web Site


Arizona offers home owners and the general public complete sales tax exemptions on solar or wind power equipment. There is no maximum amount for the exemption in terms of purchase price. To take advantage of the exemptions from tax the retailer or contractor must be registered with the Arizona Department of Revenue prior to selling or installing renewable energy devices covered under the exemption. This exemption, coupled with Arizona’s solar and wind equipment property tax exemption, reduces the prices of solar technologies and other renewables. And, in 2012 the exemption was expanded to include the purchase of renewable energy credits (RECs). However, some municipalities in Arizona may have their own sales tax, which is not preempted by the state law.

Energy Equipment Property Tax Exemption

Program Type Property tax exemption

Solar: Photovoltaics, passive solar space heat, solar hot water, solar space heat, solar thermal electric, solar thermal process heat, solar cooling, solar pool heating, daylighting. Landfill gas, wind, biomass, geothermal electric, geothermal heat pumps, CHP/cogeneration, anaerobic digestion, small hydroelectric.

Amount Exempts any increased value of the property due to installation of energy equipment
Required Documentation Documentation of purchase and installation of equipment
Official Web Site


Arizona does not consider renewable energy-generating devices to add value to property—which means consumers don’t get taxed on the value added to the property by the energy installation.


Under Arizona’s law, both “active” and “passive” systems are eligible for the credit. If the system in question generates renewable energy like a photovoltaic system or wind turbine it’s considered an active system. Passive systems, like solar water heaters or solar daylighting systems, can qualify as well, as long as it’s clear that the system in question is specifically designed to replace or offset an existing power need.


The exemption was created under state law HB-2429 and expanded by HB-2332 defines “energy equipment” as equipment that harness energy equipment to produce energy primarily for on-site consumption from renewable resources, including wind, forest thinnings, agricultural waste, biogas, biomass, geothermal, and low-impact hydropower. It also includes high performance building components in buildings or building components that meet or exceed the energy efficiencies of programs including Energy Star or LEED. 


To qualify for the exemption, property owners need to provide their county assessor with documentation of the purchase and installation of the equipment within six months. There’s no limit on this exemption—consumers can install as much qualifying equipment as they want, property tax-free.

Residential Solar and Wind Energy Systems Tax Credit

Program Type Personal tax credit
Technologies Solar: Photovoltaics, passive solar space heating and cooling, solar hot water, solar ovens, solar cooling, solar pool heating, daylighting, and wind.                                                                                          
Amount $1,000 maximum credit
Required Documentation Receipt of cost
Official Web Site


Residents in Arizona are eligible to claim a personal tax credit for up to 25 percent of the cost of various types of solar (including photovoltaics water heating and more) and wind equipment and installation. However, the homeowner can only claim up to $1,000 annually. But the credit also can be claimed until it reaches the 25 percent threshold or up to five years after the first year’s claim.


Equipment covered under the program include solar water heaters, daylighting, ovens or other solar energy devices. The state requires residents obtain a certificate from the seller of the equipment stating that the equipment complies with Arizona’s solar energy equipment requirements.

Arizona Rebates and Incentives Summary


Arizona is probably the sunniest state in the U.S. and it’s firmly in the U.S.’s sunbelt, making it an ideal state for solar installations. As such some of the world’s largest solar farms are being built in the state’s borders. Some of which is being used to power its bigger neighbor, California, some used within the state. Arizona’s renewable portfolio standard, which mandates utilities are required to acquire 15 percent of their electricity from renewable resources by 2025. Of that, 30 percent must come from distributed generation like on homes and businesses. As such the state and utilities in the state have programs that offer incentives for solar on people’s homes and businesses. These include net-metering and rebates through utilities and other incentives from the state and from municipalities. Such incentives include personal, property and sales tax credits. 


Tax credits and rebates are available to property owners who upgrade or maintain renewable energy sources. One such program is Arizona’s Energy Equipment Property Tax Exemption, under which renewable electric generation, including solar thermal electric, photovoltaics, landfill gas, wind and biomass is not considered by the state to add. In addition, solar and wind-energy-generating equipment are exempted from sales tax.


Under Arizona’s net-metering rules homeowners and variety of other entities including businesses and municipal entities, among others, renewable energy installations up to 125 percent of their energy usage can qualify for net-metering. Under the rules, net excess generation can carry forward over a year period until it’s reimbursed to the person or entity at the utility’s avoided-cost rate.


Many utilities in Arizona offer rebates or payback programs to customers who install solar- or wind-power-generating equipment on their property. Depending on the rebate program, the utility may reimburse the system based on how many kilowatt hours the system is anticipated to produce over a 20-year lifespan. The utility will use those calculations to determine what the rebate for a system is. However, reimbursement funds are limited, so it's a good idea to check with both solar installers and local utilities to determine what current rebates are. Installers will also help home or business owners understand how much they can expect in incentives and rebates. 


(Last updated October 2012)

Arizona Solar Power Financial Incentives

Financial Incentives

Corporate Tax Credit

Green Building Incentive

Personal Deduction

Personal Tax Credit

Property Tax Assessment

Property Tax Exemption

Sales Tax Exemption

Utility Loan Program

Utility Rebate Program

Rules, Regulations & Policies

Appliance/Equipment Efficiency Standards

Building Energy Code

Contractor Licensing

Energy Standards for Public Buildings

Equipment Certification

Green Power Purchasing/Aggregation


Line Extension Analysis

Net Metering

Renewables Portfolio Standard

Solar Access Law/Guideline

Solar/Wind Permitting Standards

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