Arizona Solar Incentives & Rebates (2026)
Arizona solar systems receive 30% federal tax credits, property tax exemptions, sales tax exemptions, and net metering at retail rates—combining for potential first-year savings of $8,500-$11,000 on a 6 kW system.
Arizona presents a compelling solar economics case with no state income tax (eliminating state tax credits) but offsetting property tax exemptions and sales tax relief. The state’s abundant sunshine (6+ peak sun hours daily) and retail-rate net metering create strong incentives. Arizona’s utility landscape is fragmented among three major providers—Arizona Public Service (APS), Salt River Project (SRP), and Tucson Electric Power (TEP)—each with different net metering terms and rebate structures.
Federal Solar Investment Tax Credit (30% ITC)
The federal solar investment tax credit covers 30% of total installation costs for systems installed through December 31, 2032. For a typical $30,000 residential system, this represents a $9,000 tax credit. Unlike rebates or deductions, the ITC applies directly to your federal income tax liability. The credit is non-refundable but can be carried forward to subsequent tax years if it exceeds your current-year tax liability.
To claim the ITC, file Form 5695 with your federal tax return in the year your system achieves operational status. Systems installed in 2026 can claim the full 30% credit.
Arizona State-Specific Solar Programs
Property Tax Exemption for Renewable Energy
Arizona Statute 42-14203 excludes solar energy systems from property tax assessment. A $32,000 installation adds zero assessed value. The exemption applies to residential, commercial, industrial, and agricultural systems statewide.
Sales Tax Exemption
Arizona exempts solar equipment from the state sales tax (5.6%), though local district surtaxes (up to 2.75%) still apply. The exemption saves approximately $1,800-$2,200 on typical installations.
No State Income Tax Credit
Arizona eliminated its state solar tax credit in 2019. The 30% federal ITC remains the primary tax incentive, along with property and sales tax exemptions.
Net Metering Structure (Utility-Dependent)
APS offers retail-rate net metering for grandfathered customers only; new customers face much lower export rates ($0.04-$0.06/kWh). SRP provides retail-rate net metering with monthly true-up billing. TEP’s net metering is limited to small systems (under 5 kW) and caps capacity at 5% of peak load.
Utility-Specific Rebate Programs in Arizona
Arizona Public Service (APS) Distributed Energy Resources Program
Rebates up to $1,000 for residential batteries paired with solar; limited by geographic incentive targets and current allocation status
Salt River Project (SRP) Renewable Energy Credits (RECs) Program
Residential customers receive $2.50-$3.50/month per kW installed capacity for solar systems under 8 kW (up to $280-$420 annually). Represents one of Arizona’s most valuable utility incentives.
Tucson Electric Power (TEP) Solar Incentive
Rebates up to $1,200 for residential systems under 5 kW; processed through ENERGY STAR contractor networks
Municipal Programs (City of Phoenix, Tempe)
Individual municipalities offer rebates ranging $500-$1,500 for systems installed within city limits
Solar Incentive Summary Table for Arizona
| Incentive Type | Details | Typical Value (6 kW System) |
|---|---|---|
| Federal ITC (30%) | Non-refundable tax credit through 2032 | $5,400-$7,200 |
| Property Tax Exemption | System excluded from assessments | $5,000-$12,000 (25-year) |
| Sales Tax Exemption | 5.6% state tax exempt | $1,800-$2,200 |
| Net Metering | Varies by utility (SRP best) | $400-$2,000/year |
| Utility Rebates | APS, SRP, TEP programs | $500-$1,500 |
Frequently Asked Questions About Arizona Solar Incentives
Did Arizona really eliminate its state solar tax credit?
Yes. Arizona’s state solar tax credit (up to $1,000) expired on December 31, 2018, and the legislature did not renew it. The decision reflected arguments that federal tax credits, net metering, and declining equipment costs sufficiently incentivized solar adoption. Arizona homeowners now rely solely on federal credits and utility/property-based incentives.
Which Arizona utility has the best solar policy?
SRP (serving Phoenix and central Arizona) is generally regarded as the most solar-friendly, offering retail-rate net metering with monthly true-up and renewable energy credits ($280-$420 annually). APS’s grandfathering policy disadvantages new customers with much lower export rates. TEP’s 5 kW cap severely limits residential systems.
How much does Arizona’s lack of state income tax actually cost me?
A median state solar tax credit of $800-$1,200 would have extended payback periods by 1-2 years. The property tax exemption ($280-$350 annually over 25 years) and sales tax exemption ($1,800 upfront) partially offset this loss, reducing the net disadvantage to $3,000-$5,000 per system over its lifetime.
Should I apply for SRP’s renewable energy credits or push for net metering first?
SRP customers should pursue both. Net metering optimizes hourly energy value, while the renewable energy credits provide fixed monthly payments. Together, they can reduce first-year costs by 35-40% compared to APS grandfathered customers.
Start Your Arizona Solar Journey
Solar incentives are substantial in 2026, but they evolve regularly. Federal tax credits decrease by 2 percentage points annually after 2032, making 2026-2032 the optimal window for installations.
Connect with qualified solar installers in Arizona through EnergyRanked’s solar installer directory. Our network includes pre-vetted, licensed professionals familiar with state incentives and application procedures.
For detailed information about the federal tax credit, consult our comprehensive solar tax credit guide. Return to our parent solar incentives hub to compare Arizona programs with other states.