Solar Incentives in Arizona
Arizona homeowners installing solar in 2026 have access to several active state-level incentives. Arizona's Residential Solar Energy Credit (Form 310) provides a nonrefundable state income tax credit equal to 25 percent of the cost of a qualifying solar energy device, capped at $1,000 per residence in aggregate across tax years; unused credit may be carried forward up to five consecutive years. On the property tax side, solar systems designed primarily for on-site consumption are assessed as adding no value to a property, effectively excluding their value from the owner's tax assessment entirely. Arizona also exempts retail sales of solar energy devices from the state transaction privilege tax, with no statutory dollar cap on that deduction. For homeowners who export surplus power to the grid, compensation is provided under the Resource Comparison Proxy model adopted by the Arizona Corporation Commission; export credit rates vary by utility and by interconnection vintage and are set through individual utility rate cases, so homeowners should confirm the applicable rate with their specific utility.
At the federal level, the residential Clean Energy Credit under Internal Revenue Code §25D — which had provided a 30 percent tax credit for qualifying solar installations — expired for systems placed in service after December 31, 2025. New residential solar installations completed in 2026 do not qualify for that federal credit. The absence of the 30 percent federal credit meaningfully extends payback periods compared to prior years, making the remaining state incentives relatively more significant to the overall economics of a new system.
Arizona's residential electricity rate averaged approximately 15.59 cents per kilowatt-hour as of March 2026, up about 0.45 cents year-on-year. At that rate, solar generation that offsets consumption continues to provide measurable bill savings, though actual payback timelines depend on system size, household usage, the applicable RCP export rate, and financing costs.
Figures here are verified as of June 2026 against official sources; programs and rates change with each legislative session and Arizona Corporation Commission rate case, and the Arizona Department of Revenue and the Arizona Corporation Commission are the authoritative sources for current program details.
Federal credit update. The federal residential Clean Energy Credit (the 30% “solar tax credit” under §25D) expired for systems placed in service after December 31, 2025. New 2026 residential installs do not qualify; a 2025 install can still be claimed on a 2025 return (IRS Form 5695). What this means for 2026 →
Current solar incentives in Arizona
Credit for Solar Energy Devices (Residential Solar Energy Credit, Form 310)
Arizona allows a nonrefundable individual income tax credit for installing a solar energy device at the taxpayer's Arizona residence. The credit equals 25 percent of the device's cost, capped at $1,000 per residence in aggregate across tax years, and unused credit can be carried forward up to five consecutive years. The Department of Revenue's 2025 Form 310 (published January 2026) confirms the credit remains claimable.
| Amount | 25% of the cost of the solar energy device; maximum $1,000 per taxpayer per year and $1,000 aggregate per residence; 5-year carryforward of unused credit. |
|---|---|
| Who qualifies | Arizona resident individuals (not claimed as a dependent) who install a qualifying solar energy device in their Arizona residence; device and installation must meet Title 44, Chapter 11, Article 11 requirements; builder-installed solar hot water stub-outs do not qualify. |
| Administered by | Arizona Department of Revenue |
Source: A.R.S. § 43-1083; AZ DOR Form 310 (azdor.gov/forms/tax-credits-forms/credit-solar-energy-credit) Official source →
Energy Equipment Property Tax Exemption (no added value for on-site solar)
Under Arizona property tax law, solar energy devices, grid-tied photovoltaic systems, and other systems designed to produce solar energy primarily for on-site consumption are considered to add no value to the property where they are installed, so they do not increase the owner's property tax assessment. Other renewable energy equipment, energy-efficient building components, and combined heat and power systems also add no value if the owner documents acquisition and installation costs to the county assessor by the statutory deadline.
| Amount | Solar systems for on-site consumption are assessed as adding no value to the property (effectively a 100% exclusion of the system from assessed value). |
|---|---|
| Who qualifies | Property owners with solar energy devices or grid-tied PV producing energy primarily for on-site consumption; for other renewable/efficiency equipment, documentation must be filed with the county assessor within statutory deadlines. |
| Administered by | County assessors / Arizona Department of Revenue |
Source: A.R.S. § 42-11054(C) Official source →
Solar Energy Device Sales Tax (TPT) Exemption
Arizona deducts the amount received from sales of solar energy devices from the retail transaction privilege tax base, making retail sales of solar energy devices effectively exempt from state sales tax. Retailers must register with the Department of Revenue as solar energy retailers and keep records of solar sales available for examination.
| Amount | Full deduction of solar energy device sales from the retail TPT base (no statutory dollar cap). |
|---|---|
| Who qualifies | Applies to sales of qualifying solar energy devices by retailers registered with the Arizona Department of Revenue as solar energy retailers. |
| Administered by | Arizona Department of Revenue |
Source: A.R.S. § 42-5061(M) (retail classification deduction) Official source →
Valuation of Renewable Energy and Storage Equipment (20% of depreciated cost)
Through December 31, 2040, Arizona values taxable renewable energy and storage equipment for property tax purposes at 20 percent of its depreciated cost (depreciation capped at 90 percent of adjusted original cost). This applies to grid-scale solar, wind, and other non-petroleum renewable generation, transmission, distribution, and both co-located and stand-alone energy storage that is not intended for self-consumption, substantially lowering property taxes on commercial and utility-scale projects.
| Amount | Full cash value set at 20% of depreciated cost; depreciation limited to 90% of adjusted original cost; valuation method runs through December 31, 2040. |
|---|---|
| Who qualifies | Owners of renewable energy and storage equipment in Arizona used to generate, store, transmit, or distribute power from solar, wind, or other non-petroleum renewable sources not intended for self-consumption (commercial/utility-scale; on-site residential systems are covered separately by A.R.S. § 42-11054). |
| Administered by | Arizona Department of Revenue (centrally valued property) |
Source: A.R.S. § 42-14155 Official source →
Rooftop Solar Export Compensation - Resource Comparison Proxy (RCP)
Arizona's investor-owned utilities compensate rooftop solar customers for exported energy under the Resource Comparison Proxy (RCP) model the Arizona Corporation Commission adopted in 2017 to replace retail-rate net metering. Exports are credited at a per-kWh export rate set in each utility's rate case; a customer's export rate is locked for ten years from interconnection, and the rate offered to new customers can decline by up to ten percent per year. In October 2023 the Commission opened a docket to consider updating the annual reduction cap and the ten-year lock for future customers, expressly excluding electric cooperatives, which keep their own compensation methods.
| Amount | Export credit rates vary by utility and interconnection vintage (set in ACC rate cases under the RCP methodology); locked for 10 years at interconnection; new-customer rate may step down up to 10% annually. |
|---|---|
| Who qualifies | Rooftop solar customers of ACC-jurisdictional utilities (e.g., APS, TEP, UNS Electric); Salt River Project and cooperatives set their own distributed generation compensation. |
| Administered by | Arizona Corporation Commission |
Source: ACC Rate Comparison Proxy (RCP) compensation model (adopted 2017, Value and Cost of Distributed Generation proceedings); per-utility export tariffs Official source →
Compare solar incentives across all states → · Check what applies to you →
Programs verified as of June 2026 against official state and federal sources (each cited above); refreshed quarterly as legislatures and utility rate cases change the rules. How we verify this data. This page is informational only — not tax or legal advice.