Planning a solar panel installation in Arizona in 2026 starts with understanding the incentives that can reduce upfront costs and increase long-term savings. Solar incentive programs at the federal, state, and utility level are evolving, with significant changes expected in 2026. This guide breaks down the current incentive landscape so Arizona homeowners and businesses can make informed decisions.
Note: Solar incentives are governed by state and federal policy and utility program rules that can change at any time. The information below is based on the most current guidance available, but programs in 2026 may be updated, modified, or discontinued depending on legislative and regulatory developments.
What’s Happening with the Federal Solar Tax Credit in 2026?
The most widely known incentive for solar has been the federal investment tax credit (ITC), officially called the Residential Clean Energy Credit. For years, this credit allowed homeowners to reduce their federal tax bill by 30 percent of the cost of a qualifying solar system.
Changes Coming in 2026
Under current federal law, the 30 percent residential solar tax credit is scheduled to sunset for systems placed in service after December 31, 2025 unless Congress acts to extend or revise the law. At the time of writing:
- Systems installed and energized by December 31, 2025 generally qualify for the full 30 percent credit.
- Systems placed into service in 2026 are not currently expected to be eligible for the same residential tax credit at 30 percent.
- Any extension or modification of this credit is subject to new legislation and IRS rulemaking, so homeowners should monitor for updates.
Because this is a significant shift, it reinforces the need to check current IRS guidance or consult a tax professional when planning a 2026 solar installation.
State Incentives Available in Arizona in 2026
Arizona continues to offer state-level tax incentives and exemptions that are available independently of federal changes.
Arizona Residential Solar and Wind Energy Systems Tax Credit
Arizona offers a state income tax credit of up to 25 percent of the installed cost of a qualifying solar system, with a maximum credit of $1,000 per taxpayer.
Key points:
- The credit applies when you file your Arizona state return.
- If your tax liability is less than the credit, some or all of the unused portion may be carried forward for future years, subject to Arizona tax rules.
- This incentive continues to provide meaningful savings on state income taxes.
Sales Tax Exemption for Solar Equipment
Solar panels and related equipment that qualify under Arizona law are exempt from state sales tax, which reduces the upfront cost of a system purchase and installation.
Property Tax Exemption for Solar Value
When solar panels increase a property’s market value, Arizona provides a property tax exemption on the added value that results directly from the solar installation. This helps ensure that solar does not raise ongoing local property taxes just because your home’s value went up from adding energy-producing equipment.
Utility Incentives and Programs in 2026
Several Arizona utilities offer solar-related billing credits or incentive programs that may still be in place in 2026, though program details and credit structures can change over time.
Common utility incentives include:
- Net Billing Credits: Many utilities offer net billing, where excess solar energy exported to the grid earns credits that offset future energy use.
- Battery Storage Incentives: Some utilities provide additional incentives or credits for pairing batteries with solar, especially if the system can support grid reliability.
- Time-of-Use (TOU) Credits: Solar systems may benefit from TOU billing if they generate during high-value hours of the day.
Utilities such as Arizona Public Service (APS) and Salt River Project (SRP) have offered these types of programs, but credit rates and rules vary and may change in 2026. Arizona homeowners should check with their specific utility provider for up-to-date details when planning a solar installation.
Why 2026 Is a Turning Point for Solar Incentives
Several factors make 2026 an important year for solar incentives in Arizona:
- Expiration of the federal solar tax credit for new solar panel installations, unless there is legislative action to extend or revise it.
- Continued availability of Arizona state tax credits and tax exemptions, though these incentives typically provide smaller dollar savings than the federal credit once offered.
- Changes to utility billing structures that may affect how excess electricity from solar panels is credited to your monthly bill.
Because these incentives interact differently depending on installation timing, solar system size, and utility provider, homeowners should review all available savings opportunities before committing to a solar panel installation.
If you have questions about how current and upcoming solar incentives may apply to a solar panel system for your home or business, contact us for clear, up-to-date guidance based on Arizona’s evolving incentive landscape.
Frequently Asked Questions
Will the federal solar tax credit still apply to systems installed in 2026?
As of current guidance, the 30 percent residential federal solar tax credit sunset after December 31, 2025. Homeowners should check IRS updates for any extension or changes to this policy.
What state solar incentives are available in Arizona in 2026?
Arizona offers a residential tax credit up to $1,000, sales tax exemptions, and property tax exemptions for qualifying solar systems. These continue to provide savings on state taxes and installation costs.
Can utility net billing still reduce my electric bills?
Yes. Net billing and related utility credits generally remain available, though each utility may adjust rates, program rules, and valuation of exported solar energy.
Is solar still worth it in Arizona without the federal tax credit?
Many Arizona homeowners still find solar valuable due to high sunlight, rising electricity prices, state incentives, property exemptions, and ongoing utility billing credits.
Should I install solar before federal incentives change?
Homeowners who want to capture the full federal solar tax credit should aim to have systems installed and commissioned by the end of 2025. Solar projects in 2026 should be evaluated based on current rules, available incentives, and expected long-term savings.