If you're considering going solar in Arizona, you’re in luck—both the state and certain utilities offer financial incentives that can significantly reduce your upfront costs.
At the state level, Arizona provides a Residential Solar Energy Tax Credit, which lets homeowners deduct 25% of the cost of installing a solar energy system from their state income taxes, up to a maximum of $1,000.
This credit applies to both photovoltaic (PV) panels and solar water heating systems, as long as they’re installed on your primary residence.
Unlike a deduction, which reduces taxable income, this is a nonrefundable credit—it directly lowers your tax bill dollar-for-dollar, though any amount exceeding your tax liability can’t be refunded or carried forward.
You’ll claim it using Form 336 when filing your Arizona state return, and full details are available through the Arizona Department of Revenue.
Beyond the state credit, many Arizona utilities offer their own rebates or performance-based incentives.
For example, Salt River Project (SRP) and Arizona Public Service (APS) have historically provided upfront rebates or bill credits for customers who install solar, though program specifics change frequently.
The most reliable way to check current local incentives is through the Database of State Incentives for Renewables & Efficiency (DSIRE), which tracks every active solar incentive by zip code and utility territory.
It’s also worth noting that Arizona does not impose a sales tax on the purchase of solar equipment—a small but helpful exemption that further lowers system costs.
While the state credit caps at $1,000, the federal Investment Tax Credit (ITC) remains far more substantial, currently offering 30% of total system costs with no upper limit, and it can be combined with Arizona’s credit.
If you’re trying to estimate your total savings, I’ve broken down typical system pricing and payback timelines in my guide on how much solar costs in Arizona in 2024.
Not all parts of Arizona receive equal sunlight year-round—Flagstaff, for instance, sees more cloud cover and snow—but solar still performs well there, as I explain in does solar work in Flagstaff Arizona.
Finally, choosing a reputable installer matters, especially since they’ll often handle incentive paperwork for you.
If you’re in the Phoenix metro area, I’ve reviewed top local providers in my list of the best solar companies in Phoenix.
According to researchers at the University of Arizona – Institute of the Environment, residential solar adoption has surged across the state due to falling panel prices and these layered incentives, making now an especially strategic time to go solar.
Just remember: to qualify for the Arizona tax credit, your system must be placed in service during the tax year you’re claiming it, and you’ll need documentation from your installer showing total eligible costs.