Arizona's incentive picture centers on a modest credit and a strong sun resource
A modest but real state tax credit
Arizona's residential solar tax credit under ARS 43-1083 sits at 25% of your installation cost, capped at a $1,000 lifetime maximum per residence. On most systems today, the cap kicks in well before the full 25% would, since a $4,000 system is the breakeven point where 25% equals exactly $1,000. It has no expiration date and continues into 2026 unaffected by the federal residential credit's expiration.
The sales tax exemption covers more than people expect
Arizona waives its 5.6% state transaction privilege tax on residential solar equipment and installation, and this exemption covers panels, inverters, batteries, and labor, not just the hardware itself. On a $25,000 system, that's roughly $1,400 in avoided tax. Some cities and counties add their own local sales tax on top, which this state exemption doesn't cover, so check your local rate with your installer. Once you've totaled your incentives, the combined loan and rebate timing tool can show how they affect your monthly payment if you're financing the rest of the system. Compare this against other states on the Nevada incentive estimator.
The property tax exemption is permanent
Under ARS 42-11054, solar energy devices are considered to add no value to the property they're installed on, so the added value your system gives your home is fully excluded from property tax assessment for as long as you own it, with no cap on the term. Without this exemption, a typical Phoenix-area installation could add $150 to $300 a year in property taxes depending on your county's rate. Use the property tax exemption savings calculator for a more detailed multi-year projection.
Your utility matters more than the state incentives combined
Arizona's three main utilities each run meaningfully different rate structures for solar customers. APS uses a net billing model with demand charges and pays a below-retail rate for exported power. SRP retired its net metering plans in November 2025 in favor of its own net billing structure. This utility-level difference often swings your payback period more than the state incentives on this page, so pair your state-level result with a careful look at your specific utility's current rate plan.