Arizona Solar Panels

Arizona’s Residential Solar Energy Tax Credit allows homeowners to claim 25% of the total cost of a qualifying solar or wind energy device installed at their primary or secondary residence, up to a maximum credit of $1,000. Qualifying systems include photovoltaic (solar panel) systems, solar domestic water heating systems, solar pool and spa heating systems, passive solar building systems, solar daylighting systems, and wind turbines. This credit is applied directly against your Arizona state income tax liability.

If the credit exceeds your tax liability in the year it is claimed, the unused portion can be carried forward for up to five consecutive tax years — so you won’t lose the benefit if you don’t owe enough taxes in a single year. There is no expiration date on this program, and it is currently active for 2026 installations.

To claim the credit, complete Arizona Form 310 and attach it to your state income tax return for the year the system was installed. The official form and instructions are available through the Arizona Department of Revenue at azdor.gov. Note that the $1,000 cap applies regardless of how many solar devices are installed, so the maximum benefit per household is $1,000 total.

Arizona provides a full sales tax exemption on the purchase of qualifying solar energy devices and equipment, including solar panels, inverters, mounting hardware, and installation labor. This exemption is applied automatically at the point of sale by the seller — homeowners do not need to file any paperwork to receive this benefit. The state sales tax rate is approximately 5.6%, though local jurisdictions may add additional taxes, so actual savings will vary by location.

Eligible equipment includes photovoltaic systems, solar water heating systems, solar space heating systems, solar thermal electric systems, passive solar systems, wind energy devices, solar pool heating systems, and daylighting systems. The exemption applies to both residential and commercial installations with no maximum dollar cap, making it a valuable savings tool for larger systems.

It is important to note that the sales tax exemption does not automatically extend to standalone battery storage systems, controls, or accessories that are not considered an integral part of the solar energy system. If you are pairing a battery with a new solar installation, confirm with your installer which components qualify. This exemption is authorized under Arizona Revised Statutes and has been in effect since 1997.

Under Arizona Revised Statutes §42-11054, the increase in a residential property’s assessed value resulting from the installation of a solar energy system is fully excluded from property tax calculations. This means that even though solar panels can significantly increase your home’s market value, your annual property tax bill will not go up as a result of the installation. This exemption is permanent and applies statewide to residential, commercial, and industrial properties.

For most Phoenix-area (Maricopa County) homeowners, this translates to an estimated savings of $100–$300 per year in property taxes, depending on the size of the system and the local tax rate (millage rate). In counties with higher millage rates, the annual savings can be even greater. Over the life of a solar system (25+ years), this exemption can represent thousands of dollars in cumulative tax savings.

The exemption is generally applied automatically, but homeowners may be required to submit documentation of system costs and equipment to their county assessor. It is recommended to contact your local county assessor’s office to confirm the process in your jurisdiction and ensure the exemption is properly recorded. No annual renewal is required once the exemption is in place.

The federal Battery Storage Investment Tax Credit allows homeowners to claim 30% of the total installed cost of a qualifying battery storage system directly against their federal income tax liability. To qualify, the battery must have a minimum capacity of 3 kWh. Critically, the battery does not need to be paired with solar panels — standalone battery installations also qualify for the full 30% credit. The credit covers the cost of the battery unit, inverter, installation labor, and any necessary electrical panel upgrades.

As a practical example, a Tesla Powerwall 3 with a fully installed cost of approximately $16,000 would generate a federal tax credit of $4,800. For a typical home battery system costing between $12,000 and $16,000, homeowners can expect a credit of $3,600 to $4,800. This credit is currently set at 30% through 2032, making 2026 an excellent time to take advantage of it. If the credit exceeds your tax liability in the year of installation, the unused portion can be carried forward to future tax years.

To claim the credit, file IRS Form 5695 (Residential Energy Credits) with your federal tax return for the year the battery system is placed in service. Note that this credit applies to the battery storage component specifically — the federal residential solar panel tax credit (Section 25D) has expired as of December 31, 2025, and is no longer available for new solar panel installations. Always consult a qualified tax professional to confirm your eligibility and maximize your benefit.

Arizona Public Service (APS) offers the Storage Rewards Pilot program, which pays residential battery storage owners for contributing stored energy back to the grid during high-demand periods. Enrolled homeowners earn approximately $110 per average kilowatt of battery output released during the event season, which runs from May 1 through October 31. APS may call up to 60 discharge events per season, each lasting one to four hours. A typical 13.5 kWh battery with 6 kW of output capacity can earn approximately $660 per season.

This program replaces the original APS Residential Battery Pilot, which offered an upfront rebate of up to $3,750 and is now closed to new applicants. The Storage Rewards Pilot is an ongoing, performance-based program open for enrollment. The pilot is designed to run for five years with up to 5,000 participants, so enrollment capacity may be limited. Participants must have a qualifying battery storage system installed at their APS-served home.

To enroll, contact APS directly through their website or customer service line. This program is separate from the APS Cool Rewards smart thermostat program and is specifically designed for battery storage owners. Because APS operates under a net billing structure (not net metering), pairing a battery with solar and enrolling in Storage Rewards is one of the most effective ways to maximize the financial return on a solar-plus-storage investment in the APS service territory.

Salt River Project (SRP) offers the Battery Partner Program, a virtual power plant (VPP) initiative that pays residential battery storage owners for helping manage grid demand during peak periods. Compatible battery systems — including FranklinWH and other qualifying brands managed through EnergyHub — can be enrolled to automatically discharge during high-demand events called by SRP. In return, homeowners receive ongoing financial incentives for their participation.

This program is particularly valuable for SRP solar customers because SRP retired all traditional net metering plans in November 2025. All new solar customers are now on time-of-use net billing plans with export rates of approximately $0.028/kWh — well below retail rates. Pairing solar with a battery and enrolling in the Battery Partner Program is one of the best strategies to improve the economics of solar in the SRP service territory by earning additional revenue from stored energy.

SRP also charges approximately $32/month in fixed charges for solar customers, making battery storage and demand management programs even more important for offsetting costs. To enroll, contact SRP directly or ask your solar installer about compatible battery systems that are pre-approved for the program. Program details, payment structures, and eligibility requirements should be verified directly with SRP, as terms may be updated.

Tucson Electric Power (TEP) offers the Energy Storage Rewards Program, which pays residential battery storage owners an annual performance-based incentive of approximately $120 per kilowatt of average battery output, totaling roughly $720 per year for a typical residential battery system. TEP may call up to 100 control events per year, with each event lasting a maximum of four hours, during which enrolled batteries discharge to help manage peak grid demand.

This program provides a meaningful ongoing revenue stream for TEP customers who invest in battery storage. Since TEP transitioned from net metering to net billing in 2018 — with current export rates of approximately $0.057/kWh compared to retail rates of around $0.15/kWh — batteries are essential for maximizing the value of solar energy in the TEP service territory. Customers who installed solar before TEP’s 2018 net metering transition may still be grandfathered into higher net metering rates.

To participate, homeowners must have a qualifying battery storage system installed at their TEP-served residence and enroll in the program through TEP. The program is currently active and accepting participants. Contact TEP directly or visit tep.com for current enrollment requirements, compatible battery models, and up-to-date payment rates, as program terms are subject to change.

Mohave Electric Cooperative’s SunWatts Renewable Energy Program offers residential customers a cash rebate of $0.05 per watt of installed solar capacity, with a maximum rebate of $2,500. For a typical 7 kW residential solar system — the average size in Arizona — this translates to a rebate of approximately $350. Larger systems can earn up to the $2,500 cap. The program serves customers in northwestern Arizona, including the Bullhead City, Kingman, and Lake Havasu City areas.

This rebate is available for residential solar photovoltaic systems up to 50 kW in size. A critical requirement is that homeowners must submit a reservation before installation begins — rebates will not be honored for systems installed without prior approval. Funding is subject to availability, so it is important to apply early. To start the process, contact Mohave Electric Cooperative at (928) 758-0539 or email [email protected].

The SunWatts program also includes a separate rebate for solar water heating systems, calculated at $0.75 per kWh of estimated first-year energy savings, typically yielding $1,500–$2,500 for residential solar water heaters. Combined with the state sales tax exemption, property tax exemption, and state income tax credit, Mohave Electric customers have access to a strong stack of incentives that can significantly reduce the net cost of going solar.

In addition to its solar rebate, Mohave Electric Cooperative’s SunWatts program offers a one-time $500 rebate for residential battery storage system installations. To qualify, the battery must have a minimum capacity of 5 kWh, include programmable controls, and have WiFi connectivity for remote monitoring and management. The battery storage system must also be configured so that it cannot be charged during on-peak hours — this is a firm eligibility requirement to ensure the battery helps reduce grid demand during critical periods.

This rebate is available to Mohave Electric Cooperative customers in northwestern Arizona (Bullhead City, Kingman, Lake Havasu City area). As with the solar rebate, a reservation must be submitted and approved before installation begins. Rebates are subject to available program funding, so early application is strongly recommended. Contact Mohave Electric at (928) 758-0539 to check current availability and begin the reservation process.

When combined with the 30% federal battery storage tax credit (still available through 2032), Mohave Electric customers installing a battery system can stack both incentives for significant savings. For example, on a $12,000 battery installation, the federal credit would provide $3,600 and the Mohave rebate would add $500, reducing the net cost to approximately $7,900 before any other incentives.

Arizona has transitioned from traditional net metering to net billing across its major utilities. Under net billing, when your solar panels produce more electricity than your home uses, the excess is exported to the grid and you receive a bill credit — but at a rate below the retail electricity rate. The specific export rate varies by utility: APS credits approximately $0.0617/kWh (locked in for 10 years at the time of interconnection); SRP credits approximately $0.028/kWh on time-of-use net billing plans (all legacy net metering plans were retired in November 2025); and TEP credits approximately $0.057/kWh (compared to a retail rate of ~$0.15/kWh). Some smaller cooperatives, such as Navopache Electric and Sulphur Springs Valley Electric (SSVEC), still offer traditional net metering.

A key benefit for APS customers is the 10-year rate lock: the export rate in effect when your system interconnects is guaranteed for 10 years, even if rates decrease for future customers. The Arizona Corporation Commission has established a schedule where export rates may decrease by up to 10% each year for new customers, meaning the sooner you go solar, the higher your locked-in export rate will be. APS also charges a Grid Access Fee of approximately $0.93 per kW of solar array capacity per month.

Because net billing export rates are significantly below retail electricity rates, the financial strategy for Arizona solar owners has shifted toward self-consumption — using as much of your solar production directly in your home as possible — and pairing solar with battery storage to store excess energy for use during evening peak hours rather than exporting it at low rates. Always verify the current export rate with your specific utility before making installation decisions, as rates are updated periodically.