Solar Incentives in Arizona (2026)
Arizona residents installing rooftop solar can combine the 30% federal Investment Tax Credit (ITC) with a state-specific credit (25% state tax credit up to $1,000). Net-metering rules and property/sales tax exemptions are the other big levers. Arizona avg installed cost: $2.60/watt (state avg, 2026). Federal ITC value: $4,680. Additional state incentives (below) may reduce net cost further. Every U.S. state gets the 30% federal ITC. It applies to the gross install cost, including panels, inverters, labor, and permit fees. For a 6.0 kW system in Arizona at $2.60/watt, that’s a credit of $4,680 against your federal income tax. The credit is refundable-carryforward — unused portions roll to future tax years. Valid through 2032. 25% state tax credit up to $1,000 This stacks on top of the federal credit. Consult a local CPA to confirm current-year limits. Replaced by 'net billing' — exports valued at utility avoided cost (~30-50% of retail) Net metering determines how much you’re credited for excess solar energy exported to the grid. "1:1" or "full retail" is the best — you get the same rate you pay. "Avoided cost" or "net billing" pays substantially less (often 25-50% of retail). State income-tax credit + property/sales-tax exemption make AZ solar-friendly despite the net-metering downgrade. Utility rebates change frequently. Verify current terms with your specific utility (not just "the state") before signing an installer contract. A typical 6.0 kW rooftop system in Arizona costs about $15,600 gross → $10,920 after the federal ITC. With Arizona’s electricity rate of 15.48¢/kWh, this system saves about $1,719/year — paying back in 6.4 years on the federal credit alone. Add the state-level items above and the net cost drops further. Affiliate links — we may earn a small commission at no cost to you. Yes — the federal ITC and Arizona’s state credit stack independently. However, some utility rebates reduce the "cost basis" the federal ITC applies to. Consult a CPA. The ITC reduces your federal income-tax liability for the year the system is placed in service (i.e., commissioned and producing power). If your tax owed is less than the credit, unused portions roll forward. You do not receive a check. Rebates from utilities are generally not taxable (they reduce your cost basis). Federal tax credits are not income. Some state credits may be treated differently — check your state Department of Revenue.1. Federal Investment Tax Credit (ITC)
2. State income-tax credit
3. Net metering rules in Arizona
4. Property & sales tax exemptions
5. Utility rebates & notes
Bottom line for Arizona
Before you sign an installer contract
FAQ
Can I combine federal ITC and Arizona’s state incentives?
When do I get the federal ITC money?
Do rebates and credits get taxed?