Arizona Solar Incentives Overview
Arizona is one of the sunniest states in America, making it ideal for solar energy. While net metering has been replaced by net billing (which pays less than retail rates), the combination of state tax exemptions, tax exemptions, and excellent solar production still make going solar highly economical.
Current Incentive Summary
| Incentive | Value | Availability |
|---|---|---|
| Federal ITC (PPA/Lease only in 2026) | 30% via 48E (company claims it) | Through Dec 2027 (PPA/Lease only) |
| Property Tax Exemption | 100% exemption | All homeowners |
| Sales Tax Exemption | Varies by city | Most areas |
| Utility Net Billing | $0.05-0.08/kWh | All utilities |
Federal Tax Credit Update: What Changed in 2026
Important 2026 Update: The 30% residential ITC (25D) for homeowner-purchased solar systems (cash or loan) expired on December 31, 2025. There is no longer a federal tax credit for purchased systems.
- PPA/Lease: Solar company claims a 30% commercial credit (48E) through Dec 2027, typically passes savings to you as lower rates
- Purchased systems (cash/loan): No federal credit available in 2026
- Stackable: Combines with Arizona tax exemptions
- Requirements: System must be at your primary residence
Example savings:
Every home is different. Chat with our AI to get numbers specific to your address, usage, and utility.
Arizona State Tax Credit
Arizona has historically offered a state solar tax credit, but it was suspended in recent years. Legislation has been proposed to revive or modify the credit. Check with a tax professional or the Arizona Department of Revenue for current status.
Arizona Property Tax Exemption
Arizona provides a 100% property tax exemption for residential renewable energy systems. This is especially valuable given Arizona's rising property values.
- Exemption: 100% of added value
- Automatic: Applied when you install solar
- Savings: Can save $1,000-$3,000/year
Sales Tax Exemption
Arizona state law provides a sales tax exemption for solar energy systems. Some cities may have additional exemptions:
- Phoenix: State exemption applies
- Tucson: State exemption applies
- Other areas: Varies by city/county
Utility Programs
Arizona's three major utilities each have different solar compensation structures:
Arizona Public Service (APS)
APS serves most of Arizona (Phoenix area, Flagstaff, Yuma). They use a net billing structure with export credits lower than retail rates.
- Export Rate: ~$0.06-0.08/kWh
- Retail Rate: ~$0.13-0.15/kWh
- Peak Hours: 3-7 PM weekdays
- Strategy: Maximize self-consumption during peak
APS Battery Pilot Program
- Incentive: Up to $500 for battery installation
- Purpose: Grid support during peak demand
- Requirements: Must enroll in demand response
Salt River Project (SRP)
SRP serves the Phoenix metro area (Tempe, Scottsdale, Mesa, Chandler). They offer multiple solar pricing options.
SRP E-27 Standard Plan
- Export Credit: ~$0.03-0.05/kWh
- Peak Hours: 3-7 PM summer
- Best for: Heavy daytime usage
SRP Time-of-Use Plans
- Peak Rate: Higher rates during peak
- Off-Peak: Lower rates at night
- Strategy: Shift usage to off-peak
Tucson Electric Power (TEP)
TEP serves the Tucson area and uses net billing similar to APS.
- Export Rate: ~$0.05-0.06/kWh
- Retail Rate: ~$0.12-0.14/kWh
- TEP Energy Storage Rewards: Battery incentives available
TEP Energy Storage Rewards Program
- Incentive: $200-500 per kWh for batteries
- Requirements: Must be paired with solar
Calculate Your Total Savings
Here's how to estimate your total incentives when going solar in Arizona:
Example: 10kW System ($23,000)
| System Cost | $23,000 |
| Federal ITC (PPA/Lease only in 2026) | -$6,900 |
| Sales Tax Exemption (est.) | -$1,500 |
| Net Cost After Incentives | $14,600 |
What's the best way to maximize Arizona solar savings?
- Add battery storage for peak hour self-consumption
- Explore PPA/Lease options to benefit from the 30% commercial credit (48E)
- Shift high energy usage to midday when solar production peaks
- Consider enrolling in utility demand response programs
- Get quotes from multiple installers
How to Claim Your Incentives
- Federal ITC: Claim on IRS Form 5695
- Property Tax: Automatic—no application needed
- Sales Tax: Applied by installer
- Utility Net Billing: Sign up with your utility
- Battery Incentives: Apply through utility