Besides the many other good reasons to go solar, state and federal tax credits can reduce total system ownership costs. Combined incentives on residential systems can offset up to 40 percent of total system cost, increasing the financial benefits from installing solar on your home.

We're solar installers, not accountants, so this information is presented in good faith to the best of our knowledge. We recommend you consult with your own tax professional as needed.

FEDERAL TAX CREDIT

The federal Residential Renewable Energy Tax Credit (often called “25D” after the tax code section) allows you to take 30% of the solar system cost as a tax credit for your personal tax return for systems installed, commissioned, and paid for before January 1st, 2026. Systems can be on a primary residence.

This credit was previously scheduled to last until 2032, then phase down, but the length of availability was severely cut in the 2025 reconciliation bill. You can find more details on this credit here.

For businesses, the Business Energy Investment Tax Credit (often called “ITC") is also a 30% credit. Generally, this credit will be applicable to systems that are installed and placed in service by December 31st, 2027. For some businesses and installations, there may be applicable bonus credits. You can find more details on this credit here.

If you have sufficient tax liability, you can take the entire credit in one year. Otherwise, it's possible to carry the remaining tax credit amount to a following year.

You'll take this credit when you file taxes for the year in which your solar electric system is installed and placed in service.

For the Residential Tax Credit: Use IRS Form 5695

For the Commercial Tax Credit: Use IRS Form 3468

ARIZONA STATE INCOME TAX CREDIT

The state of Arizona offers a one-time 25% personal tax credit for the installation of a qualifying solar energy device on a primary residence. The credit must be taken in the year that it is installed, and the maximum credit cannot exceed $1,000 total for all devices. Again, any amount greater than your tax liability that first year can be carried forward up to five years until exhausted.

More information on the Arizona Tax Credit for homes.

STATE PROPERTY TAX INCREASE EXEMPTION

Arizona state law dictates that your property taxes will not increase as a result of installing a photovoltaic system.

More information on this law.

STATE HOA LAW

Arizona law protects private property solar access by nullifying homeowners association covenants restricting solar energy systems. HOAs cannot require changes to system design that increase system cost or reduce system performance.

More information on these laws.