Arizona solar incentives and tax credits: what actually exists in 2026
The 30% federal credit ended December 31, 2025. Arizona's 25% state credit, capped at $1,000, did not. Here is every incentive still on the books, the statutes behind them, and the three that quietly expired.
In this article
- What survives, at a glance
- The federal credit: what happened and who can still claim it
- Arizona’s state credit: 25 percent, capped at $1,000
- Will there be a solar tax credit in Arizona in 2026?
- Sales tax: the equipment deduction survived, the labor one did not
- Property tax: the system adds no assessed value
- Utility programs: one real one, and a lot of confusion
- Does Arizona have a solar rebate program?
- Putting it together on a real system
- Related reading
The single most important fact about Arizona solar incentives in 2026 is a subtraction. The 30 percent federal Residential Clean Energy Credit is gone. It was repealed by Section 70506 of Public Law 119-21, and it does not apply to expenditures made after December 31, 2025.
A very large amount of solar content on the internet has not caught up. If you are reading a guide that stacks a 30 percent federal credit on top of Arizona’s state credit and quotes you a combined number, that guide is describing 2024.
Here is what is actually left, with the statute or form number for each so you can check it yourself.
$7,500
Incentive value lost on a $25,000 system between a 2025 and a 2026 completion
Federal Residential Clean Energy Credit repealed by Public Law 119-21 § 70506 for expenditures made after December 31, 2025
From $8,500 combined to $1,000 from Arizona alone
What survives, at a glance
| Incentive | Status in 2026 | Value | Authority |
|---|---|---|---|
| Federal Residential Clean Energy Credit (25D) | Repealed for expenditures after 2025-12-31 | Was 30% | Pub. L. 119-21 § 70506 |
| Arizona Solar Energy Credit | Active | 25% of cost, max $1,000 | A.R.S. § 43-1083 |
| Arizona sales tax deduction on equipment | Active | Removes state TPT from equipment cost | A.R.S. § 42-5061(M) |
| Arizona property tax treatment | Active | System adds no assessed value | A.R.S. § 42-11054(C)(2) |
| Arizona sales tax deduction on installation labor | Expired for periods after 2016-12-31 | Was a prime contracting deduction | A.R.S. § 42-5075(13) |
| Solar for All Arizonans | Unavailable since 2025-08-07 | Was $156M in loans and grants | EPA termination notice |
| SRP Battery Partner | Active pilot | $55 per average kW, twice yearly | SRP program terms |
| Utility rebates and battery payments | Active, utility-specific (see detail) | Up to $2,500 cash rebate; $55-$120 per kW battery payments | See Arizona solar rebates |
Everything below expands on those rows.
The federal credit: what happened and who can still claim it
Section 25D of the Internal Revenue Code gave homeowners a 30 percent credit on qualified clean energy property, including solar panels and battery storage of at least 3 kWh capacity. It was scheduled to run through 2034 with a step-down starting in 2033.
Public Law 119-21, enacted in July 2025 and commonly called the One Big Beautiful Bill Act, ended it early. The operative text of Section 70506 (opens in a new tab) strikes the phrase “to property placed in service after December 31, 2034” and replaces it with “with respect to any expenditures made after December 31, 2025.” The step-down paragraphs were struck entirely.
The IRS page on the credit (opens in a new tab), last reviewed July 4, 2026, states it plainly: “The credit is not available for any property placed in service after December 31, 2025.”
The word “expenditure” is doing real work here
The statutory trigger is when an expenditure is made, not when you paid, and not when you signed. IRS FAQ guidance on the Public Law 119-21 modifications (opens in a new tab) says “an expenditure with respect to an item is treated as made when the original installation of the item is completed.”
If completion slipped past December 31, 2025, the guidance is explicit that the expenditure “will be treated as made after December 31, 2025, which will prevent the taxpayer from claiming the section 25D credit.” Paying a deposit in November 2025 for a system finished in February 2026 does not help.
If your system was finished in 2025
You can still claim it, on a 2025 return.
The credit goes on Form 5695, Part I. The relevant lines:
| Line | What it captures |
|---|---|
| 1 | Qualified solar electric property costs |
| 5a | Whether battery storage has at least 3 kWh capacity. Answer no and the battery does not qualify |
| 5b | Battery storage costs |
| 6a | Sum of lines 1 through 5b |
| 6b | Multiply line 6a by 30% |
| 12 | Credit carryforward from 2024 |
| 14 | Limitation based on tax liability |
| 15 | Final credit, also entered on Schedule 3 (Form 1040), line 5a |
| 16 | Credit carryforward to 2026 |
Line 16 matters more than people realize. The credit is nonrefundable, so it only offsets tax you actually owe. If your 2025 liability was smaller than your credit, the remainder carries into 2026 and beyond. The credit itself is dead for new installations, but an unused balance from a 2025 system keeps working.
The 2025 filing deadline was April 15, 2026. That has passed. If you were on extension or need to amend, that is a conversation for a tax professional, not a blog post.
Arizona’s state credit: 25 percent, capped at $1,000
This one is still on the books, and the statute contains no sunset clause.
A.R.S. § 43-1083 (opens in a new tab) provides a credit equal to “twenty-five percent of the cost of the device,” with a hard ceiling: “The maximum credit in a taxable year may not exceed one thousand dollars.”
The cap is stricter than it first looks. The statute also blocks stacking across years: you “may not cumulate over different tax years tax credits under this section exceeding, in the aggregate, one thousand dollars for the same residence.” One thousand dollars per residence, total, ever.
Which means the credit maxes out at a $4,000 system cost. Above that, every additional dollar you spend earns nothing from this credit. On a typical residential system the credit is a flat $1,000.
Arizona Solar Energy Credit by system cost
The credit is 25 percent of the cost of the device, capped at $1,000 per residence in aggregate across all tax years. The cap binds at a $4,000 system, so the last three columns are identical.
View the numbers as a table
| System cost | Value ( USD) |
|---|---|
| $2,000 | 500 USD |
| $4,000 | 1000 USD |
| $10,000 | 1000 USD |
| $24,000 | 1000 USD |
Computed directly from A.R.S. § 43-1083, which sets the credit at 25 percent of cost with a $1,000 maximum. The system costs shown are illustrative reference points, not typical prices.
The details that trip people up
It is nonrefundable. The Department of Revenue describes it as “A nonrefundable individual tax credit for an individual who installs a solar energy device in taxpayer’s residence located in Arizona.” If you owe no Arizona income tax, you get nothing this year. Unused credit carries forward “for not more than five consecutive taxable years.”
Leases and power purchase agreements do not qualify. The Form 310 instructions are blunt: “If you lease or enter into a power purchase agreement (PPA) for the solar energy device, that device does not qualify for this credit.” This is a genuine fork in the road. A third-party-owned system forfeits the state credit entirely, and now that the federal credit is gone, ownership structure carries more weight in the math than it did two years ago.
Batteries and inverters count. The Form 310 instructions include “Solar photovoltaic systems - collectors, batteries, inverters, solar system related wiring” in qualifying costs.
You need a compliance certificate from the seller. Per the instructions: “The person who sells you your solar energy device must furnish you with a certificate stating that the solar energy device complies with Arizona’s solar energy device requirements.” Get it at the time of sale. Chasing it down two years later at tax time is a bad experience.
Second homes get a partial allowance. A taxpayer “may claim a credit of up to $1,000 for a second personal home,” but is “limited to a maximum credit of $1,000 in the taxable year” across both properties. Two homes do not mean $2,000.
How to claim it
File Arizona Form 310 along with Arizona Form 301 (Nonrefundable Individual Tax Credits and Recapture). The 310 instructions state you “must also complete Arizona Form 301” and include both with the return.
One scheduling note: the Department of Revenue publishes each tax year’s Form 310 in the following January. The 2025 form was published January 1, 2026. A tax year 2026 form was not yet posted as of August 9, 2026, which is normal and not a signal about the credit’s status.
Will there be a solar tax credit in Arizona in 2026?
Yes, and it is the same one described above. A.R.S. § 43-1083 has no expiration date written into it. Nothing in the 2025 federal repeal touches Arizona’s state credit, which is enacted under state income tax law and funded independently.
What people often mean when they ask this question is whether the combined incentive is still worth something. Honest answer: much less than it was. A homeowner who finished a $25,000 system in 2025 could claim $7,500 federally plus $1,000 from Arizona. The same system finished in 2026 gets $1,000. That is a $7,500 swing on identical hardware, and it changes payback math substantially.
Sales tax: the equipment deduction survived, the labor one did not
Two separate provisions, and only one is still alive. Almost every guide conflates them.
Equipment is still deductible. A.R.S. § 42-5061(M) (opens in a new tab) states: “There shall be deducted from the tax base the amount received from sales of solar energy devices. The retailer shall register with the department as a solar energy retailer.”
The registration requirement is a condition, not a formality. The use tax counterpart, § 42-5159(E) (opens in a new tab), says the tax “does not apply to the purchase of solar energy devices from a retailer that is registered with the department as a solar energy retailer or a solar energy contractor.” Buy from an unregistered seller and the exemption does not attach.
Installation labor is no longer deductible. A.R.S. § 42-5075(13) (opens in a new tab) provided a prime contracting deduction for “the gross proceeds of sales or gross income derived from a contract to provide and install a solar energy device.” Read the qualifying clause: “For taxable periods beginning from and after December 31, 1996 and ending before January 1, 2017.”
It expired more than nine years ago. If a quote tells you the whole installed cost is tax exempt, that is wrong under current statute.
“Solar energy device” itself is defined at A.R.S. § 44-1761(8) (opens in a new tab) as a system “designed primarily to provide heating, to provide cooling, to produce electrical power,” and it “includes a distributed energy generation system.”
Property tax: the system adds no assessed value
This is the quietest incentive and arguably the most durable, because it applies every year for as long as you own the house.
A.R.S. § 42-11054(C)(2) (opens in a new tab) instructs assessors that “Solar energy devices, as defined in section 44-1761, grid-tied photovoltaic systems and any other device or system designed to produce solar energy primarily for on-site consumption are considered to add no value to the property on which such a device or system is installed.”
Add $25,000 of equipment to your roof, and your assessed value does not move. Subsection (C)(3) handles the case where the system is characterized as personal property, routing valuation to § 42-13056.
One correction worth making because it circulates widely: A.R.S. § 42-11132 is not the solar statute. It governs “Property leased to educational institutions.” Guides that cite it for solar are citing the wrong section.
Utility programs: one real one, and a lot of confusion
SRP Battery Partner
This is open and it is the only live Arizona utility incentive for residential storage found in this review.
Per SRP’s program page (opens in a new tab), participants “earn $55* per average kilowatt in incentives twice a year,” paid “at the end of the summer and winter seasons in the form of bill credits.” The incentive is variable: SRP notes it is “based on variables such as system storage size, customer load and system settings.”
Two constraints to know before counting on it. SRP describes it as “a pilot program, approved for five years (ending April 30, 2030) and available to a maximum of 5,000 customers.”
Understand what this is. It is a demand-response payment for letting SRP call on your battery, not a rebate that reduces your purchase price. It pays out over time, and only if you keep participating.
What is not available
Neither SRP nor APS appears to offer an upfront rebate for a homeowner-purchased solar system. SRP’s residential rebate menu covers air conditioners, cool roofs, duct sealing, heat pump water heaters, insulation, LED lighting, shade screens, smart thermostats, window replacement, and EV chargers. No solar or battery purchase rebate appears on it.
APS’s solar page (opens in a new tab) offers no purchase incentive either. On credits it says only to consult a tax professional and check the DSIRE database.
APS does run Solar Partner and Solar Communities, but those are APS-owned-equipment programs where APS installs panels on participating roofs and pays a bill credit. They are not rebates on a system you buy. Confirm current terms directly with APS if you are considering either.
Solar for All: terminated
Arizona’s Governor’s Office of Resiliency was selected in 2024 to administer a $156 million EPA Solar for All award, with a residential component providing “low-interest loans and grants for distributed residential rooftop solar photovoltaic installations to homeowners located in geographically dispersed low- and moderate-income households.”
That program is not running. The state page (opens in a new tab) states: “The Office of Resiliency received a termination notice from the U.S. Environmental Protection Agency regarding the Solar for All grant on August 7, 2025. The program is unavailable until further notice.”
Confusingly, that same page still carries legacy text saying the program “is in development and will be available for participants in 2026.” Both sentences were live as of August 9, 2026. Treat the termination notice as the operative statement, and do not build a budget around this program.
Does Arizona have a solar rebate program?
No statewide program, but real rebates and payments exist at the utility level.
Arizona’s state-level solar benefits are a tax credit, a sales tax deduction, and a property tax valuation exclusion. None of them is a rebate. A rebate reduces what you pay at purchase, and all three of Arizona’s state mechanisms operate through the tax system months later, with two of them requiring you to have tax liability to benefit at all.
Below the state level, Mohave Electric Cooperative pays a genuine cash-per-watt rebate on residential solar, and APS, SRP, and TEP each pay a seasonal battery performance payment. Arizona solar rebates: which ones are real and which are myths verifies every program and dollar amount against the utility’s own terms.
Putting it together on a real system
Illustrative example, with every assumption stated. A homeowner-purchased $24,000 system completed in 2026.
| Line item | 2026 |
|---|---|
| System cost | $24,000 |
| Federal credit | $0 (repealed) |
| Arizona credit | $1,000 (capped) |
| Sales tax on equipment | Deducted at point of sale |
| Sales tax on labor | Applies |
| Net after incentives | ~$23,000 |
The same system completed in 2025 would have netted roughly $15,500 after a $7,200 federal credit and the $1,000 state credit.
Incentive value on the same $24,000 system, by completion year
Illustrative, using the $24,000 homeowner-purchased system above. The Arizona credit is unchanged between the two years because A.R.S. § 43-1083 has no sunset. The entire difference is the repealed federal credit. Both figures assume enough tax liability to absorb the full credit.
View the numbers as a table
| Category | Completed in 2025 ( USD) | Completed in 2026 ( USD) |
|---|---|---|
| Federal 25D credit | 7200 USD | 0 USD |
| Arizona credit | 1000 USD | 1000 USD |
Federal credit repealed by Public Law 119-21 § 70506 for expenditures made after December 31, 2025. Arizona credit per A.R.S. § 43-1083, 25 percent of cost capped at $1,000.
That is the honest before-and-after, and it is the reason the payback conversation in Arizona changed shape this year. The remaining economics depend far more on your utility, your rate plan, and your export rate than on incentives.
Incentive figures in this article were verified against Arizona Revised Statutes, Arizona Department of Revenue forms, IRS guidance, and the enrolled text of Public Law 119-21 on August 9, 2026. Tax law changes. Confirm current rules with a tax professional before filing.
Related reading
- Is solar worth it in Arizona? works through payback with the post-2025 incentive picture.
- APS solar buyback rates explained covers the export rate, which now matters more than incentives to total return.
- APS rate plans explained covers the retail rates solar offsets.
- Arizona solar rebates: which ones are real and which are myths is the detailed rebate-by-rebate breakdown behind the row above.
- The federal solar tax credit ended walks through the repeal mechanics and who can still file for a prior year.
- Filing IRS Form 5695 for a prior-year system covers the paperwork for claiming what remains.
- Incentives
- Solar Basics
- Arizona
More on Incentives
Arizona solar rebates in 2026: which ones are real and which are myths
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