Arizona is one of the sunniest states in the country, making it the perfect place to install solar panels and solar batteries. If you’re an Arizona resident considering a solar installation, it helps to know about solar incentives and tax credits that can reduce the costs of installation.
In this article, we look at all the solar incentives and tax credits available to Arizona residents in 2025, including the federal solar tax credit, state tax credit, sales tax exemption, property tax exemption, and more.
Before we dive in, it’s important to understand that solar incentives can shift without warning. Some phase out gradually, while others will appear through new legislation, or vanish seemingly overnight—like the 30% Federal Investment Tax Credit (ITC) that was mostly eliminated by the “Big Beautiful Bill” signed into law over the July 4 weekend. We update our blogs frequently, but for the most current information in your area, we always encourage readers to reach out to one of our solar experts for a no obligation consultation.
The Residential Solar Investment Tax Credit (still widely called the ITC) remains a top-tier incentive for Arizona homeowners—but only until December 31, 2025. Under the “Big Beautiful Bill” signed on July 4, 2025, the credit disappears entirely for any residential system placed in service on or after January 1, 2026, with no phase-down period. The Washington Post GreenLancer
Because the credit vanishes on January 1, 2026, your system must be installed and utility-commissioned by December 31, 2025 to qualify. Permitting, inspections, and utility approvals already take months and are expected to slow further as demand surges, so starting early in 2025 is the safest way to lock in the credit. EnergySage
The 30 % applies to everything—panels, inverters, batteries, labor, permitting fees, and even sales tax. For a typical 5 kW home system in Arizona, that’s about a $7,100 federal tax offset, dramatically shortening payback time. GreenLancer
To claim the credit, attach IRS Form 5695 to the return for the tax year in which your system receives its utility “permission to operate.” Keep invoices and your PTO letter with your records.
Keep Reading: Big Beautiful Bill Passes: 2025 Is Your Last Chance to Claim the 30% Solar & Battery Tax Credit
As well as the generous federal solar incentive, Arizona homeowners can take advantage of a state-level tax credit designed to further reduce the cost of going solar. This incentive, called the Credit for Solar Energy Devices, provides a 25% credit on the total cost of a residential solar energy system, up to $1,000.
This one-time credit applies to both primary and secondary residences within Arizona. Most homeowners will qualify for the full $1,000 amount, especially if you’re installing a complete solar panel system.
Just like the federal tax credit, the Arizona solar tax credit reduces your state income liability rather than your upfront costs. If your Arizona tax bill isn’t large enough to use the full credit in one year, any unused portion can be carried forward for up to five years.
To claim the Credit for Solar Energy Devices, you need to submit Arizona Form 310 to the Arizona Department of Revenue when you file your state income taxes for the year in which the system was installed.
A Solar Renewable Energy Credit (SRECs) are tradable certificates issued for every 1 megawatt-hour (1,000 kWh) of electricity a solar array produces. Traditionally, utilities purchase these credits to meet state Renewable Portfolio Standard goals. Larger producers, such as commercial entities, have traditionally been able to sell their certificates in states were SREC markets exist. Until recently, there has not been a viable market system that would allow homeowners to cash-in the SRECs they’re already producing.
As an exclusive to Sun Valley Solar Solutions customers, our company has partnered with Brytr—the first homeowner-focused marketplace that turns Solar Renewable Energy Credits (RECs) into cash, gift cards, or other perks.
Homeowners who own or finance their solar arrays simply connect Brytr (a free, secure website) to their inverter’s monitoring portal, allowing the Brytr platform to monitor system performance and create one REC for every megawatt-hour generated. Bryter then sells those credits to corporate buyers with no hidden fees. A typical residence generates 5–10 RECs a year—roughly $75 – $250 in value—and larger systems can earn even more. There is no fee to participate.
Read more about Sun Valley Solar’s exclusive SREC marketplace: Earn Hundreds Each Year with TEP’s Energy Storage Rewards Program
Installing solar panels can increase your home’s value. Research shows that homes with solar panels are valued 4.1% higher than those without, and homebuyers are willing to pay an additional $15,000 or more for solar-powered homes.
But unlike other home upgrades, this increase won’t raise your property taxes in Arizona, thanks to the state’s Energy Equipment Property Tax Exemption.
Under this incentive, 100% of the added value from eligible solar energy equipment is excluded from your property’s assessed value. That means you can enjoy the higher resale value of a solar-powered home without having to pay more in annual property taxes.
The Energy Equipment Property Tax Exemption applies to a wide range of solar technologies, including:
To claim the exemption, you must submit documentation of system costs and components to your county assessor no less than six months before the full cash value notice is issued. The assessor’s office will provide guidance on what paperwork is required, so it’s worth reaching out early in the process.
Learn More: Do Solar Panels Increase Home Value?
Another way that Arizona has made going solar more affordable is by waiving state sales tax on solar energy equipment. This is a one-time exemption that applies at the time of purchase and covers a wide range of qualifying components, including:
Unlike some of the other incentives listed in this article, you won’t need to fill out any forms or submit paperwork to receive this benefit. Instead, solar equipment sellers handle the exemption directly so that sales tax is simply not applied to your invoice.
While this isn’t something you need to actively manage, the savings can still make a noticeable difference in your final system cost, especially given Arizona’s state sales tax of 5.6%. On a $20,000 system for example, that’s more than $1,100 in savings just by avoiding sales tax.
If you’re a Mohave Electric Cooperative customer, you may qualify for the SunWatts Renewable Energy and Rebate Program. This local incentive is designed to make solar more affordable for homeowners in northwestern Arizona.
The rebate provides $0.05 per watt of installed solar up to a maximum of $2,500. If you install a 7 kW system, for example, you could receive an upfront rebate of $350 to help lower your overall installation cost.
To take advantage of this program, you’ll need to submit a reservation and application before you start any installation work. Mohave Electric also requires that the system meets certain technical and safety standards, so it can help to work with a qualified installer who is familiar with the co-op’s requirements.
Keep Reading: Is Solar Worth it in Arizona? (2025 Homeowner's Guide)
While Arizona no longer offers traditional net metering, homeowners who install a grid-tied solar system can still benefit from net billing.
Net billing works similarly to net metering: when your solar panels generate more electricity than your home uses, the excess solar energy is sent to the grid and earns credits. These credits can be applied to future electricity bills when your system isn’t producing enough power (e.g. at night or on cloudy days).
That said, the value of your solar credits is lower under net billing than it was under net metering. Instead of being credited at the full retail rate (what you pay for electricity), your exported energy is credited at your utility’s avoided cost rate – what it would have cost the utility to generate or purchase that power elsewhere. These rates are determined using a formula established by the Arizona Corporation Commission (ACCC).
Here’s a look at Arizona’s net billing rates as of July 2025:
|
UTILITY COMPANY |
SOLAR BUYBACK RATE |
ESTIMATED RETAIL RATE |
MAX CREDIT PAYOUT |
|
Arizona Public Service (APS) |
$0.06857/kWh |
$0.15/kWh |
$25 |
|
Tucson Electric Power (TEP) |
$0.0570/kWh |
$0.15/kWh |
$10 |
|
UniSource Energy Services |
$0.0680/kWh |
$0.13/kWh |
$10 |
Your solar credits roll over month to month indefinitely. Once your balance exceeds the utility-specific threshold (between $10 to $25), you might receive a check or account credit for the value.
It’s also worth noting that many Arizona utilities, including APS, TEP, UniSource, and Salt River Project (SRP) from November 2025, require solar customers to enroll in time-of-use (TOU) rate plans. Under TOU billing, electricity prices vary by time of day, season, and demand.
In APS territory, net billing compensation rates are adjusted annually each September, with a cap of no more than 10% decrease per year. That said, the ACC is currently reviewing whether to allow larger annual reductions, which could affect long-term savings for new solar customers. At the very least, we fully expect APS’ solar buyback rate to drop by another 10% on September 1, 2025.
Learn more about net billing in Arizona in our article: Beat the Clock—APS Solar Buy-Back Drops on Sept 1!
Arizona doesn’t currently offer a statewide solar battery rate or incentive, but homeowners can still take advantage of other incentives to reduce the upfront cost of battery storage:
With that in mind, are solar batteries worth it? In a state like Arizona, where net billing credits exported electricity at a lower rate, using a battery to power your home can increase your overall savings from solar energy. That said, for some homeowners, the long-term financial return might not be enough to outweigh the initial investment.
If you’re considering a battery system, our team at Sun Valley Solar Solutions can help evaluate your usage patterns, utility rates, and eligibility for incentives to let you know if it’s worth it for your particular goals and situation. Contact us for a free consultation today.
Learn More: Solar and Batteries Made Simple – A Practical Guide to Clean Energy
Let’s wrap up with a quick summary of solar incentives and tax credits available in Arizona in 2025.
|
INCENTIVE |
VALUE |
ELIGIBILITY |
DETAILS |
|
Federal Residential Clean Energy Credit |
30% of total system cost |
U.S. taxpayers who purchase solar systems through cash or loan |
Reduces federal income liability, unused credit can roll over for 5 years |
|
Solar Renewable Energy Credit Rewards |
$75-$250 on average, variable by system size with no cap |
Only available to Sun Valley Solar Solutions customers |
No fee to participate. Just connect your inverter and start earning rewards |
|
Arizona Residential Solar and Wind Energy Systems Tax Credit |
25% of system cost, up to $1,000 |
Arizona taxpayers installing solar on primary or secondary residences |
Reduces state income tax liability, unused credit can roll over for 5 years |
|
Energy Equipment Property Tax Exemption |
100% exemption on added system value |
Arizona property owners installing qualifying solar equipment |
Solar installations are exempt from property tax assessments |
|
Solar and Wind Equipment Sales Tax Exemption |
100% exemption from state sales tax |
Anyone who buys qualifying solar equipment in Arizona |
Sales tax won’t be applied to eligible solar equipment purchases |
|
Mohave Electric Cooperative SunWatts Rebate Program |
$0.05 per watt installed, up to $2,500 |
Mohave Electric Cooperative customers installing solar systems |
One-time upfront rebate |
|
TEP Energy Storage Rewards Program |
Up to $120 per kilowatt (kW) of stored energy |
TEP customers installing a battery and participating in the program |
Homeowner allows TEP to draw from their battery during peak-demand |
With generous state and federal tax credits, plus exemptions, it’s a great time to go solar in Arizona. These incentives can significantly reduce the upfront cost of a solar installation and help accelerate your return on investment. We’re lucky to have these programs in place now, but they may not be around forever.
If you’re considering a solar installation or battery storage in Arizona, our team at Sun Valley Solar Solutions can help you understand your eligibility for these incentives. Contact us today for a free consultation and let’s start planning your solar future.