The installation of solar panels has accelerated as the prices of solar panels, battery banks, charge controllers, and inverters have dramatically reduced. The federal tax credits have steadily declined and are currently at 26% and dropping to 22% in 2023 and 0% in 2024 for residential installations.
Solar panels are deemed a moveable asset, and although it significantly adds to your property value, they will not increase your property taxes. Depending and state and county regulations, you can bank on a sales tax rebate of as much as 9.5% of the total value of your solar system installation.
There are several important factors to consider when calculating the return on investment of your solar power system:
- Solar property tax exemptions
- Sales taxes applicable to solar system equipment
- Solar system installation rebates
Let’s look at these issues one by one and get you leveled up on what to expect and how installing a solar system will impact your budget.
Which States Offer Solar Property Tax Exemptions In The US?
Thirty-six states offer property tax exemptions for solar energy installations at private properties and businesses in the United States.
|State||Solar Property Tax Exemption||Solar Sales Tax Exemption|
|Alabama||100% exempt for up to 20 years||No exemption|
|Alaska||Local exemptions||No sales tax|
|Arizona||100% exempt||100% exempt|
|Arkansas||No exemption||No exemption|
|California||100% exempt until 1/2/2025||No exemption|
|Colorado||100% exempt||100% exempt|
|Connecticut||100% exempt||100% exempt|
|Delaware||No exemption||No state sales tax|
|Florida||100% exempt||100% exempt|
|Georgia||No exemption||No exemption|
|Hawaii||100% NHL only||No exemption|
|Idaho||No exemption||No exemption|
|Illinois||Special assessment||No exemption|
|Indiana||100% exempt||No exemption|
|Iowa||100% exempt for 5 years||100% exempt|
|Kansas||100% exempt for 10 years||No exemption|
|Kentucky||No exemption||No exemption|
|Louisiana||100% exempt||No exemption|
|Maine||No exemption||100% exempt|
|Maryland||100% exempt||100% exempt|
|Massachusetts||100% exempt for 20 years||100% exempt|
|Michigan||100% exempt||No exemption|
|Minnesota||100% exempt||100% exempt|
|Mississippi||No exemption||No exemption|
|Missouri||100% exempt||No exemption|
|Montana||100% exempt for 10 years||No state sales tax|
|Nebraska||Exemptions only||No exemption|
|Nevada||Exemptions only||No exemption|
|New Hampshire||Local exemptions||No state sales tax|
|New Jersey||100% exempt||100% exempt|
|New Mexico||100% exempt||100% exempt|
|New York||100% exempt for 5 years||100% exempt|
|North Carolina||80% exempt||No exemption|
|North Dakota||100% exempt for 5 years||No exemption|
|Ohio||Exemptions in Cincinnati||100% exempt|
|Oklahoma||No exemption||No exemption|
|Oregon||100% exempt||No state sales tax|
|Pennsylvania||No exemption||No exemption|
|Rhode Island||100% exempt||100% exempt|
|South Carolina||100% exempt||No exemption|
|South Dakota||Exemption of either $50,000||No exemption|
|or 70% of total property value|
|Tennessee||Tax value no more than 12.5%||100% exempt|
|of installed cost|
|Texas||100% exempt||No exemption|
|Utah||No exemption||Exemptions only|
|for systems over 2 MW|
|Vermont||100% exempt||100% exempt|
|Virginia||Local exemptions||No exemption|
|Washington||No exemption||Exemptions only|
|for systems up to 10 kW|
|Washington DC||100% exempt||No exemption|
|West Virginia||No exemption||No exemption|
|Wisconsin||100% exempt||100% exempt|
|Wyoming||No exemption||No exemption|
The installation of a solar panel power system typically increases the property’s value. In states that offer an exemption on renewable energy, you will enjoy protection from being taxed on the increased property value due.
Your property value will increase, but your property taxes will remain unchanged due to the addition of a solar system. In addition to this exemption, 25 states also over to zero-rate the sales tax on purchasing renewable energy-related equipment.
State sales taxes can vary between 2.9% and 9.5%, and you could thus enjoy an additional saving of up to 9.5% depending on the GST in your state when purchasing solar equipment.
Which Solar Tax Rebates Apply In The US?
There are several federal and state-specific solar system tax rebates or incentives. Your local solar installers will be able to help you through all the mechanisms through which you can take full benefit.
The Federal Solar Investment Tax Credit or Solar ITC is available to all US residents that pay federal taxes. You can deduct 26% of your solar system installation cost from your federal taxes in the year of completion of the installation.
The time on this incentive is fast running out as the rebate will drop to 22% in 2023 and expire for all residential installations at the start of 2024.
State and city-specific tax incentives are also available to encourage homeowners to transition to renewable energy. These incentives are in addition to the federal Solar STI but must be claimed separately.
The Solar Incentive mechanisms are the following:
- Tax credits
- Low-interest loans
- Property tax relief
- SRECs (Solar Renewable Energy Certificates)
- Performance-Based Incentives (PBIs)
Choose a solar installer that can help you maximize the incentives applicable in your state and provide you with the required documentation to facilitate your claims.
Do not get fooled into the solar leasing schemes as you will not get the benefit as you are not the principal investor. The best option is to finance and own the solar installation, giving you access to the tax benefits and rebates.
It is essential to use the maximum benefits you qualify for, as this could significantly reduce the return on investment (ROI) payback period. Solar installation costs have decreased considerably in the past five years, but the federal incentive will fall away in 2024.
My advice is not to delay your plans to install solar or other renewable forms of power generation. The financial payback varies between five and eight years on an investment that will last for thirty years.
You are paying a premium for grip power anyway, and this investment could significantly reduce your utility bill and add to the value of your property. There is no downside to going solar.
To see what you will be able to qualify for in your state or county, please make use of the link below and enter your zip code: