Does Arizona have a state solar tax credit in 2026?

Yes. Arizona offers a state income tax credit worth 25% of the cost of a solar energy device, capped at $1,000. With the federal residential credit gone since December 31, 2025, this state credit is now the main tax-based incentive for Arizona homeowners. Claim it through the Arizona Department of Revenue (Form 310).

How much do APS and SRP pay for exported solar?

Both major utilities use net billing rather than one-to-one net metering. APS credits exports at its avoided-cost rate — around 3.2 cents per kWh as of 2026, locked for 10 years when you interconnect. SRP's export credits sit near 3 cents, with time-of-use plans ranging roughly 3.7–6.3 cents per kWh. Since retail power costs about 15.5 cents, self-consuming your production is worth far more than exporting it.

Why is solar particularly productive in Arizona?

Arizona averages about 6.5 peak sun hours per day — the highest of the 15 states in our guides. A given system size produces more electricity annually here than anywhere else we cover, so a smaller, cheaper system can offset the same usage. Extreme summer heat slightly reduces panel efficiency, but the effect is minor compared to the sun-hour advantage.

Solar Panel Costs and Savings in Arizona (2026 Guide)

Arizona has the best solar resource of any state in our guides and one of the few remaining state tax credits — but its utilities pay very little for exported electricity, which shapes how systems should be sized here.

Arizona solar at a glance (July 2026)

Metric	Figure
Avg. residential electricity rate	15.48¢/kWh (EIA, April 2026)
Avg. peak sun hours	~6.5 per day (NREL-based estimate) — highest of our 15 states
Typical installed cost	Among the lowest in the U.S., roughly $2.30/W reported for 2026 (national range $2.40–$3.35/W)
Export compensation	Net billing: APS ~3.2¢/kWh (locked 10 years); SRP ~3–6.3¢/kWh by plan
Federal tax credit	None for purchases after Dec 31, 2025 (details)
Headline state incentive	25% state tax credit, up to $1,000 (AZ Form 310)

The 25% state credit is now Arizona’s headline incentive

Arizona’s state income tax credit — 25% of the system cost, capped at $1,000 — was always a nice bonus on top of the federal credit. With the federal residential credit ended as of January 2026, it’s now the main direct tax incentive left. It’s claimed against your Arizona income tax for the year the system is installed and operational, via Arizona Department of Revenue Form 310. Arizona also exempts solar equipment from state sales tax, trimming the upfront cost further.

Net billing: exports earn ~3¢, retail costs ~15¢

Arizona’s big utilities moved away from one-to-one net metering years ago:

APS credits exported electricity at its avoided-cost export rate — around 3.2¢/kWh in 2026. The rate you interconnect at is locked for 10 years, which protects existing customers as the rate declines for new ones.
SRP export credits sit near 3¢/kWh, with time-of-use plans ranging roughly 3.7–6.3¢/kWh depending on plan choice.

With retail power at 15.48¢/kWh, a kWh you consume from your own panels is worth roughly four to five times a kWh you export. The design consequence: size to your actual usage, and point your consumption at solar hours — which in Arizona largely means air conditioning, the dominant load in most homes here. See our net metering guide for how net billing differs from traditional net metering.

Heat, production, and sizing

At ~6.5 peak sun hours, Arizona systems produce more per installed watt than anywhere else we cover, so smaller systems go further. Extreme heat does modestly reduce panel efficiency (panels lose output as cell temperature rises), which is why a proper installer production estimate beats a generic sun-hours calculation — but the net effect still leaves Arizona at the top of the production table. Match the system to your summer-heavy usage pattern with our sizing guide and run your numbers in the calculator.

Bottom line

Arizona combines the strongest sun in our guides, below-average installed costs, and a real state tax credit — offset by low export compensation from APS and SRP. In 2026 the winning play is a right-sized system aimed at self-consumption, claimed against the $1,000 state credit. Exporting for profit is not the strategy here; avoiding 15¢ retail power with 6.5 hours of daily sun is.