2022 Arizona Solar Incentives, Tax Credits, Rebates (And More)

Here’s a quick look at the solar incentives in Arizona:

  • Federal Solar Tax Credit (ITC)
  • Arizona Solar Tax Credit
  • Sales and Property Tax Exemptions
Ecowatch Author Karsten Neumeister

By Karsten Neumeister, Solar Expert

Updated 5/18/2022

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Our solar experts have sifted through hundreds of local governments and utility companies’ websites to find accurate information about current solar incentives in each state. We’ve also unbiasedly ranked and reviewed hundreds of solar installers to empower you to make the right choice for your home.


Understanding Rebates and Incentives in Arizona

In this article, we’ll discuss the solar incentives and rebates available to Arizona homeowners. When you’re ready to speak with a qualified professional, follow the links below. Each of these companies can help you identify and apply for incentives available in Arizona.

Jump to Section:

  1. Overview of Arizona Solar Incentives
  2. Federal Solar Tax Credit
  3. FAQ: Arizona Solar Incentives
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Arizona is a very sunny state thanks to its desert climate, which means that solar panels are very productive when used on homes and businesses. There are also several incentive programs that improve your return on investment, including the Arizona solar tax credit.

According to the Solar Energy Industries Association (SEIA), Arizona installed more than 6,100 megawatts of accumulated solar capacity. This is enough to provide electricity for over 907,000 homes and make Arizona the fifth-largest solar market leader in the U.S.

So, what kind of solar Incentives can homeowners in Arizona take advantage of when going solar? Let’s dig in. 

Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.

Overview of Arizona Solar Incentives

The abundance of sunshine in Arizona is a natural incentive for solar power systems, since you get more kilowatt-hours of energy from each photovoltaic panel you install. However, the state also offers several tax benefits when going solar, which can add up to significantly reduce your solar payback period. Here is a summary of each incentive:

Arizona Solar Incentive Program Overview
Residential Solar Energy Tax Credit Solar power systems in Arizona get a tax credit equivalent to 25% of their value or $1,000, whichever is less.
Solar Equipment Sales Tax Exemption Solar panels are exempt from Arizona’s 5.6% sales tax, which means immediate savings when buying equipment.
Energy Equipment Property Tax Exemption Any increase in home value after installing solar panels is not taxed in Arizona.
Local Incentives Additional incentives may be available depending on your location and electric company.

We’ll explain a bit more about each Arizona solar incentive below, but if you haven’t already, we recommend getting a free quote from a local installer to see exactly how much these tax credits and rebates could save you. 

Residential Arizona Solar Tax Credit

You’ve probably heard about the 26% federal tax credit for solar energy systems, which is available to homeowners throughout the U.S. However, there is also a specific Arizona solar tax credit that can be combined with the nationwide benefit, and it gets deducted from your state income taxes.

The Arizona tax credit for solar panels is 25% of your system costs or $1,000, whichever amount is less. According to our market research and data from top solar brands, the average cost of solar panels in Arizona is $2.61 per watt of solar capacity, which means a 5-kW system costs around $13,050 before incentives. In Arizona, you can claim a total tax credit of $4,393 for a solar system with this price:

  • The 26% federal tax credit is equivalent to $3,393.
  • Add the $1,000 Arizona tax credit, and you get a total deduction of $4,393.

The combination of federal and state tax credits makes solar panel systems more affordable, since you recover a large portion of your investment on your next tax declaration. However, make sure you contact a certified public accountant (CPA) to ensure that your solar tax credits are filed correctly.

Arizona Solar Tax Exemptions

In addition to the Arizona solar tax credit, the state offers two different types of tax exemptions for solar power systems:

  • Sales tax exemption: Arizona normally charges a 5.6% sales tax, but it doesn’t apply when installing solar panels. For example, if your system has a price of $13,050, you’re saving $731 upfront.
  • Property tax exemption: Home upgrades normally increase your property value, which means the corresponding taxes are also higher. However, any increase in home value that comes from solar panels is not taxed in Arizona.

Tax exemptions improve the ROI of solar power systems, since their ownership costs are reduced. In states where solar panels are subject to sales and property taxes, these tax payments consume part of the money you save on power bills.

Arizona Solar Rebates and Other Local Incentives

We have already discussed the statewide solar incentives available in Arizona, but keep in mind that municipalities and utility companies often create their own solar programs. Before purchasing a solar panel system for your home, make sure you aren’t missing out on any local incentives.

For example, SRP (Salt River Project) recently offered an incentive for solar battery systems, which was available up until April 30, 2021. The program offered $300 per kilowatt-hour of storage capacity, up to a maximum amount of $3,600 toward a solar battery.

Your solar company should be able to help you identify and apply for additional solar incentives in your area.

Federal Solar Tax Credit

Regardless of where your solar panels are installed in the U.S., you can claim a 26% federal solar tax credit on your next declaration. In the case of Arizona, this benefit is combined with a residential state tax credit and two tax exemptions.

  • The 26% tax credit will remain available until the end of 2022, decreasing to 22% in 2023.
  • There will only be a 10% tax credit from 2024 onward, and it will only be available for solar power systems owned by businesses (not for residential systems).

If you plan to install a solar battery along with your panels, it can also qualify for the 26% federal tax credit. However, there is one important condition: your battery can only be charged with your solar panels, and not with electricity from the grid.


Leonardo David is an electromechanical engineer, MBA, energy consultant and technical writer. His energy-efficiency and solar consulting experience covers sectors including banking, textile manufacturing, plastics processing, pharmaceutics, education, food processing, fast food, real estate and retail. He has also been writing articles about energy and engineering topics since 2015.

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FAQ: Arizona Solar Incentives

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Karsten Neumeister

Solar Expert

Karsten Neumeister is a solar energy specialist with a background in writing and the humanities. Before joining EcoWatch, Karsten worked in the renewable energy sector of New Orleans, focusing on solar energy policy and technology. A lover of music and the outdoors, Karsten might be found rock climbing, canoeing or writing songs when away from the workplace.