Solar tax exemptions: sales tax and property tax (2021)

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There are financial incentives that make it easier for homeowners to invest in solar power systems, including a number of solar tax exemptions at national and local levels. These solar tax exemptions may vary by location and may include relief from sales taxes, property taxes and more.

In this article, we’ll discuss the tax exemptions available to homeowners investing in renewable energy systems in each state, as well as the federal solar energy tax credit. Read on to find out more or complete the form below to get a free, no-obligation quote from a solar installer near you to see how much you can save on a solar panel system.

Disclaimer: This article is for informational purposes only. It should not be relied on and is not intended to provide accounting, legal or tax advice.

Solar sales tax exemptions

Solar sales tax exemptions are a common financial incentive designated by state governments. According to the Association of Solar Energy Industries, there are
currently 25 states that offer a solar sales tax exemption.

What does this mean, exactly? Most states levy a tax on consumer purchases, which can range from 2.9% to 9.5%. With a solar sales tax exemption, these taxes are removed on purchases of solar panels, solar batteries and other forms of solar equipment. Of course, this can drastically reduce the total cost of purchase, making a solar investment a bit more affordable.

For example, if your state has a 6% sales tax and you buy a solar panel system for $ 16,000, you will end up paying $ 16,960 in total. If your state has a solar sales tax exemption, however, you will only pay $ 16,000.

Solar energy property tax exemptions

The Solar Energy Industries Association notes that
36 states currently offer a property tax exemption for homeowners who install residential solar systems.

Here’s what that means: A solar panel installation usually results in a significant increase in the value of your property. (On average, homeowners see an increase in solar-related property values ​​of about 4.1%.) In states that benefit from renewable energy property tax exemptions, homeowners whose increases in property values ​​are protected against a comparable increase in property taxes. In other words, the home’s value goes up, but the owners don’t have to pay more at tax time.

Solar tax exemptions: breakdown state by state

Different states have different laws regarding sales tax exemptions and property tax for solar installations. To find out what tax incentives are available in your region, see the table below:

State

Solar property tax exemption *

Solar sales tax exemption *

Alabama

No exemption

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 contribution

No exemption

Indiana

100% exempt

No exemption

Iowa

100% exempt for 5 years

100% exempt

Kansas

100% exempt

No exemption

Kentucky

No exemption

No exemption

Louisiana

100% exempt

No exemption

Maine

No exemption

No exemption

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 for systems over 100 kW

No exemption

Nevada

Exemptions only for certain systems over 10 MW

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 and Cleveland

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

Caroline from the south

No exemption

No exemption

South Dakota

$ 50,000 exemption

or 70% of the total property value

No exemption

Tennessee

Tax value not exceeding 12.5% ​​of installation cost

100% exempt

Texas

100% exempt

No exemption

Utah

No exemption

Exemptions only for systems

more than 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

* Correct at time of posting.

Federal tax incentives for solar energy

In addition to these state-specific incentives, there is also a federal tax incentive that is available to all Americans who invest in solar energy. The Solar Investment Tax Credit (ITC) is currently valued at 26% of the total cost of the solar installation, meaning homeowners can essentially deduct 26% of that initial cost.

This tax credit covers:

  • The cost of solar panels
  • Labor costs for installation
  • Additional solar equipment, such as inverters, wiring, etc.
  • Energy storage devices, including solar batteries
  • Sales taxes paid for qualifying solar installation expenses (in states that do not have sales tax exemptions)

Note that the federal tax credit is available to all homeowners who buy a system, whether they buy it directly or finance it with a solar loan, but it is not available to those who rent solar panels.

Frequently Asked Questions: Solar Tax Exemptions

Are solar panels exempt from sales tax?

In states that benefit from a solar sales tax exemption, yes, the purchase of solar panels is exempt from sales tax. Currently, at least 25 states offer a solar sales tax exemption.

Is Solar Sales Tax Exempt in Texas?

No, Texas solar incentives currently do not include sales tax exemption.

Is solar exempt from property taxes?

Currently, 36 states offer tax incentives for solar energy. Take a look at the table above to find out if your state offers a solar property tax exemption. Some municipalities may also have local property tax rebates, so homeowners who are considering switching to solar power should check government websites for additional information on incentives and rebates.

Are solar roofs tax deductible?

Your solar roof shingles can be claimed through the Federal Solar Investment Tax Credit, which allows you to deduct 26% of the total cost of your clean energy system.

Do solar panels reduce property taxes?

Solar projects typically increase residential property values, which in some states can actually mean higher property taxes. However, in the 36 states that offer a solar property tax exemption, an increase in home values ​​does not result in an increase in property taxes.


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