Arizona is one of the few states with a real state solar tax credit: 25% of your system cost, capped at $1,000 (A.R.S. Section 43-1083). Solar is also exempt from state sales tax and from added property tax. Arizona homeowners pay about 15.23 cents per kWh (EIA, May 2026), but the state now uses net billing, so exported power earns less than the retail rate, and how much less depends on whether you are with APS, SRP, or TEP.
Arizona has one of the strongest solar cases in the country: heavy sun, high summer cooling bills, and a genuine state tax credit that most states do not offer. This page covers Arizona solar incentives in 2026, starting with the $1,000 state credit and the sales and property tax exemptions, then a size-by-size cost and payback estimate, how net billing changed the value of the power your panels export, the actual export rates APS, TEP, and SRP pay today, and how the federal change affects a purchase this year. Every figure links to its source, and utility export rates change often, so treat any rate here as something to confirm before you sign.
The Arizona state solar tax credit: 25% up to $1,000
Arizona gives residents a state income-tax credit worth 25% of the cost of a solar energy device, up to a maximum of $1,000. This is the Residential Solar and Wind Energy Systems Tax Credit under Arizona Revised Statutes Section 43-1083 (A.R.S. Section 43-1083; Arizona Department of Revenue). It is a real credit against the state income tax you owe, not a rebate check, and it sets Arizona apart from most states, which offer no state solar credit at all.
The cap is $1,000 per residence, and unused credit can carry forward. If your 25% credit is larger than the Arizona tax you owe in the year you install, or larger than $1,000, the state limits the credit to $1,000 per residence and lets you carry any unused amount forward for up to five years (Arizona Department of Revenue; Arizona Governor’s Office of Resiliency). You claim it on Arizona Form 310. This is a state matter, so confirm the current amount and how it applies to you with a tax professional; MySolarFY does not provide tax advice.
One thing to watch: the credit has drawn repeal proposals, so confirm it is still in force before you count on it. As of August 2026 the state credit under Section 43-1083 still exists and homeowners are still claiming it on Form 310, and the statute itself carries no expiration date (Arizona Legislature). Arizona lawmakers have floated legislation in the 2026 session (tracked as HB 4152) that would end the individual solar-device credit, but its status is contested and its practical effect on the residential credit is not settled. We are not asserting the credit has been repealed. Because a repeal could change this, verify the credit is still available for your install year with the Arizona Department of Revenue or a tax professional before you rely on it.
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What solar costs in Arizona, and what your roof makes
Solar pays in Arizona because of the sun that drives it and the high bills it offsets. The average Arizona residential electricity price is about 15.23 cents per kWh (EIA retail sales, residential Arizona, as of May 2026). Arizona homes run air-conditioning hard from spring through fall, so bills climb in the months when the sun is strongest, which is exactly when rooftop solar produces the most.
Arizona sun turns that rate into some of the best production in the nation. According to MySolarFY’s own analysis (as of August 2026), a 6 kW rooftop system in Phoenix is modeled to produce about 10,531 kWh a year (NREL PVWatts v8 run, NSRDB typical-year data). At the state average price, that output offsets roughly $1,600 of grid power a year, before any incentive. Your actual production depends on your roof’s pitch, orientation, and shading, so estimate your own roof with NREL’s free PVWatts calculator before you size a system.
Illustrative cost and payback by system size
Arizona installed prices run around $2.77 per watt in 2026 before incentives (SolarReviews Arizona; EnergySage reports a lower figure near $2.20 per watt, so treat the range as your quote target). The table below is a MySolarFY computed estimate: it scales the modeled Phoenix production above across common system sizes, prices each at about $2.77 per watt before incentives, and shows a simple payback range. Payback assumes you offset grid power at roughly 15.23 cents per kWh and does not subtract the $1,000 state credit; net billing on exported power and how much you use during the day will move your real number.
| System size | Est. cost @ ~$2.77/W (before incentives) | Modeled Phoenix production | Illustrative simple payback* |
|---|---|---|---|
| 5 kW | ~$13,850 | ~8,800 kWh/yr | ~11 to 13 years |
| 6 kW | ~$16,620 | ~10,500 kWh/yr | ~11 to 13 years |
| 8 kW | ~$22,160 | ~14,000 kWh/yr | ~11 to 13 years |
| 10 kW | ~$27,700 | ~17,600 kWh/yr | ~11 to 13 years |
*MySolarFY computed estimate, August 2026. Cost uses SolarReviews’ ~$2.77/W Arizona average; production scales the PVWatts-modeled 6 kW Phoenix figure; payback divides cost by grid power offset at the EIA state average rate before the $1,000 state credit. A ConsumerAffairs 2026 state comparison puts a typical Arizona payback near 11.7 years, in the same range. Your quote, roof, utility, and daytime usage change the result, so use this to frame questions for an installer, not as a guarantee.
For a fuller price breakdown, see our Arizona solar cost guide.
Arizona solar incentives at a glance
Arizona stacks a state tax credit on top of two tax exemptions, and then your export value depends on your utility. Here is what each piece does in 2026 and the fine print worth knowing.
| Incentive | What it does | 2026 status | Source |
|---|---|---|---|
| State solar tax credit | 25% of system cost as an Arizona income-tax credit | Available, capped at $1,000 per residence, carries forward up to 5 years (A.R.S. Section 43-1083); verify current status before you install | AZ Dept. of Revenue |
| Sales-tax exemption | Exempts qualifying solar equipment from Arizona sales tax | Available for qualifying residential systems; confirm current terms | DSIRE Arizona |
| Property-tax exemption | Excludes the value solar adds to your home from your property-tax assessment | Available for qualifying systems; verify with your county assessor | DSIRE Arizona |
| Net billing (export credit) | Credits the solar energy you export to the grid | Set by your utility below the retail rate; verify the current rate with your utility | Arizona Corporation Commission |
| Federal residential (Section 25D) | A 30% homeowner credit | Ended for expenditures made after December 31, 2025 | IRS |
The two tax exemptions apply broadly and are easy to miss. Arizona exempts qualifying solar equipment from state sales tax, and it excludes the added home value from a solar system from your property-tax assessment, so going solar does not raise your property-tax bill even as it can raise what your home is worth (DSIRE Arizona; verify current terms with your county assessor and the Arizona Department of Revenue). These do not depend on the federal credit that ended after 2025. For how programs stack across states, see our solar incentives overview, and for the full state picture start at our Arizona solar hub.
Heads up on the federal change: the 30% federal Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025, under the One Big Beautiful Bill Act (IRS, as of January 2026), so an Arizona homeowner who buys solar with cash or a loan in 2026 cannot claim it. The state $1,000 credit and the two exemptions are separate and still apply. Confirm every figure against the linked source, and ask a tax professional about your own situation. MySolarFY does not provide tax advice.
Net billing in Arizona: exports earn less than retail
Arizona no longer uses full retail net metering, and this is the single biggest thing to understand about the economics. After a 2016 to 2017 decision by the Arizona Corporation Commission, the state moved regulated utilities from retail-rate net metering to net billing, where the power you export is credited at a lower export rate rather than the full retail price you pay (Arizona Corporation Commission; U.S. Department of Energy on net metering). The practical effect: solar is most valuable when you use the power as you make it, and less valuable for what you send back. For the mechanics of how export credits work in general, see how net metering credits your solar exports, and our deep dive on Arizona net billing in 2026.
The phase-out did not happen all at once; each utility moved on its own timeline. APS transitioned new rooftop customers off retail net metering in 2017, and TEP followed in 2018, both under the Corporation Commission’s net billing framework (Arizona Corporation Commission). SRP is a public power district and is not ACC-regulated, so it moved separately and earlier, adopting demand-based solar price plans in the mid-2010s rather than crediting exports at the retail rate, and it has continued to revise those solar plans since, including updates in 2025 (SRP; verify the current plan). Because of this history, the year you interconnect and the utility you are on both shape the deal you get.
Because the export rate steps down over time and varies by utility, the size and orientation of your system matter more here than in a full net-metering state. A licensed local installer who works your utility’s rules every day can size a system to your usage so you self-consume more of what you produce. Battery storage also changes the math, because it lets you save cheap midday solar for the expensive evening peak instead of exporting it at a lower credit.
APS, SRP, and TEP: the three utilities do it differently
Which utility serves you decides how your solar is credited, and Arizona’s three big ones each run their own approach. Two are regulated by the Arizona Corporation Commission and one is not, so the rules are not uniform across the state. The export rates below are the most recent published figures; utilities revise them, so confirm your current rate on your utility’s tariff before you size a system.
| Utility | Type | Recent export credit (2026) | Key terms to verify |
|---|---|---|---|
| APS (Arizona Public Service) | Investor-owned, ACC-regulated | ~6.17 cents/kWh (RCP, Sept 2025 to Aug 2026 tranche) | Export rate locks for 10 years at interconnection; new-customer tranches step down up to 10% a year |
| TEP (Tucson Electric Power) | Investor-owned, ACC-regulated | ~5.13 cents/kWh (RCP, new systems from Oct 1, 2025) | Also credited under the RCP net billing framework; confirm your current tranche and rate plan |
| SRP (Salt River Project) | Public power district, not ACC-regulated | ~3.45 cents/kWh export (current solar price plans) | Solar customers use a demand-based plan with a monthly service charge (roughly $20 to $40) and, on some plans, a demand charge; verify current terms with SRP |
APS and TEP are investor-owned utilities regulated by the Arizona Corporation Commission, so they follow the state’s net billing framework, crediting exports at a set rate below retail that the Commission reviews periodically (Arizona Corporation Commission). APS credits exports under its Resource Comparison Proxy method at roughly 6.17 cents per kWh for the tranche running September 2025 to August 2026, and once you interconnect that export rate is locked for ten years, even though the rate offered to each new year’s customers steps down (APS; verify your tranche). TEP uses the same RCP approach, with a recent export rate near 5.13 cents per kWh for systems connecting after October 1, 2025 (TEP; verify current). The exact rate and the best rate plan for a solar home change, so confirm the current numbers before you commit. SRP is different: it is a public power district governed by its own elected board, not the Corporation Commission, so SRP solar customers are typically placed on a demand-based price plan that credits exports near 3.45 cents per kWh and adds a monthly service charge, with a demand charge on some plans (SRP; verify current terms). Because SRP sets its own rules, treat its plan details as something to confirm directly with SRP before you size a system.
Is solar worth it in Arizona?
For many Arizona homeowners, yes, because the fundamentals are unusually strong. You have some of the best sun in the country, high summer cooling bills, a real $1,000 state tax credit, and two tax exemptions, which together make a solid case even after the federal homeowner credit ended. The honest catches are that net billing credits your exports below retail, the export rate steps down over time, and the details differ by utility. Whether it pays for your specific home comes down to your roof, your utility, and how much power you use during the day. For a deeper look at the numbers, see whether solar panels are worth it, and the federal picture in what the federal solar tax credit change means in 2026.
How you pay decides which benefits you keep. The 30% federal homeowner credit (Section 25D) ended for expenditures made after December 31, 2025, so it is not part of a 2026 purchase on any path. If you buy the system with cash or a loan, you own it and can claim the Arizona state credit and take the two exemptions directly. If you lease or sign a power-purchase agreement, a third party owns the panels, you typically pay little or nothing up front, and the company that owns the system claims any commercial credit (Section 48E), not you, and generally the state residential credit as well. On any path, Arizona’s property-tax exemption still applies to the home. MySolarFY matches you with licensed Arizona installers so you can compare real local quotes side by side, with no obligation. Comparing another state? See our Texas solar incentives guide.
Frequently asked questions
Does Arizona have a state solar tax credit in 2026? Yes. Arizona offers a state income-tax credit worth 25% of the cost of a solar energy device, capped at $1,000 per residence, under Arizona Revised Statutes Section 43-1083. Unused credit can carry forward for up to five years, and you claim it on Arizona Form 310. This is separate from the federal credit that ended after 2025. Lawmakers have floated repeal legislation in the 2026 session, so confirm the credit is still available for your install year with a tax professional or the Arizona Department of Revenue.
What solar incentives does Arizona offer besides the state credit? Arizona exempts qualifying solar equipment from state sales tax and excludes the value solar adds to your home from your property-tax assessment, so adding solar does not raise your property-tax bill. On top of those, the power you export is credited through your utility’s net billing program. There is no statewide cash rebate, and the 30% federal homeowner credit ended for expenditures made after December 31, 2025. Verify current terms with each source before you sign.
What export rate do APS, TEP, and SRP pay for solar in 2026? Recent published figures are roughly 6.17 cents per kWh for APS and about 5.13 cents per kWh for TEP, both under the Resource Comparison Proxy net billing method, with APS locking your export rate for ten years once you interconnect. SRP, which is not ACC-regulated, credits exports near 3.45 cents per kWh on a demand-based plan that also carries a monthly service charge. All three revise these numbers, so confirm your current rate on your utility’s tariff before you size a system.
Does Arizona have net metering? Not the full retail kind anymore. After a 2016 to 2017 Arizona Corporation Commission decision, regulated utilities moved to net billing, which credits the solar power you export at a rate below the retail price you pay, and that rate steps down over time. APS moved new customers over in 2017 and TEP in 2018, while SRP, which sets its own rules, adopted demand-based solar pricing earlier. Solar is most valuable when you use the power as you make it, so verify your utility’s current export rate before you size a system.
How do APS, SRP, and TEP handle solar differently? APS and TEP are investor-owned utilities regulated by the Arizona Corporation Commission and follow the state’s net billing framework, crediting exports at a set rate below retail. SRP is a public power district governed by its own board, not the Commission, and typically places solar customers on a demand-based price plan with its own export terms and a monthly service charge. Because each utility sets its own numbers, confirm the current export rate and rate plan directly with your utility.
Can Arizona homeowners claim the federal solar tax credit in 2026? No. The 30% federal Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025, under the One Big Beautiful Bill Act, so an Arizona homeowner who buys solar this year with cash or a loan cannot claim it. A separate commercial credit (Section 48E) can apply to leased and PPA systems, but the business that owns the system claims it, not you. Arizona’s own state credit and exemptions were not affected.
Is solar worth it in Arizona without the federal credit? For many homes, yes. Arizona has some of the strongest sun in the country, high summer bills, a real $1,000 state tax credit, and sales and property tax exemptions, which together keep the case strong even after the federal credit ended. The main tradeoffs are net billing crediting exports below retail and terms that vary by utility, so whether it pays for your home depends on your roof, your utility, and your daytime usage. Compare real local quotes before you decide.
Reviewed by the MySolarFY team. Figures were verified against the linked EIA, NREL, IRS, DSIRE, SolarReviews, EnergySage, Arizona Revised Statutes, Arizona Department of Revenue, Arizona Corporation Commission, APS, TEP, and SRP sources as of August 2026; Arizona utility export rates and program terms change, so confirm the current state credit amount and your utility’s net billing terms before you decide. MySolarFY does not provide tax or financial advice; consult a licensed professional about your own situation. Learn more about the MySolarFY team and how we work, and browse more states from our solar by state hub.
MySolarFY is a free service that matches homeowners with licensed solar installers. We are not an installer, financing company, or government program. “No up-front cost” refers to qualifying lease or PPA financing, where eligible homeowners may have no out-of-pocket cost at installation. Lease and PPA terms typically run 20 to 25 years, may include an annual price escalator, and total payments may exceed the cost of a cash purchase. Homeowners do not get the federal residential credit that ended after December 31, 2025; on a leased system the company that owns it claims any commercial credit. Solar panels are not free and monthly payments apply. Eligibility, savings, incentives, and rates vary and are not guaranteed. See our full disclaimer.
