Arizona Solar Incentives for Homeowners: Tax Credits, Rebates & What To Know

Going solar in Arizona has always made sense, considering the 300 days of sunshine per year and some of the highest electricity rates in the Southwest.

But understanding which solar incentives are still available, and which ones have changed, is key to making a smart investment in 2026.

Whether you live in Tucson, Marana, or anywhere else in Southern Arizona, there are still ways to reduce the cost of solar installation through state tax credits, property and sales tax exemptions, utility programs, and creative financing options.

This guide covers major Arizona solar incentives for homeowners, what the expiration of the federal solar tax credit means for you, and how to maximize your return on investment this year.

Saguaro Solar Electric has been installing and maintaining solar panels for over a decade, and we’re here to answer any questions you may have. Call (520) 704-6868 to speak with a solar expert, or request your free estimate today to get your project started.

What Changed: The Federal Solar Tax Credit Has Expired

The biggest shift regarding solar incentives happened on December 31, 2025, when the federal solar energy tax credit (also known as the solar Investment Tax Credit, or ITC) officially expired for homeowner-owned residential solar systems.

For years, the ITC offered homeowners a 30% tax credit on the total cost of installing a solar panel system.

On a $25,000 installation, that meant $7,500 back on your federal tax return by filing IRS Form 5695. It was the single largest financial incentive driving residential solar adoption across the country.

So what does this mean for Arizona homeowners in 2026 and beyond?

If you already had your system installed and operational before the deadline, you can still claim the credit on your 2025 tax return, but for new installations moving forward, the federal residential tax credit is no longer available for homeowner-owned systems.

However, Arizona’s state-level incentives remain intact, and there are still several ways to significantly reduce your cost of going solar.

Arizona’s Residential Solar Tax Credit

Arizona offers its own state-level solar tax credit through the Credit for Solar Energy Devices program. This incentive gives homeowners a credit worth 25% of the cost of purchasing and installing a solar energy system, up to a maximum of $1,000.

Here is how it works:

The credit applies to your Arizona state income tax liability.
You claim it using Arizona Form 310.
If your tax bill is less than $1,000, you can carry the unused portion forward for up to five years.
The system can be installed on your primary or secondary residence.
At the time of this writing, there is no announced expiration date for this program.

While $1,000 may seem modest compared to the former 30% federal credit, every dollar counts, and this credit is straightforward to claim.

Property Tax Exemption for Solar Energy Systems

One of the most valuable and often overlooked Arizona solar incentives is the property tax exemption. When you add a solar panel system to your home, it increases the property’s market value. In most states, that would mean a higher property tax bill.

In Arizona, solar energy equipment is exempt from property tax assessments. Your local assessor treats the added value of your solar system as if it does not exist for tax purposes.

For a solar system that adds $15,000 to $20,000 in home value, this exemption can save you hundreds of dollars annually over the life of the system.

This is particularly relevant for Tucson homeowners, where residential property values have been rising steadily. A solar installation can boost your home’s resale appeal, and solar panels can increase home value by roughly 4% on average, without increasing your tax burden.

If you are considering buying a solar-equipped home in the Tucson area, working with a knowledgeable Marana realtor, such as Liz Stoughton at Your Marana, can help you find properties that already benefit from solar energy savings.

Solar Sales Tax Exemption

Arizona also exempts solar panel equipment and installation from state sales tax. Retailers can deduct the cost of solar energy devices from their transaction privilege tax base, which means you will not pay Arizona’s 5.6% state sales tax on your solar purchase.

On a $25,000 system, that is roughly $1,400 in savings you would have paid otherwise. Combined with the state tax credit and property tax exemption, these three incentives alone can save Arizona homeowners more than $2,500 on a typical residential solar installation.

Net Billing in Arizona: How Your Excess Solar Energy Earns Credits

Arizona no longer offers traditional net metering, but homeowners who connect their solar panel system to the grid can take advantage of net billing.

Under net billing, you earn credits when your solar panels produce more electricity than your home uses and that excess energy flows back to the grid.

How this works depends on your utility provider:

Tucson Electric Power (TEP): TEP customers with solar systems receive bill credits for exported energy at a rate that is typically lower than the full retail rate. The exact rate depends on when the energy is exported and your specific rate plan.
Arizona Public Service (APS): APS uses a similar export rate structure. Solar customers earn credits that offset their electricity costs, though the credit value varies by time of day and rate schedule.
Salt River Project (SRP): SRP’s solar rate plans factor in demand charges and time-of-use pricing. Solar customers should carefully evaluate which plan offers the best return.

Net billing credits decrease in value over time for new enrollees, so the sooner you go solar, the more favorable your export rate will be locked in.

Utility-Specific Solar Programs and Rebates

Beyond net billing, several Arizona utilities offer additional programs for solar homeowners:

SRP Demand Management System Rebate: Salt River Project offers a $250 rebate when you purchase and install a rooftop demand management system from a preferred vendor. This works alongside solar to help manage peak energy usage.
Mohave Electric Cooperative SunWatts Program: If you are a Mohave Electric customer, you can earn a rebate of $0.05 per watt of solar installed, up to $2,500. For a typical 7 kW residential system, that is up to $350 in direct savings.
Solar for All Arizonans: This state program provides low-interest loans and grants for residential rooftop solar installations, specifically targeting low- and moderate-income households. If you qualify, this can dramatically reduce your upfront costs.

Solar Leasing Still Benefits From Federal Incentives

Although the federal solar panel tax credit has expired for homeowner-owned systems, financial institutions that fund leased residential solar retain access to federal incentives under Section 48E through 2027.

This means solar leasing companies can still offer competitive pricing by passing some of those savings along to you.

For homeowners who prefer to avoid large upfront costs, leasing remains a viable path to solar energy in Arizona. Many lease programs now include:

Zero or low upfront installation costs.
Predictable monthly payments that are often lower than your current electric bill.
Maintenance coverage for the life of the lease.
A path to ownership, typically after five to six years.

Cash purchases still deliver the fastest ROI and greatest long-term savings, but solar financing through loans remains another popular option. However, for households looking for flexibility, leasing fills an important gap in the post-ITC years.

How Much Can You Save With Arizona Solar Incentives?

Even without the federal tax credit, Arizona homeowners can still see significant savings. Here is a breakdown for a typical 7 kW residential solar system:

Average system cost before incentives: $20,000 to $25,000
Arizona solar tax credit (25%, up to $1,000): -$1,000
Sales tax exemption savings (approximately 5.6%): -$1,120 to $1,400
Property tax exemption: Ongoing annual savings of $150 to $250+
Net billing credits: Ongoing monthly savings on your electric bill
Total first-year incentive savings: Approximately $2,120 to $2,400+

For Tucson homeowners, the average payback period for a solar panel system is approximately 8 to 10 years, after which you enjoy essentially free electricity for the remaining 15 to 20 years of the system’s life.

That adds up to tens of thousands of dollars in energy savings over the lifetime of your solar investment.

The cost of solar panels in Arizona has also dropped significantly over the past decade, making the economics even more favorable. With Tucson Electric Power rates continuing to rise, locking in solar energy production now protects you from future rate increases.

What Arizona Homeowners Should Do Next To Maximize Solar Savings

If you are a homeowner in Tucson or Southern Arizona considering solar energy in 2026, here is how to take full advantage of available residential solar incentives:

Get multiple quotes from reputable local solar installers to compare pricing, equipment, and financing options.
Claim the Arizona state tax credit by filing Arizona Form 310 with your state return after installation.
Confirm your utility’s net billing rates with TEP, APS, or SRP before finalizing your system size.
Consider solar battery storage to maximize your energy independence and reduce reliance on grid power during peak hours when rates are highest.
Ask about solar financing options, including loans and lease programs that may still benefit from federal incentives.
Check eligibility for the Solar For All Arizonans program if you are a low- or moderate-income household.

Saguaro Solar has been helping Tucson homeowners navigate solar incentives and solar installation for years.

Whether you are ready to go solar today or still exploring your options, our team can walk you through Arizona solar programs and the current incentive options and help you find the best path forward.

Once your system is up and running, we’ll continue to provide the support you need with solar repair services and solar maintenance services.

Ready to start saving with a new solar installation? Call us at (520) 704-6868 to learn more or schedule your free estimate today.