With the increasing demand for renewable energy sources, many homeowners in Arizona are turning to solar panels to decrease their carbon footprint and energy bills. Besides the financial and environmental benefits of installing a solar panel, it’s widely known that solar panels increase property value.
However, this property value increase comes with the question on whether solar panels lead to higher property taxes. After all, shouldn’t property taxes owed increase whenever property value goes up? This simple answer is no. Solar panels in Arizona don’t increase property taxes because Arizona has a solar property tax exemption.
How Solar Works in Arizona?
Arizona is well-suited for solar energy production because of its favorable climate and abundant sunshine. It’s no surprise that the state is considered a pioneer in the solar industry.
Most homeowners who have installed solar panels in Arizona can benefit from their utility’s net billing system. Like net metering, net billing lets you get compensation via bill credits for any extra excess energy you share with the larger electric grid. In Arizona, the largest utilities that provide solar export credits include:
- Arizona Public Service (APS)
- Tucson Electric Power (TEP)
- Salt River Project (SRP)
How Do Solar Panels Affect Property Taxes in Arizona
As mentioned, your new solar panel will not attack more property taxes because of available tax exemptions. However, it's important to note the amount of tax exemption homeowners get depends on various factors, including the total value of their property.
What About Solar Incentives and Tax Credits ?
One of the major benefits of installing solar panel systems in Arizona is the eligibility for a range of incentives and tax credits. The incentives are meant to offset the high upfront cost of installing solar panels, making them more financially attractive for homeowners.
Here are the common types of solar incentives and tax credits in Arizona:
Federal solar tax credit
Commonly known as the investment tax credit (ITC), the federal solar tax credit allows homeowners to claim a credit of 30% of their total solar panel installation costs on their federal income taxes.
It’s worth noting that the federal solar tax credit is not a refund but a reduction in the amount of tax you owe.
Arizona state residential solar tax credit
This solar tax credit allows homeowners who install solar panels to claim credits of up to $1,000. If your credit is more than the income taxes you owe, it’s possible to carry it over up to 5 years.
Energy equipment property tax exemption
Arizona offers energy equipment property tax exemption so that homeowners don’t have to pay more than Texas as the value of their property increases.
Equipment property tax exemption in Arizona include:
- Solar pool heaters
- Solar thermal electric
- Solar water heaters
- Solar space heaters
In short, solar panels don’t increase property taxes in Arizona. Many property tax exemptions in Arizona make the whole process of going solar affordable.
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