This guide will walk you through all the major solar incentives and policies available to Arizona residents in 2025. We’ll clarify how each program works, who’s eligible, and how they contribute to your solar investment.
Find out what Arizona programs are available to you!
Federal Solar Incentives: The Investment Tax Credit (ITC)
The most significant financial incentive for homeowners nationwide is the federal Solar Investment Tax Credit (ITC). This is a dollar-for-dollar credit that directly reduces the amount of federal income tax you owe.
- Credit Amount: For systems installed between 2022 and 2032, the ITC allows you to claim 30% of the total cost of your solar energy system.
- Impact: On a $20,000 solar system, the 30% ITC provides a $6,000 credit, effectively lowering your net cost.
Arizona’s State & Local Solar Incentives
Arizona’s primary incentive is its own state tax credit, which can be combined with the federal credit for powerful savings.
Name of Incentive | Type | Description | Key Details | Estimated Cash Value |
Federal Solar Tax Credit | Federal Tax Credit | A 30% credit on the total cost of your system against your federal income taxes. | The most significant financial incentive available. | $4,200 – $7,800 |
AZ State Solar Tax Credit | State Tax Credit | A 25% credit on the total cost of your system against your state income taxes, up to $1,000. | A direct, one-time reduction of your state tax bill. | $1,000 |
Property Tax Exemption | State Tax Exemption | A 100% exemption on the value added to your home by a solar system. | Your property taxes will not increase. | Varies |
Sales Tax Exemption | State Tax Exemption | A 100% exemption on the state’s sales tax for all solar equipment. | Immediately reduces your upfront system cost. | $800 – $1,500+ |
Net Billing | Utility Bill Credit | Earn credits on your utility bill for excess electricity your system sends to the grid. | Maximizes the value of every kWh you produce. | Varies |
Arizona Residential Solar Energy Tax Credit
- How it Works: This powerful state-level tax credit allows you to claim 25% of your total solar system cost, up to a maximum of $1,000, on your Arizona state income tax return. This is in addition to the 30% federal tax credit. The credit can be rolled over if it exceeds your state tax liability for one year.
- Impact: This is an excellent benefit that provides a direct reduction in the state taxes you owe, further lowering the net cost of your system.
Arizona Solar Property Tax Exemption
- How it Works: Arizona law provides a 100% property tax exemption for the value added to a home by a solar energy system. While solar panels increase your home’s value, this exemption ensures your annual property tax bill will not go up.
- Impact: This is a significant long-term benefit that saves you hundreds of dollars every year for the life of your system.
Arizona Sales Tax Exemption for Solar
- How it Works: When you purchase a solar panel system in Arizona, all equipment is exempt from the state’s sales tax.
- Impact: This provides an immediate, upfront cost reduction on your solar equipment.
Utility-Specific Solar Programs in Arizona
Net Billing
- How it Works: Net billing is the successor to Arizona’s original net metering program. When your panels generate more power than you are using, the excess is sent to the grid, and you receive a credit on your bill from your utility (APS, TEP, etc.). The credit rate is lower than the full retail rate, which makes using your own solar power (“self-consumption”) or storing it in a battery more valuable.
- Impact: While not as lucrative as the old net metering program, net billing still allows you to significantly reduce your electricity bills by offsetting your usage.
Find out what Arizona programs are available to you!
Understanding the Full Cost of Solar
To appreciate how these powerful incentives work, it’s important to understand the total cost of a solar project they are designed to reduce. A complete solar installation includes panels, inverters, racking, and professional labor, all of which factor into the final price that is eligible for both federal and state tax credits.
For a detailed breakdown of what goes into the price of a system, see our complete guide on The Cost of Solar Panels in Arizona.
Are Solar Panels Worth It in Arizona?
The excellent tax incentives are a primary reason why solar is so worthwhile in Arizona. By combining the 30% federal tax credit and the 25% state tax credit, homeowners can lower their net cost significantly. This leads to a very short payback period and an excellent return on investment.
To see a full financial breakdown and understand your long-term savings, read our detailed analysis: Are Solar Panels Worth It in Arizona?.
How To Get Solar With No Upfront Cost
Financing options like $0-down solar loans are especially powerful because they allow you to own your system and claim all of the valuable incentives, including both the federal and state tax credits. This makes solar accessible even without a large initial capital outlay.
Our complete guide, How To Get Free Solar Panels in Arizona, breaks down how solar loans, leases, and PPAs work.
Why Your Choice of Installer is Critical
The quality of your installer is the most important factor in ensuring you maximize every available incentive. A top-tier installer in Arizona will be an expert in both the federal and state tax credit rules and your utility’s interconnection process, ensuring you get every dollar of savings you are entitled to.
Our guide to the Top Solar Companies in Arizona explains exactly what to look for in a trusted local partner.
How EcoGen America Simplifies Your Solar Journey
Navigating tax credits and utility policies can be confusing. EcoGen America makes it simple. We connect you with our network of trusted, pre-vetted local installers in Arizona who are experts in all available incentives and provide transparent, no-obligation quotes.
Find out exactly what incentives you qualify for.
Find out what Arizona programs are available to you!
Frequently Asked Questions
Yes. Arizona is one of the states that allows you to claim a state tax credit in addition to the 30% federal credit, making it one of the best places in the country to go solar.
Generally, no. The major utilities like APS, TEP, and SRP do not currently offer a direct rebate for solar. The primary incentives are the tax credits and exemptions.
Sources & References:
- SEIA (Solar Energy Industries Association) – Arizona Solar Policy: https://seia.org/state-solar-policy/arizona-solar/
- Energy.gov (U.S. Department of Energy) – Homeowner’s Guide to Going Solar: https://www.energy.gov/eere/solar/homeowners-guide-going-solar
- IRS (Internal Revenue Service) – Form 5695, Residential Energy Credits: https://www.irs.gov/forms-pubs/about-form-5695
- NREL (National Renewable Energy Laboratory) – Annual Technology Baseline (ATB) for Solar: https://atb.nrel.gov/electricity/2024/residential_pv
- EIA (U.S. Energy Information Administration) – Arizona State Energy Profile: https://www.eia.gov/state/?sid=AZ
- DSIRE (Database of State Incentives for Renewables & Efficiency) – Arizona Programs: https://programs.dsireusa.org/system/program/az/solar
- Arizona Department of Revenue – Credit for Solar Energy Devices: https://azdor.gov/
