Do Solar Panels Increase Property Taxes?

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.

Solar Panels On A House In The Countryside
Solar Panels On A House In The Countryside

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.

StateSolar Property Tax ExemptionSolar Sales Tax Exemption
Alabama100% exempt for up to 20 yearsNo exemption
AlaskaLocal exemptionsNo sales tax
Arizona100% exempt100% exempt
ArkansasNo exemptionNo exemption
California100% exempt until 1/2/2025No exemption
Colorado100% exempt100% exempt
Connecticut100% exempt100% exempt
DelawareNo exemptionNo state sales tax
Florida100% exempt100% exempt
GeorgiaNo exemptionNo exemption
Hawaii100% NHL onlyNo exemption
IdahoNo exemptionNo exemption
IllinoisSpecial assessmentNo exemption
Indiana100% exemptNo exemption
Iowa100% exempt for 5 years100% exempt
Kansas100% exempt for 10 yearsNo exemption
KentuckyNo exemptionNo exemption
Louisiana100% exemptNo exemption
MaineNo exemption100% exempt
Maryland100% exempt100% exempt
Massachusetts100% exempt for 20 years100% exempt
Michigan100% exemptNo exemption
Minnesota100% exempt100% exempt
MississippiNo exemptionNo exemption
Missouri100% exemptNo exemption
Montana100% exempt for 10 yearsNo state sales tax
NebraskaExemptions onlyNo exemption
NevadaExemptions onlyNo exemption
New HampshireLocal exemptionsNo state sales tax
New Jersey100% exempt100% exempt
New Mexico100% exempt100% exempt
New York100% exempt for 5 years100% exempt
North Carolina80% exemptNo exemption
North Dakota100% exempt for 5 yearsNo exemption
OhioExemptions in Cincinnati100% exempt
 and Cleveland 
OklahomaNo exemptionNo exemption
Oregon100% exemptNo state sales tax
PennsylvaniaNo exemptionNo exemption
Rhode Island100% exempt100% exempt
South Carolina100% exemptNo exemption
South DakotaExemption of either $50,000No exemption
 or 70% of total property value 
TennesseeTax value no more than 12.5%100% exempt
 of installed cost 
Texas100% exemptNo exemption
UtahNo exemptionExemptions only
  for systems over 2 MW
Vermont100% exempt100% exempt
VirginiaLocal exemptionsNo exemption
WashingtonNo exemptionExemptions only
  for systems up to 10 kW
Washington DC100% exemptNo exemption
West VirginiaNo exemptionNo exemption
Wisconsin100% exempt100% exempt
WyomingNo exemptionNo exemption
Solar Property Tax Exemptions In The US By State

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
  • Rebates
  • 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:

https://www.seia.org/initiatives/solar-tax-exemptions#:~:text=Property%20tax%20exemptions%20allow%20businesses,a%20residential%20or%20commercial%20property.

Resources

General Solar Panel FAQ

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