Solar panels on an Arizona home with cost and savings data overlay
By SwapToSolar Team 9 min read

Solar Savings in Arizona 2026: 25% State Tax Credit & Calculator

How much can Arizona homeowners save with solar in 2026? The Arizona 25% state tax credit (up to $1,000), sales and property tax exemptions, net billing rules, and a free savings calculator by ZIP code.

Arizona gets more sunshine than almost anywhere in the country — and in 2026 it still offers a state solar tax credit that survived the federal ITC expiration. With 6+ peak sun hours a day, an Arizona 25% credit (up to $1,000), sales and property tax exemptions, and high summer cooling bills, Arizona remains a strong solar state even after the federal 30% credit ended.

Use our Solar Savings Calculator to get an instant estimate based on your Arizona ZIP code and monthly electricity bill.

Arizona Solar at a Glance (2026)

FactorArizona 2026
Avg. electricity rate~$0.14/kWh
Avg. 7 kW system cost~$18,200
Federal ITC❌ Expired Dec 31, 2025
AZ State Tax Credit25%, up to $1,000 (still active)
Sales tax exemption✅ Yes
Property tax exemption✅ Solar adds $0 to assessed value
Net metering⚠️ Net billing — export rate below retail
Avg. peak sun hours6.0–6.6/day (best in US)
Avg. payback period8–11 years

What Solar Incentives Are Available in Arizona in 2026?

The federal 30% residential ITC (Section 25D) expired December 31, 2025 — see our full ITC status guide. Arizona’s state incentives remain in place:

1. Arizona Residential Solar Energy Tax Credit (25%)

This state credit survived the federal expiration. Under Arizona Revised Statutes §43-1083:

  • 25% of your system cost, capped at $1,000
  • Claimed on Arizona Form 310 with your state income tax return
  • Nonrefundable, but unused credit carries forward up to 5 years
  • Most systems easily exceed the threshold to claim the full $1,000

2. Solar Equipment Sales Tax Exemption

Arizona exempts solar energy devices from the state transaction privilege (sales) tax. On an $18,200 system, that’s roughly $1,000+ saved, depending on local rates.

3. Energy Equipment Property Tax Exemption

Under A.R.S. §42-11054, solar energy devices are assessed at zero added value for property tax purposes. Your home’s value rises with solar, but your property tax bill does not — a clean, automatic benefit.

4. Utility Programs (APS, SRP, TEP)

Arizona’s major utilities — Arizona Public Service (APS), Salt River Project (SRP), and Tucson Electric Power (TEP) — each set their own solar export and rate rules:

  • APS and TEP use an export rate (net billing) that credits exported solar below the retail rate, and it steps down over time
  • SRP places solar customers on a specific time-of-use demand rate plan — modeling your bill on SRP’s solar plan is essential
  • Some utilities have offered battery storage incentives — check current availability

Understanding Net Billing in Arizona

Arizona moved away from full retail net metering years ago. Today, most utilities use net billing with an export rate:

Full Net Metering (old)Net Billing (current AZ)
Export creditFull retail (~$0.14/kWh)Export rate (~$0.07–$0.09/kWh)
TrendStableSteps down annually
Best strategyMaximize system sizeMaximize self-consumption / add battery

What this means for you: Because exported power is credited below retail, the most valuable solar in Arizona is the energy you use directly during the day (running AC) or store in a battery for the evening. Size your system to your daytime usage rather than to export as much as possible.


Arizona Solar Savings Example (2026)

For an Arizona homeowner with a $170/month electricity bill ($2,040/year) — high summer AC drives this:

Amount
7 kW system gross cost$18,200
Sales tax exemption−$1,000
AZ State Tax Credit (25%, capped)−$1,000
Estimated net cost~$16,200
Annual electricity savings~$1,500–$1,900
Property tax exemption$0 added assessed value
Payback period8–11 years
25-year net savings~$32,000–$46,000

Estimates based on a 7 kW system producing ~12,800 kWh/year at Arizona’s excellent ~6.3 peak sun hours. Actual results vary by utility and rate plan.

Get your free Arizona solar estimate → Use our Solar Calculator


Arizona Electricity Rates and Solar ROI

Arizona’s average rate of ~$0.14/kWh is near the national average, but the state’s enormous sun resource means systems produce more energy per kilowatt installed than almost anywhere else. The catch is net billing — exported power earns less — so the homeowners who win biggest are those with high daytime AC loads that consume solar as it’s produced.

Arizona cities and their solar potential:

CityAvg. Peak Sun Hours/DayNotes
Phoenix6.5Massive AC load, APS or SRP territory
Tucson6.4TEP territory, excellent production
Yuma6.6One of the sunniest cities in the US
Flagstaff6.0Cooler, snow load considerations
Mesa / Scottsdale6.5SRP demand-rate modeling important

Use NREL’s PVWatts Calculator for a production estimate at your specific address.


APS vs. SRP vs. TEP: Know Your Utility

Your utility shapes your Arizona solar economics more than almost any other factor:

  • APS: net billing with a declining export rate; multiple rate plans — pick the one best for solar
  • SRP: not regulated by the Arizona Corporation Commission; uses specific solar time-of-use demand plans with a demand charge. Battery storage often pairs well to manage demand peaks
  • TEP: net billing with an export rate similar to APS

Always have your installer model your bill on your specific utility’s solar rate plan — a generic estimate can be misleading in Arizona.


Solar + Battery Storage in Arizona

Storage is increasingly central to Arizona solar value:

  • Net billing rewards self-consumption — a battery stores midday solar for expensive evening hours
  • SRP demand charges can be reduced with a well-managed battery
  • Backup power matters during monsoon-season outages and extreme heat events
  • Federal ITC for batteries expired December 31, 2025 — no 30% federal credit in 2026

Is Solar Worth It in Arizona Without the Federal ITC?

For most Arizona homeowners, yes — the unbeatable sun plus the surviving state credit keep returns solid. Solar is especially strong for:

  • High summer AC users with $150+/month bills
  • Homeowners who self-consume most of their production (daytime usage or a battery)
  • Phoenix, Tucson, and Yuma with 6.4+ peak sun hours
  • SRP customers who add a battery to manage demand charges

Where Arizona solar is harder to justify in 2026:

  • Low bills (<$90/month)
  • Systems oversized for export under net billing
  • Shaded roofs or significant east/west-only orientation

How to Get an Accurate Arizona Solar Quote

Your actual savings depend on:

  1. Your utility and rate plan — APS, SRP, and TEP differ substantially (especially SRP’s demand charges)
  2. Your export rate — net billing credits exported power below retail
  3. Your daytime usage — high AC load improves self-consumption and ROI
  4. Whether you add a battery — often worthwhile under net billing and SRP demand rates

Get quotes from 3+ installers and require each to model your specific utility rate plan. Arizona prices vary 15–25%.

Start with a free estimate → Solar Calculator


Key Takeaways

  • Arizona’s 25% state tax credit (up to $1,000) is still active — claimed on Form 310, carries forward 5 years
  • Best sun in the US (6.0–6.6 peak hours) means high production per kW installed
  • Net billing credits exported power below retail — size to your daytime usage or add a battery
  • Sales tax exemption and $0 property tax assessment on solar are automatic
  • SRP customers face demand-rate plans where battery storage often pays off
  • Federal ITC expired December 31, 2025 — no 30% federal credit for 2026 installations
  • Avg. payback: 8–11 years; 25-year savings: $32,000–$46,000

Sources: Arizona Revised Statutes §43-1083 / Form 310, A.R.S. §42-11054 (Property Tax), Arizona Corporation Commission, NREL PVWatts, DSIRE Arizona Incentives, EIA Arizona Electricity Profile.