The federal solar investment tax credit (ITC) is the most significant solar incentive in Arizona. You may also take advantage of tax breaks, rebate programs or incentives through Mohave Electric Cooperative or the City of Scottsdale.
Jump to insightLeasing or entering a power purchase agreement (PPA) is often cheaper upfront, but you won’t be eligible for the federal solar tax credit and other financial incentives.
Jump to insightArizona has net billing, a system similar to net metering that compensates residents for sending any excess solar power to the grid. The credit is not necessarily at the full retail rate. Arizona Public Service (APS), Tucson Electric Power (TEP) and Salt River Project (SRP) all have different net billing compensation rates.
Jump to insightSolar incentives in Arizona
The federal solar investment tax credit (ITC) reduces your federal tax liability by 30% of the cost of your solar energy system. This tax credit applies to both residential and commercial installations, and it includes the cost of the solar panels and other equipment, labor and additional features for monitoring the system.
For example, if you spend $10,000 installing a solar panel system, the ITC is worth $3,000. If you owe $15,000 in taxes, the ITC reduces what you owe to $12,000. You don’t get these benefits automatically, though. You have to claim your solar equipment, labor and permits on your federal taxes for the same year you started using your system on Form 5695.
Don’t get confused: the ITC is a credit, meaning it directly decreases the amount of taxes you owe. This is different from a deduction, which reduces your taxable income. It isn’t a rebate or a refund. It only offsets your tax liability; you can't take advantage of the ITC if you don’t owe taxes in the first place. However, the credit rolls over to the next tax year if you don’t use the full amount.
Federal solar tax credit expires at the end of 2025
The ITC is now set to expire at the end of the year, much earlier than previously scheduled. The credit was expected to drop gradually, then fully expire in 2035 — but those future step-downs have been eliminated under the “One Big Beautiful Bill,” signed in July of 2025. This means you have until Dec. 31, 2025, to install and pay for a system to qualify for the 30% credit.
Statewide Arizona solar tax breaks
In addition to the ITC, residents can take advantage of financial incentives when they go solar, including income tax credits, sales tax exemptions and property tax exemptions. Keep in mind that these don’t go into effect automatically — there’s almost always a form to fill out.
- State income tax credit: Homeowners in Arizona may claim the state’s Residential Solar and Wind Energy Systems Tax Credit on their taxes. This credit lets you claim 25% of the cost of solar devices on your personal income taxes, up to $1,000. Leased systems and power purchase agreements (PPAs) are not eligible. See Form 310 instructions for more qualifications and how to file properly to claim the credit.
- Sales tax exemption: Arizona offers a 100% state sales tax exemption on the purchase and installation of solar energy equipment, up to a limit of $5,000 per device. Solar panels, solar water heaters and lithium-ion battery storage technologies are eligible. Solar retailers fill out Form 6015 before starting the installation, which lets them reduce the taxable portion of their sales, resulting in lower tax liability for them and cheaper devices for you.
- Property tax exemption: Solar technology and devices are exempt from Arizona state property tax. For the purpose of property tax assessment, solar technology adds no taxable value. To qualify, property owners must provide their county assessor with documentation of purchase and installation, along with costs.
» MUST-KNOW: Tax deductions for homeowners
Mohave Electric Cooperative solar rebate
Mohave Electric Energy Rebates encourage customers to install renewable energy systems in their homes and businesses. A homeowner with solar panels can earn 5 cents/watt, up to a maximum of $2,500.
City of Scottsdale Green Building Incentives
The City of Scottsdale has incentives to support energy-efficient construction through its Green Building Program. The City offers technical assistance, green building permitting and inspection, educational lectures, a green homeowner’s manual, recognition on the city website and free promotional green building materials.
More solar incentives in Arizona
Check the DSIRE for the most comprehensive source of information about solar incentives and policies in Arizona.
| Incentive type | Amount | Eligible solar equipment | Applicable sectors | Administrator | |
|---|---|---|---|---|---|
| Energy Conservation Subsidy Exclusion | Corporate tax exemption | 100% of energy conservation subsidies provided by public utilities | Solar panels, solar water heat, solar space heat | Residential, multifamily residential | United States Internal Revenue Service |
| Residential Energy Conservation Subsidy Exclusion | Personal tax exemption | 100% of energy conservation subsidies provided by public utilities | Solar panels, solar water heat, solar space heat | Residential, multifamily residential | United States Internal Revenue Service |
| Energy Efficient Mortgages | Loan program | Up to 100% of improvement costs | Solar panels, passive solar, solar water heat, solar space heat | Residential | Federal Housing Administration |
| Energy Efficient Mortgages | Loan program | $3,000-$6,000 | Solar panels, passive solar, solar water heat, solar space heat | Residential | Veterans Administration |
What to know about net metering in Arizona
Arizona handles compensation for solar energy differently than other states. It uses net billing, a system similar to net metering in which residents are compensated for supplying excess power to the grid. This is different from net metering in one major aspect — under net metering, customers are compensated at the retail rate, while under net billing, this rate is reduced to a lower wholesale rate.
This avoided cost rate varies between utilities and locations around Arizona. The three largest utilities — Arizona Public Service (APS), Tucson Electric Power (TEP) and Salt River Project (SRP) — all have different net billing compensation rates approved by the ACC. For example, SRP solar price plans are different from Tucson Electric Power RCP export rates.
For example, after one complete billing cycle, Roland in Parker said, "We got a $130 credit on our power bill instead of a $130 bill this last month." The alternative to net metering is getting a solar storage battery.
Arizona has generally solar-friendly policies plus some of the most potential solar energy in the nation, making it one of the best states for going solar. However, be mindful that the Arizona Corporation Commission is currently reconsidering rules under which homeowners are compensated for extra power.
How much are solar panels in Arizona?
Before considering the federal solar tax credit, solar panel costs in Arizona typically range from $7,253 to $21,372. On the higher end, Joel in Buckeye, Arizona, said he spent $38,000 on a system.
Average solar panel installation cost by system size in Arizona
| 5 kW | 6 kW | 7 kW | 8 kW | 9 kW | 10 kW | |
|---|---|---|---|---|---|---|
| Before federal tax credit | $11,720 | $14,064 | $16,407 | $18,751 | $21,095 | $23,439 |
| After federal tax credit | $8,204 | $9,844 | $11,485 | $13,126 | $14,767 | $16,407 |
Solar resources in Arizona
Here are some additional resources that can guide you through transitioning to solar in Arizona.
- Arizona Renewable Energy Standard
- Arizona Solar Energy Industries Association (AriSEIA)
- Arizona Solar Rights
- Mohave Electric SunWatts Program
- Sulphur Springs Valley EC Renewable Energy Programs
- Trico Electric Cooperative Renewable Energy Programs
Find solar companies in Arizona
There are more than 350 solar companies in Arizona, including manufacturers, installers and developers, according to the Solar Energy Industries Association. Read our guide to the top solar companies in Arizona for more information on comparing all your options and getting the best deal.
| Company | Customer rating | Professional installation | Payment options | Warranty | Year founded | |
|---|---|---|---|---|---|---|
 Sunrun | Get Started | 4.3 |  | Cash, loan, lease | 25 years | 2007 |
 Project Solar | Learn More | 4.3 | | Cash, loan | 25 years | 2016 |
 Elevation | Learn More | 1.0 | | Not disclosed | 10 to 25 years | 2014 |
 ShopSolar | Learn More | 4.7 |  | Cash, loan | Varies | 2018 |
 Tesla Energy | Learn More | 2.2 | | Cash, loan and lease | 10-25 years | 2015 |
 Sunnova | Learn More | 1.1 | | Cash, loan, lease and PPA | 25-year system warranty | 2012 |
FAQ
How do I know if my house is a good candidate for solar?
It's important to ensure your home is a good candidate before investing in solar panels. For instance, many older homes need new roofs to support solar panels in the first place. Here are the main factors to consider:
- Roof orientation: A south-facing roof with minimal tilt is ideal for maximizing solar production; north-facing, steeply pitched roofs are least compatible with solar panel efficiency.
- Roof condition: If your roof needs replacement soon, do that first. Solar panels last 25 to 30 years, so you want a roof that will last equally as long. Otherwise, you have to pay for costly removal and reinstallation.
- Appliance efficiency: It’s smart to upgrade old appliances like refrigerators and AC units to reduce your electrical loads before installing solar.
- Sun exposure: Arizona gets ample peak sun hours, but shading from trees or buildings can reduce solar panel efficiency.
What has Arizona’s investment in solar been so far?
Arizona’s total solar investment is $18.8 billion, according to the Solar Energy Industries Association.
What is the difference between net metering and net billing?
Net metering and net billing are two different approaches to compensating solar energy system owners for the electricity they generate and send back to the grid. Both involve crediting solar system owners for excess electricity production, but they have distinct mechanisms and implications:
- Net metering: Net metering allows owners of solar energy systems to earn credits at retail rates for the surplus electricity they feed into the local power grid. These credits can offset costs when solar production is low, with any extra credits rolling over to future bills.
- Net billing: Net billing credits solar system owners for excess electricity, but often at a rate lower than retail. The setup may use the same bidirectional meter as net metering or a different one, with specific policies and rates varying by location.
Since solar energy policies and regulations can change over time and differ by location, it's crucial to consult local utility companies or relevant authorities to understand the specific net metering or net billing policies applicable in a particular area.
How much can I save with solar panels in Arizona?
On average, Arizona homeowners with solar panels avoid $42,844 in total utility costs over 25 years. How much you save per month depends on the efficiency of your system, whether you finance and other factors. For instance, Lawrence in Scottsdale, Arizona, told us his monthly bill dropped from $300 to $84; Billy in Surprise, Arizona, said his bill dropped from $300 to $50.
Will solar panels increase the value of my home?
Installing solar panels can significantly increase a home's value. According to a Zillow study, homes with solar panels sell for 4.1% more on average. The exact increase in value varies by location, with homes in active solar markets seeing higher boosts.
How can I pay for solar panels?
The most obvious way to pay for solar panels is upfront, but many people don’t have that kind of money saved up. If you’re one of those people, you can finance solar panels with a solar loan. It works a lot like any other type of loan — there’s an application and approval process, and you pay it back over time (with interest). You could also go with a lease or power purchase agreement (PPA).
Bottom line
Buying solar panels is a big upfront investment, but Arizona’s personal tax exemption, legalized power purchase agreements and other solar-friendly policies help make it cheaper. The ConsumerAffairs Research Team conducted an in-depth analysis to determine the average costs of going solar. Turns out, it’s worth it for many homeowners, particularly in Arizona.
Solar panel costs vs. savings: Arizona and nearby states
| Average cost per watt | 6 kW system cost (before incentives | 10 kW system cost (before incentives) | Typical system size needed* | Total utility power cost savings** | |
|---|---|---|---|---|---|
| Arizona | $2.14 | $12,823 | $21,372 | 7 kW | $42,844 |
| California | $2.44 | $14,669 | $24,449 | 7.2 kW | $136,109 |
| Colorado | $2.79 | $16,729 | $27,882 | 4.9 kW | $31,582 |
| Nevada | $2.34 | $14,049 | $23,414 | 7.2 kW | $36,225 |
| New Mexico | $2.82 | $16,898 | $28,164 | 5.2 kW | $22,365 |
| Utah | $3.02 | $18,120 | $30,200 | 5.8 kW | $31,768 |
Article sources
- Arizona Department of Revenue, “Renewable Energy Production Tax Credit.” Accessed Feb. 28, 2024.
- DSIRE, “Arizona Programs." Accessed Feb. 28, 2024.
- EnergySage, “The cost of solar panels in Arizona.” Accessed Feb. 28, 2024.
- Solar Energy Industries Association, “Arizona Solar.” Accessed Feb. 28, 2024.
- Office of Energy Efficiency & Renewable Energy, “Homeowner's Guide to the Federal Tax Credit for Solar Photovoltaics.” Accessed Feb. 28, 2024.
- Tucson Electric Power, “What You Should Know About Residential Solar Systems.” Accessed Feb. 28, 2024.
