2025 Federal Solar Tax Credit: Final Deadline and What Arizona Homeowners Need to Know Going Into 2026

Updated for December 2025

The 30 percent federal solar tax credit is in its final month. For Arizona homeowners, this incentive has significantly lowered the cost of going solar — but the credit expires on December 31, 2025, and current timelines leave very little room to spare.

As the deadline approaches, homeowners across Arizona are looking for clear answers on what’s changing and what stays the same. Even though the 30 percent incentive expires at the end of this year, several Arizona programs and utility benefits continue into 2026.

What Is the Federal Solar Tax Credit?

The federal solar tax credit, also called the Residential Clean Energy Credit, allows homeowners to deduct 30 percent of their solar system cost from their federal tax bill.

This includes:

• Solar panels and equipment

• Labor and installation

• Permitting and inspections

• System design and electrical work

• Battery storage

These qualifying costs are defined by the IRS as part of placing the system in service, including all work required to make the system operational.

Here’s what the 30% tax credit could mean for you:

• A $20,000 system = $6,000 tax credit

• A $25,000 system = $7,500 tax credit

• A $30,000 system = $9,000 tax credit

The credit applies to the full system cost (not just the hardware) making it one of the most significant incentives available to homeowners.

The Credit Ends December 31, 2025 — Here’s What That Means Right Now

To receive the full credit, your system must be:

• Installed

• Inspected

• Approved by your utility (PTO)

• Turned on and producing power

  
  

While the IRS requires your system to be fully installed, inspected, and approved by your utility before December 31 - speak to your solar representative about options to ensure your home qualifies upon signing.

The December Bottleneck

Due to timely federal tax credit upcoming expiration and an influx of additional solar clients, installers are working hard this December to keep up with:

• City permit backlogs

• APS and SRP inspection queues

• End-of-year installer scheduling limits

  
  

In Arizona, the IRS considers a system eligible only when it is fully placed in service. That includes receiving formal permission to operate (PTO) from APS, SRP, or TEP. Without PTO before December 31, the full credit cannot be claimed.

If any final step happens after Dec 31, the 30 percent credit is lost.

This is the final month.

What Happens After the Solar Tax Credit Ends? (2026 Update)

Arizona State Incentives Continue

• The Arizona Residential Solar Tax Credit (up to $1,000) still applies.

• Property tax exemptions continue.

• Utility-specific benefits remain.

Utility Rates Are Rising Into 2026

APS and SRP have both submitted rate changes and cost adjustments carrying into 2026.

Electricity will not get cheaper next year.

Solar Still Reduces APS and SRP Bills

Even without the 30 percent credit, solar significantly lowers electricity costs because Arizona has:

• High power rates

• Year-round sun

• An above-average payback period

• Significant long-term savings

  
  

Solar becomes more urgent in 2026 for many homeowners precisely because rates continue rising.

What About Solar Leases in 2026?

Some homeowners may consider solar leases or PPAs in 2026 since these options remain available even after the federal tax credit expires. Leases can still reduce monthly electricity expenses, but it’s important to know that leased systems do not qualify for the federal tax credit and do not provide system ownership. Monthly terms and savings vary by program, so a consultation can help compare whether ownership or leasing makes more sense for your home next year.

Do You Still Qualify Right Now?

You qualify for the 30 percent credit if:

• You own your home

• Your solar system is installed and turned on by Dec 31 (if signing your system contract in at any point in December 2025, speak to your representative about your options to still qualify)

• You own the system (cash or loan; leases do not qualify)

• You pay federal taxes

  
  

You can roll unused portions forward into future years.

How Arizona Homeowners Claim the Credit in 2025

Step 1: Install your system

Step 2: Pass city inspections

Step 3: Receive APS or SRP PTO

Step 4: Turn on the system in 2025

Step 5: File IRS Form 5695

Arizona Incentives That Still Apply in 2026

These benefits will remain available next year:

Arizona Solar Tax Credit

Up to $1,000 back.

Property Tax Exemption

Solar adds value but cannot raise property taxes.

APS, SRP, TEP Programs

Still active, still beneficial.

APS Storage Rewards & Tesla Virtual Power Plant

For homeowners adding a Tesla Powerwall, APS offers an additional way to earn money back through its Storage Rewards program, powered by the Tesla Virtual Power Plant (VPP). When enrolled, your Powerwall can discharge excess energy to the grid during APS “events,” and you earn bill credits based on performance.

Current program details include incentives of up to $110 per kW of average performance, with a Powerwall 3 earning up to about $400 per year in bill credits, depending on how much energy it contributes. You can set a backup reserve so your Powerwall never discharges below the level you’re comfortable with and can opt out of individual events if needed.

Participation requires an APS residential account in good standing, an approved battery interconnection, and enrollment through the Tesla app. Program rules, payouts, and eligibility are set by APS and may change over time.

Tesla Powerwall 3 Rebate (2026 Installations)

On top of APS bill credits, Tesla is also offering a limited-time rebate for Powerwall 3 and Powerwall 3 Expansion. Homeowners who order eligible Powerwall units between November 1, 2025 and March 31, 2026, and have them installed, connected, and registered between January 1 and September 30, 2026, can earn $500 per Powerwall 3 or Expansion, up to $1,000 total per home.

The rebate is paid as a Virtual Visa® Reward Card after you complete registration and submit your rebate request through Tesla’s rebate portal. This offer can be combined with other incentives and applies whether your Powerwall is part of a purchase or a lease, as long as Tesla’s rebate terms are met.

Should You Wait Until 2026?

For most APS and SRP customers, waiting reduces savings.

In 2026, homeowners can expect:

• Systems cost the same or more

• Electricity rates increase

• The federal credit decreases

• Utility programs remain the same

  
  

The “solar math” in Arizona continues to favor installing earlier rather than later, especially with rising APS rates and SRP rates carrying into 2026.

Final Month Action Plan

With limited installation slots left in 2025, scheduling a consultation now is the only way to determine whether your home can still meet the deadline.

Ultra Energy can help you understand:

• Your eligibility

• Your timeline

• Your estimated savings

• Whether your project can realistically qualify this month

Next Steps

With demand expected to rise as the deadline approaches, now is the time to secure your consultation and get your system in the queue. Ultra Energy offers transparent, no-pressure solar consultations designed to help you make an informed decision and lock in your federal tax credit before it disappears.

We are dedicated to helping you meet the deadline and providing service to the highest degree.

See if Your Home Can Still Qualify for the 30 Percent Credit

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