Federal & State Incentives

Established by The Energy Policy Act of 2005, the federal tax credit for residential energy property initially applied to solar-electric systems, solar water heating systems and fuel cells. The Energy Improvement and Extension Act of 2008 extended the tax credit to small wind-energy systems and geothermal heat pumps, effective January 1, 2008. Other key revisions included an eight-year extension of the credit to December 31, 2023; the ability to take the credit against the alternative minimum tax; and the removal of the $2,000 credit limit for solar-electric systems beginning in 2009. The credit was further enhanced in February 2009 by The American Recovery and Reinvestment Act of 2009, which removed the maximum credit amount for all eligible technologies (except fuel cells) placed in service after 2008.

A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is at a new home, the "placed in service" date is the date of occupancy by the homeowner. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The excess credit may be carried forward until 2023, but it is unclear whether the unused tax credit can be carried forward after then. The maximum allowable credit, equipment requirements and other details vary by technology, as outlined below.

 

RESIDENTIAL SOLAR ENERGY CREDIT:  ARIZONA

An individual who is an Arizona resident who is not a dependent of another taxpayer is eligible to take the solar energy credit. The solar energy credit is equal to 25 percent of the cost of the device. The maximum credit in a taxable year cannot exceed $1,000, and the cumulative solar energy credits allowed for the same residence cannot exceed $1,000. The maximum credit a taxpayer may take for all solar energy devices installed in the same residence cannot exceed $1,000 in the aggregate. 

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Solar-electric property

  • There is no maximum credit for systems placed in service after 2008.
  • Systems must be placed in service on or after January 1, 2006. On December 18, 2015, Congress extended the solar tax credit for homeowners through 2021.
  • The home served by the system does not have to be the taxpayer’s principal residence.
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Solar water-heating property

  • There is no maximum credit for systems placed in service after 2008.
  • Systems must be placed in service on or after January 1, 2006. On December 18, 2015, Congress extended the solar tax credit for homeowners through 2021.
  • Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.
  • At least half the energy used to heat the dwelling's water must be from solar in order for the solar water-heating property expenditures to be eligible.
  • The tax credit does not apply to solar water-heating property for swimming pools or hot tubs.
  • The home served by the system does not have to be the taxpayer’s principal residence.

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Small wind-energy property

  • There is no maximum credit for systems placed in service after 2008.
  • Systems must be placed in service on or after January 1, 2008. On December 18, 2015, Congress extended the solar tax credit for homeowners through 2021.
  • The home served by the system does not have to be the taxpayer’s principal residence.
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Geothermal heat pumps

  • There is no maximum credit for systems placed in service after 2008.
  • Systems must be placed in service on or after January 1, 2008. On December 18, 2015, Congress extended the solar tax credit for homeowners through 2021.
  • The geothermal heat pump must meet federal Energy Star criteria.
  • The home served by the system does not have to be the taxpayer’s principal residence.

Significantly, The American Recovery and Reinvestment Act of 2009 repealed a previous limitation on the use of the credit for eligible projects also supported by "subsidized energy financing." For projects placed in service after December 31, 2008, this limitation no longer applies.

U.S. Department of Energy - Current tax credits, rebates and savings for Arizona, click, here.

Database of State Incentives for Renewable Energy (DSIRE) - Current policies and incentives for Arizona, click here.

We recommend speaking with your tax advisor to see how you may benefit from current Federal and State incentives.

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