Arizona Solar Incentive Programs
State Tax Credits
Arizona offers a direct state income tax credit for residential solar installations.
Arizona's state income tax credit allows homeowners to claim 25% of the cost of a qualifying solar energy device, up to $1,000 per tax year. Because the aggregate cap per residence is also $1,000, most homeowners exhaust the credit in a single filing year for larger systems. For smaller or phased installations under $4,000 total cost, the credit may be claimed annually until the $1,000 aggregate is reached.
The credit can be carried forward for up to five consecutive taxable years if it cannot be fully used in the year of installation due to insufficient tax liability. The device must comply with A.R.S. Title 44, Chapter 11, Article 11 (state standards for solar equipment). Your installer must provide a cost accounting statement.
Interaction with the federal ITC: The federal residential solar ITC was eliminated for systems whose installation was completed after December 31, 2025 under P.L. 119-21. The Arizona state credit is unaffected and remains available. Arizona does not require you to subtract the federal credit from your state credit calculation, both were claimable independently when the federal credit was available.
Source: A.R.S. §43-1083, azleg.gov (Tier 1 verified)
Net Billing by Utility
Arizona moved from traditional net metering to net billing. Credit rates differ by utility and interconnection date.
APS customers who interconnect after September 20, 2018 receive net billing under the Resource Comparison Proxy (RCP) rate rather than traditional net metering. Excess solar energy exported to the grid earns a bill credit at the current RCP rate. The RCP rate is set annually on September 1 and may decrease by no more than 10% per year per Arizona Corporation Commission Decision No. 82122.
Each customer's rate is locked for 10 years at the tranche rate in effect when their interconnection application was submitted, provided the system is approved within 180 days. After 10 years, the rate adjusts to the then-current annual rate. This means customers who interconnected in prior years may have a different (higher or lower) RCP rate than the current Tranche 2026 rate of $0.05554/kWh.
Excess credits carry forward from month to month. Any remaining credit balance exceeding $25 at the end of the December billing cycle is issued as a check to the customer.
Source: APS Rate Rider RCP, A.C.C. No. 6248, aps.com (Tier 1 verified, effective Sept 1, 2026 per Decision No. 82122)
SRP solar customers on the E-15 Customer Generation Price Plan receive net metering credits at the same time-of-use per-kWh rates they pay for consumption. If the billing cycle calculation is net negative (you exported more than you consumed), SRP credits the net kWh at the applicable on-peak or off-peak rate. This is more favorable than APS's fixed RCP rate during peak solar production hours.
SRP's solar rate plans (E-13, E-14, E-15, E-27) will remain available through November 2029 but are being phased out as SRP unifies solar and non-solar customers onto the same plans (E-16/E-28). After November 2029, customers transition to those standard plans. Demand charges apply based on peak 30-minute usage intervals during on-peak hours, which is an important consideration when sizing a solar system for SRP service.
SRP is a public power utility not regulated by the Arizona Corporation Commission, so its rates are set by the SRP Board of Directors rather than through ACC proceedings.
Source: SRP FY26 Ratebook E-15 (srpnet.com, Tier 1 verified); SRP Management Recommendations February 2025 (Tier 1)
TEP's net billing program uses the Resource Comparison Proxy (RCP) rate to credit residential solar customers for excess energy exported to the grid. The rate is set annually by the Arizona Corporation Commission based on average market costs for solar energy over a recent five-year period. New customers are locked in at the rate in effect on their interconnection date for 10 years.
The current rate of $0.0462/kWh is in effect from October 1, 2026 through September 30, 2027. Customers who interconnected before September 20, 2018 are on legacy net metering terms, contact TEP directly for your specific compensation rate. Credits appear on the bill as "Excess Generation Credit" under Power Supply Charges.
Note: TEP's RCP rate shown above applies from October 1, 2026 through September 30, 2027 (verified October 19, 2026). Check tep.com/rcp for the current rate before making financial projections.
Source: TEP RCP page (tep.com/rcp), Tier 1 verified. Rate shown effective Oct 1, 2026, verified October 19, 2026.
Property Tax Exemption
Arizona law permanently exempts solar installations from property tax assessment.
Under A.R.S. §42-11054, solar energy devices, grid-tied photovoltaic systems, and any device designed to produce solar energy primarily for on-site consumption "are considered to add no value to the property" for property tax purposes. This means the full value of a solar installation is excluded from your property's assessed value, and you pay no additional property taxes as a result of going solar.
The exemption applies to all property types, residential, commercial, and industrial, with no system size limit and no sunset date in the current statute. Arizona has maintained this exemption since 2006.
Source: A.R.S. §42-11054, azleg.gov (Tier 1 verified)
Sales Tax Exemption
Arizona exempts solar energy devices from the state transaction privilege tax (sales tax).
Arizona's transaction privilege tax (TPT, the state's form of sales tax) does not apply to sales of "solar energy devices" under A.R.S. §42-5061(M). The statute requires that retailers claiming this deduction be registered with the Arizona Department of Revenue as solar energy retailers. The exemption has no stated expiration date.
Important limitation: City-level privilege taxes (typically 0.5 to 2% depending on the municipality) may still apply to solar purchases unless the specific city has enacted its own exemption. Verify with your installer and your municipality whether local transaction privilege taxes apply to your purchase. The state-level exemption is confirmed; local exemptions vary.
Source: A.R.S. §42-5061(M), azleg.gov (Tier 1 verified)
Arizona Solar Savings Estimator
Estimate your first-year incentive value. Results are illustrative; consult a tax professional and your utility for exact figures.
Property tax savings based on 0.7% effective rate applied to full system value exempted. Sales tax savings based on 5.6% Arizona state TPT rate. Net billing credit assumes 30% of production exported. Does not include federal ITC (eliminated for systems whose installation was completed after Dec 31, 2025). Not financial or tax advice.
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