Note: Beginning 2014, you must also complete Arizona Form 301, Nonrefundable Individual Tax Credits and Recapture, and include Forms 301 and 310 with your tax return to claim this credit.
Arizona law provides a solar energy credit for an individual who installs a solar energy device in his or her residence located in Arizona. The solar energy credit for buying and installing a solar energy device is 25% of the cost, including installation, or $1,000, whichever is less. If you install another device in a later year, the cumulative credit cannot exceed $1,000 for the same residence.
Note: A taxpayer may claim a credit of up to $1,000 for a second personal home. A taxpayer that claims a credit for both a primary home and a second home is limited to a maximum credit of $1,000 in the taxable year. To claim a credit for a second home you must complete a second form and add the two amounts together to claim on your return. If the allowable tax credit is more than your tax or if you have no tax, you may carry the unused credit forward for up to the next 5 consecutive years. To be eligible for this credit, you must be an Arizona resident who is not a dependent of another taxpayer.
A solar energy device is a system or series of mechanisms which collect and transfer solar generated energy and which
are designed primarily to:
- Provide heating;
- Provide cooling;
- Produce electrical power;
- Produce mechanical power;
- Provide solar daylighting; or
- Provide any combination of the above by means of collecting and transferring solar generated energy into such uses either by active or passive means, including wind generator systems that produce electricity.
Solar energy systems may also have the capability of storing solar energy for future use. Passive systems must clearly be designed as a solar energy device, such as a trombe wall, and not merely as a part of a normal structure, such as a window. Only a system or device, which performs one or more of these functions, qualifies for the credit. An individual component of a system does not qualify for the credit by itself.
The following devices, when used for residential purposes, qualify for the credit:
- Solar domestic water heating systems - collectors, storage tanks, heat exchangers, and piping, valves, wiring, etc.,
directly related to the solar system.
- Solar swimming pool and spa heating systems - collectors, heat exchangers, piping, valves, wiring, etc., directly related to the solar system.
- Solar photovoltaic systems - collectors, batteries, inverters, solar system related wiring, and including solar photovoltaic systems for recreational vehicles used as a residence. End-use appliances (even if they are 12 vdc) are excluded unless they are manufactured specifically for photovoltaic systems applications.
- Solar photovoltaic phones, street lighting, etc. - collectors, batteries, inverters, and solar system related wiring. Phone, lights, etc., are excluded unless they are manufactured specifically for photovoltaic applications.
- Passive solar building systems - trombe wall components, thermal mass, and components specifically designed for energy gains. Dual pane windows, low-e, and other window coatings, etc., are excluded.
- Solar day lighting systems - those devices and systems specifically designed to capture and redirect visible solar energy while controlling the infrared energy (conventional skylights are specifically excluded).
- Wind generators - windmill, structure, generator, batteries, controls, wiring, and other components directly related to the wind generator. End-use
appliances are excluded.
- Wind-powered pumps - windmill, structure, pump, pipes, and other components directly related to the wind pump.
The person who sells you your solar energy device must furnish you with a certificate stating that the solar energy device complies with Arizona's solar energy device requirements. If you designed and installed the system yourself, you will not receive such a statement, but your solar energy device must meet the required criteria.
For more information on the solar energy credit and the Arizona solar energy device requirements, see the department’s brochure, Pub 543, Solar Energy Credit.
The following DO NOT qualify for the credit:
- Conventional plumbing components - water softeners, drinking water systems, etc., even if they are provided
(free or otherwise) as part of the system.
- Conventional controls - load controllers, programmable thermostats, etc., even if they are provided (free or otherwise) as part of the system.
- Conventional heating/cooling systems - air conditioners, heat pumps, evaporative coolers, furnaces, regardless of efficiency.
- Conventional windows and window treatments - dualpane, low-e, shade screens, reflective and dark coatings, awnings, interior shades, drapes, and blinds.
- Conventional skylights.
- Appliances (all voltages) - refrigerators, lights, fans, TVs, etc., unless they are manufactured specifically for photovoltaic systems.
Fans - ceiling, window, attic, interior, etc., unless they are manufactured specifically for photovoltaic applications.
- Paint - ceramic, reflective roof coatings.
- Insulation (includes "outsulation") and radiant barrier.
- Weather stripping, caulking.
- Misting systems.
- Vegetation - shade trees, shrubs, grass.
- Solar energy cars.
- A solar hot water heater plumbing stub out that was installed by the builder of a house or dwelling unit before title was conveyed to the taxpayer. You may be able to take this credit on Arizona Form 319. For details, see Form 319.
NOTE: If you claim a credit, you cannot take a depreciation deduction for the solar energy device for which the credit is claimed. If such depreciation deduction is included in your federal adjusted gross income, you must add that amount to your Arizona gross income. You must make this addition for
each period in which you deduct depreciation for federal purposes.