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

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:

* 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.