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Tax credit · Arizona Department of Revenue · Arizona

Arizona Residential Solar Energy Tax Credit

25% of system cost up to $1,000

Arizona's Residential Solar Energy Tax Credit (Form 310) pays 25% of solar PV, solar water heating, geothermal, and small wind system cost — capped at $1,000 per residence. The cap means the credit maxes out at $4,000 system cost, modest by today's typical 8 kW residential install pricing of $20,000+. Despite the cap, the AZ credit stacks with the federal 25D (30% uncapped), property tax exemption, and sales tax exemption to deliver meaningful incentive value. Arizona has the second-best solar resource in the United States after California — the no-fuss Tax Credit pairs with strong production economics for fast payback.

Eligibility

Who qualifies?

Arizona residential homeowners who own (not lease) the system.

System types?

Solar PV, solar water heating, geothermal heat pumps, small wind turbines, and biomass.

Carry-forward?

Yes. Unused credit rolls forward up to 5 years.

How to apply for AZ Solar Credit

  1. Confirm system ownership

    You must own the system outright (cash or solar loan). Leases and PPAs do not qualify.

  2. Document total cost

    Equipment, install labor, permits, interconnection. AZ does not deduct utility rebates from basis (verify with current AZ DOR rules).

  3. File AZ Form 310

    Attach to AZ Form 140 (state income tax return). Calculates 25% × cost, capped at $1,000.

  4. Carry-forward unused credit

    If credit exceeds AZ state tax owed, rolls to next year for up to 5 years.

Stacking with other programs

Stacks with federal 25D (30%), Arizona Energy Equipment Property Tax Exemption (100% added value), Arizona Solar Energy Equipment Sales Tax Exemption (100% state), APS/SRP/TEP utility rebates, and Arizona net metering successor (Resource Comparison Proxy). Full Arizona stack delivers 35–45% solar cost coverage typical.

Frequently asked questions

Why is the cap so low? +
The Arizona credit was authored in 2007 when residential solar systems averaged $4,000–$8,000. The $1,000 cap was meaningful then but has not been updated for current system costs.
Does it stack with federal 25D? +
Yes. Federal 30% on full system cost (or post-utility-rebate basis), AZ 25% capped at $1,000. Total federal + AZ credits on a $20,000 system: $6,000 + $1,000 = $7,000.
APS/SRP/TEP rebates — do they affect AZ credit? +
Verify with AZ DOR. Most state credits use pre-rebate cost basis. Arizona's rules are similar to NY and Oregon.

Official program page: https://azdor.gov/forms/credit-forms/credit-solar-energy-devices

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