Solar Tax Credits & Incentives — 2026 Arizona Guide

Published: 2026 · Reading time: 5 minutes · Tucson, AZ

Going solar in Tucson has never been more affordable — and the incentives available in 2026 can cut your net cost by 40-50%. Here's every credit, rebate, and incentive Arizona homeowners should know about.

1. Federal Solar Investment Tax Credit (ITC) — 30%

The federal solar tax credit lets you deduct 30% of your total system cost from your federal income taxes. This is the single biggest incentive available. On a $20,000 system, you get $6,000 back. The credit applies to panels, inverters, racking, labor, permits, and battery storage — essentially everything on your installer's invoice. The 30% rate is locked through 2032, then drops to 26% in 2033, 22% in 2034, and expires for residential in 2035. If you can't use the full credit in one year (your tax liability is less than the credit), the remainder rolls forward to future years. There's no income cap and no maximum system size.

2. Arizona State Solar Tax Credit — 25% (up to $1,000)

Arizona offers a state income tax credit worth 25% of your system cost, capped at $1,000. If your system costs $4,000 or more, you max out the $1,000 credit. This is in addition to the federal credit — you claim both. The Arizona credit is non-refundable (can't exceed your state tax bill) but carries forward for up to 5 years.

3. Arizona Solar Equipment Sales Tax Exemption

When you purchase solar panels, inverters, and related equipment in Arizona, you pay zero state sales tax (5.6%) and typically no local sales tax either. On a $20,000 system, that saves you $1,120+ compared to buying non-exempt equipment. Most installers automatically apply this exemption — confirm with your provider.

4. Net Metering (TEP & Other Arizona Utilities)

Under Arizona's net metering policy (also called net billing), your utility credits you for excess solar energy sent to the grid. With Tucson Electric Power (TEP), you receive a credit on your bill that offsets future usage. During sunny spring days when your system overproduces, those credits offset your summer AC usage. TEP's export rate is approximately $0.07-0.09 per kWh — lower than the retail rate, which is why battery storage (storing your own solar for evening use) has become more popular under current net metering structures.

5. Property Tax Exemption

In Arizona, solar panels are exempt from property tax assessments. Even though solar adds $15,000-$25,000 to your home's market value, your property tax bill won't increase. This is permanent state law — the exemption doesn't expire.

Total Incentive Example: 6kW System in Tucson

System cost: $18,000
Federal tax credit (30%): -$5,400
Arizona state credit: -$1,000
Sales tax savings: ~$1,008
Net cost: approximately $10,592
Plus: no property tax increase, ongoing net metering credits, and $1,200-$1,800/year in electricity savings.

Ready to claim these incentives? Get matched with a Tucson solar pro who will walk you through every available credit. Free estimate, no obligation. Call (520) 593-0496.