Arizona solar incentives and tax credits for 2026.

The 2026 Arizona incentive stack at a glance

Arizona homeowners stack four to six separate incentives on a typical residential solar + battery project. The federal and state tax credits are the biggest. The sales and property tax exemptions run automatically. Utility rebates are in flux — confirm current status with your utility before assuming.

Statutory citations: Internal Revenue Code § 25D (Residential Clean Energy Credit, expanded under the 2022 Inflation Reduction Act), Arizona Revised Statutes Title 43 Chapter 10 Article 5 (residential credit), A.R.S. § 42-5159.B.10 (sales tax exemption), A.R.S. § 42-11054 (property tax exemption).

Federal ITC 30% deep-dive

The Residential Clean Energy Credit (formerly "Investment Tax Credit" or ITC) under IRC § 25D gives homeowners a nonrefundable credit equal to 30% of qualifying solar and battery storage costs. The 30% rate is locked in through tax year 2032, steps down to 26% in 2033, to 22% in 2034, and sunsets after that, per the Inflation Reduction Act of 2022 (P.L. 117-169).

• What counts: PV modules, inverters, racking, wiring, labor, permitting, battery storage with a capacity of at least 3 kWh (expanded under IRA — previously batteries had to be solar-charged). Standalone battery retrofits on existing solar systems also qualify since 2023.
• What doesn't: Roof replacement costs unless the roofing functions as solar (i.e., solar shingles). Structural improvements unrelated to the PV install.
• Nonrefundable: You must have federal income tax liability to use the credit. Unused credit carries forward up to 5 tax years per IRS Form 5695 instructions.
• Basis: Use gross system cost before any state or utility rebate. If a utility pays you $1,500 for a battery, you still compute the ITC on the full installer invoice minus that utility rebate; state income tax credits do not reduce basis.
• Claim year: The year the system is placed in service (passes utility PTO), not the contract year.

A typical 9 kW + 13.5 kWh battery system priced at $40,000 generates a $12,000 federal credit. That credit offsets your federal income tax dollar-for-dollar. Consult a CPA; this page is general information, not tax advice.

AZ $1,000 residential credit (Form 310)

Arizona offers a nonrefundable state income tax credit equal to 25% of the cost of a residential solar energy device, capped at $1,000 per residence, per Arizona Department of Revenue Form 310.

• Claimed on Form 310 filed with your Arizona individual income tax return.
• Nonrefundable; carries forward up to 5 tax years.
• The $1,000 cap is per residence, not per system. If you installed solar a decade ago and claimed the credit then, you cannot claim it again on the same residence today.
• Applies to PV, solar water heating, and passive solar heating. Battery storage alone (without solar) does not qualify for this credit under current ADOR guidance.
• Credit is computed on the cost to the homeowner before the federal ITC.

A 9 kW system at $27,000 would theoretically generate a 25% credit of $6,750, but the cap pins it at $1,000. Virtually every AZ residential PV project maxes the cap.

Sales tax exemption

Under A.R.S. § 42-5159.B.10, solar energy devices are exempt from Arizona Transaction Privilege Tax (TPT), which is Arizona's version of sales tax. The exemption extends to most city transaction privilege taxes as well. Effective combined TPT in Arizona cities runs 5.6% to 8.6% (Phoenix 8.6%, Tucson 8.7%, Tempe 8.1%, Scottsdale 8.05%, Gilbert 7.8%, Mesa 8.3%).

The exemption is applied at the installer invoice level — the installer must hold the exemption certificate (Form 5000HC) and charge you the net price. You don't file anything. Check the proposal to confirm no sales tax line item on the solar equipment portion. On a $27,000 system in Phoenix, the exemption alone saves roughly $2,320.

Property tax exemption

A.R.S. § 42-11054 exempts the added assessed value of a solar energy device from Arizona property tax. The county assessor treats the solar system as having zero added value for property-tax purposes, even though appraisals show solar adds roughly $15,000–$25,000 to a typical Arizona home's market value (per Zillow and Lawrence Berkeley National Laboratory market-value studies).

This matters because at a combined Arizona residential property tax rate of roughly 0.65% (Maricopa County effective), an exemption on $20,000 of added value saves about $130/year. Over 25 years, that's another $3,250–$4,000 in the savings column.

The exemption is automatic. File Arizona Form 82506 with your county assessor the first year to register the exemption, or more commonly the installer handles it as part of the install package. Confirm it happened by checking the assessor's valuation notice in the following year.

Utility-side rebates (2026 status)

Arizona utility rebates for residential solar and battery storage have been scaled back compared with 2015–2020 when APS and SRP ran large incentive programs. Current 2026 status:

• APS: The direct upfront battery rebate of previous years was closed after hitting budget cap. Watch ACC Docket E-01345A filings for any new storage incentive program. APS continues to publish the Resource Comparison Proxy export rate annually.
• SRP: The SRP Demand Management Battery Rebate has run intermittently, historically paying up to $1,800 for qualifying storage that enrolls in demand-response. Check srpnet.com for the current program window.
• TEP: Smart Home and Technology pilots run periodically; current status on tep.com residential programs.
• Mohave Electric, UniSource, Trico, municipals: Generally no direct rebate, but interconnection rules and export credits vary. Consult the specific utility's tariff sheet.

Installers operating in each territory track these programs closely — if a rebate is live, your proposal should include it. See APS solar rate plans and SRP solar specifics for more.