Incentive Calculator
Calculate Your Total Solar Incentive Savings
Estimated Solar System Cost
Net Cost After Federal Credit
$17,500
Total Incentive Value
$15,150
The math is compelling: most Tucson homeowners pay $150 to $300 monthly for Tucson Electric Power service. A financed solar system typically costs $120 to $220 per month with $0 down, creating immediate positive cash flow. You’re trading an expense that increases annually (rising TEP rates) for a fixed payment that ends in 10-25 years, after which you enjoy virtually free electricity for the remaining life of your system.
Solar financing options have evolved dramatically. Today’s products offer competitive interest rates (2.99% to 6.99% APR), flexible terms (10 to 25 years), and seamless application processes with decisions in minutes. Whether you prefer ownership through loans, want to leverage home equity, or need budget-friendly lease options, there’s a financing path designed for your situation.
Primary Incentive
Federal Solar Investment Tax Credit (ITC) — 30%
The federal solar Investment Tax Credit is the largest and most valuable incentive available to Tucson solar customers. Established by Congress and extended multiple times due to bipartisan support, the ITC allows you to claim 30% of your total solar system cost — including equipment, installation labor, permits, and interconnection fees — as a direct credit against your federal income tax liability.
Unlike a tax deduction that reduces your taxable income, a tax credit reduces your actual tax owed dollar-for-dollar. For a $25,000 solar installation (typical for Tucson homes), the ITC provides $7,500 in tax savings. There is no cap on the credit amount — whether your system costs $15,000 or $50,000, you claim the full 30%.
The credit applies in the tax year your solar system is placed in service (activated and producing electricity). If your federal tax liability for that year is less than the credit amount, the unused portion carries forward to future tax years for up to five years total. This means retirees and lower-income households can still benefit fully over time.
ITC Timeline & Future Changes
2022-2032
30%
Current rate — maximum savings available
2033
26%
Step-down begins
2034
22%
Further reduction
2035+
0-10%
Expiration or minimal credit (subject to Congressional renewal)
How to Claim the Federal Solar Tax Credit
- 1Install and activate your solar system during the calendar year you want to claim the credit.
- 2Obtain documentation from your installer showing the total system cost (we provide this automatically).
- 3Complete IRS Form 5695 (Residential Energy Credits) when filing your federal tax return.
- 4Transfer the calculated credit to Form 1040 to reduce your federal tax liability.
We recommend consulting with a tax professional for personalized guidance. The credit applies whether you pay cash, finance, or use home equity — you still claim the full 30%.
State Benefits
Arizona Solar Exemptions & Benefits
Arizona Property Tax Exemption
100% Exempt
Arizona law completely exempts the added home value from solar installations from property tax assessments. Studies show solar systems increase home values by 4-6% on average. For a $300,000 Tucson home, that’s $12,000-$18,000 in added value.
Without the exemption, homeowners would pay approximately $120-$180 annually in additional property taxes (at 1% property tax rate). Over 25 years, that’s $3,000-$4,500 in tax savings — money that stays in your pocket instead of going to the county.
This exemption applies automatically. There’s no application process or special forms to file. Your county assessor cannot increase your property tax bill due to solar installation, regardless of system size or value.
Arizona Sales Tax Exemption
5.6% Savings
Solar energy equipment is exempt from Arizona state sales tax under A.R.S. § 42-5061. The combined state and Pima County sales tax rate is approximately 5.6%, meaning you save $1,400 on a $25,000 system and $2,000 on a $35,000 system.
This exemption applies to solar panels, inverters, mounting hardware, batteries, and installation labor — essentially the entire solar system cost. Unlike some states that only exempt equipment, Arizona exempts labor too.
The exemption applies automatically at point of sale. Your solar installation contract and invoice reflect the tax-exempt pricing. There’s no rebate to claim or paperwork to file — you simply don’t pay sales tax on your solar purchase.
Additional Programs
TEP Net Metering & Other Solar Incentives
Tucson Electric Power Net Metering
Bill Credit Program
TEP’s net metering program credits you for excess solar energy sent to the grid. During sunny midday hours when your panels produce more electricity than your home uses, the surplus flows to the TEP grid and you receive credits on your monthly bill. At night or during cloudy periods, you draw from the grid and use those credits to offset consumption.
Net metering makes solar financially viable in Tucson by allowing you to effectively “store” excess daytime solar production for use during evening hours when panels aren’t generating. Without net metering, you’d need expensive battery storage to capture the full value of your solar system’s production.
TEP’s net metering rates and structures vary by customer rate plan. We design every solar system to maximize net metering benefits under TEP’s current program rules and can recommend the optimal rate plan for solar customers. Arizona law requires utilities to offer net metering, protecting your ability to offset your bills with solar.
Battery Storage Tax Credit
30% ITC Applies
The 30% federal Investment Tax Credit applies to battery storage systems when installed with solar or added to existing solar installations. A Tesla Powerwall (13.5 kWh) costing $15,000 qualifies for a $4,500 tax credit, reducing net cost to $10,500.
This makes battery backup more affordable than ever for Tucson homeowners who want monsoon outage protection and peak-rate optimization. Batteries installed standalone (without solar) don’t qualify for the federal credit, so pairing with solar is essential to claim the tax benefit.
Commercial MACRS Depreciation
Business Tax Benefit
Business owners installing commercial solar can depreciate their system over 5 years using the Modified Accelerated Cost Recovery System (MACRS). With bonus depreciation, businesses can deduct up to 85% of the system cost in year one, creating significant tax savings on top of the 30% ITC.
For a $100,000 commercial solar system, the combination of 30% ITC ($30,000) plus accelerated depreciation (approximately $20,000-$25,000 in tax savings) can reduce the effective cost by 50% or more in the first year. This makes commercial solar one of the highest-ROI business investments available.
Timing Considerations
When to Go Solar to Maximize Incentives
The 30% federal tax credit remains at its current level through 2032, giving Tucson homeowners several years of maximum savings opportunity. However, waiting has costs — every month you delay solar is another month paying full TEP electric bills instead of generating your own clean energy.
From a financial perspective, installing solar sooner rather than later typically provides better returns. TEP rates increase 3-5% annually, meaning your baseline electric bills (and thus your solar savings) grow each year. A system installed today saves more money over its lifetime than an identical system installed in 2030, even though both qualify for the 30% credit.
Arizona’s property and sales tax exemptions have no scheduled expiration and are unlikely to change given strong legislative support for solar. However, TEP’s net metering program could be modified in future years as more customers install solar. Installing now locks in current favorable net metering terms for the life of your system.