Incentives are available for residential solar hot water systems installed in 2013 can cover over 60% of system costs, significantly improving the return on investment.

Federal Tax Credit

The federal solar tax credit is a 30% credit off income taxes. There is a $2,000 cap for residential systems. The credit is currently set to expire December 31, 2016. This credit can be taken in addition to the federal tax credit for solar electric systems.
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State Tax Credit

The Arizona state income tax credit is 25% and is capped at $1,000 per residence. The unused portion of the tax credit may be carried forward for up to five years. This credit must be shared with other qualifying solar devices. There is also a sales tax waiver for solar systems, so you pay no state sales tax on your system. The expiration date for the residential state tax credit is December 31st, 2016.
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TEP Incentive

Tucson Electric Power offers incentives for solar hot water systems.  The Arizona Corporation Commission reinstated the incentive program for 2013 at $0.40 per kilowatt hour after funds were exhausted in 2012. For most systems, this is about $1200 toward the cost of a system.  This program cannot be used in conjunction with the Southwest Gas incentive.    TEP

TEP will issue a 1099 for the utility incentive.  Customers will therefore have to count the TEP rebate as miscellaneous income on their income tax form and pay taxes on the utility rebate.

TRICO Incentive

TRICO offers incentives for solar water heating systems.  The Arizona Corporation Commission reinstated the incentive program for 2013 at $0.40 per kilowatt hour after funds were exhausted in 2012.  TRICO

Southwest Gas Incentive

Southwest Gas is now offering an incentive for solar water heating systems.  The rebate is offered at $15.00 per therm and is capped at 50% of the total system cost.  This option works well for homes that currently heat their hot water using gas and have room for an additional water storage tank.  The incentive funds for 2012 have been exhausted, and the 2013 funds will not be determined or become available until the AZ Corporation Commission reviews the program.  This incentive cannot be used in conjunction with the TEP solar hot water incentive.  Southwest Gas

State Property Tax Increase Exemption

Arizona state law dictates that your property taxes will not increase as a result of installing a solar hot water system.
AZ state property tax law, see 42-11054.C.2
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State HOA Law

Arizona state law A.R.S. § 33-439 protects private property solar access by nullifying Home Owners Association covenants restricting solar energy systems. See DSIRE website.

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