Arizona Solar Tax Credit & Other Incentives Available in 2022

Last Updated on Nov 13, 2022 by Jos

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    Here’s what you need to know about saving money on solar in the Grand Canyon State.

    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.

    arizona home with solar panels using tax credits
    Arizona Home with solar

    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 IncentiveProgram Overview
    Residential Solar Energy Tax CreditSolar power systems in Arizona get a tax credit equivalent to 25% of their value or $1,000, whichever is less.
    Solar Equipment Sales Tax ExemptionSolar panels are exempt from Arizona’s 5.6% sales tax, which means immediate savings when buying equipment.
    Energy Equipment Property Tax ExemptionAny increase in home value after installing solar panels is not taxed in Arizona.
    Local IncentivesAdditional 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. To get started, you can use this tool or fill out this form:,&Landing_Page=

    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.

    FAQ: Arizona Solar Incentives

    Does Arizona have a solar tax credit?

    Yes, when you purchase a home solar system in Arizona, you can claim 25% of its cost as a state tax credit, up to a maximum of $1,000. Keep in mind you can combine this benefit with the 26% federal tax credit, which isn’t limited by a maximum amount.

    Is it worth going solar in Arizona?

    Yes, your solar panels will be very productive thanks to the abundant sunshine in the state, and you get four tax benefits in addition to power bill savings.

    Does Arizona have net metering?

    Strictly speaking, Arizona does not have net metering. But you still get partial credit for surplus solar power that gets exported to the grid. Arizona used to have net metering for solar power at full retail price, but the benefit was repealed in 2016.

    In states with net metering laws, electric companies must give you full credit for all solar energy sent to the grid. Arizona has “net billing” instead, through which electric companies give you partial credit, assuming their avoided cost per kWh and not the full retail price.

    What is the solar tax credit for 2022?

    The Arizona state tax credit is 25% of your solar PV system costs, up to $1,000. The federal tax credit will remain at 26% until the end of 2022, and there is no maximum amount.

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