Sales And Property Tax Exemptions For Home Solar Power
Tax exemptions are solar tax incentives that can reduce either the upfront or long-term cost of adding solar panels to your home. Unlike income tax credits, you do not need to have income to claim these incentives.
There are two types of tax exemptions available: solar sales tax exemptions and solar property tax exemptions.
Solar sales tax exemptions reduce the upfront cost of going solar. If you live in a state with sales tax, you could pay between 2.9% and 9.5% sales tax on the cost of a solar installation. 17 states exempt that purchase from sales tax, and five other states dont have sales tax at all.
Solar property tax exemptions reduce tax bills that property owners would have to pay if the value of their solar systems were added to the tax basis of their homes. Thats a complicated way of saying that solar adds value to your home, and these exemptions make sure you dont have to pay extra taxes on that value.
In this article, we provide a list of the tax exemptions available by state, then go on to describe how they work to save you money on a home solar installation.
Do Solar Panels Increase Property Taxes In States Without Exemptions
While we dont have specific data for real property tax increases from adding solar in states without solar property tax abatements or exemptions, we can look at the additional taxes that could be assessed based on the value of an average solar system.
According to 2016 data from ATTOM Data solutions collected by mortgagecalculator.org, residential property taxes in states without personal property tax exemptions for solar projects ranged from 0.48% in Alabama to 1.89% in Pennsylvania.
So, for an average solar PV system costing $13,000 after financial incentives like the federal solar investment tax credit , a person who added solar to their home in one of those states could expect to be assessed an additional $62 to $245 in the first tax year after installation.
Property Tax Exclusion For Solar Energy Systems
There are two main ways a reassessment at full market value of your property can be triggered in Californiawhen you sell or buy a house and when theres new construction or major house renovations. Section 73 of the states revenue and taxation code allows a property tax exclusion for qualifying new solar installations. Meaning, your property taxes will not increase if you install solar on your property. This tax exclusion was set to expire in 2016, but is now extended through January 1, 2025. Find out more about the active solar energy system tax exclusion and what qualifies here.
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The Question Of Warranty
Many buyers will also want to know about the warranty on the solar package, especially if theyre not incredibly thrilled to be stuck with solar in the first place. Zaragoza mentions that you should always ask your solar provider what will happen to your warranty if you decide to sell the home. Knowing that you can transfer the warranty to new owners offers them a big peace of mind, and if this isnt possible, then this might be a reason to reconsider the purchase or lease agreement.
Owning Vs Leasing Matters
While this might not be at all obvious to the unsuspecting homeowner, theres a big difference between owning and leasing your solar panels especially when its time to sell the home later on. Were guessing the solar company mightve left this detail out, as they like to say leasing is one of the cheapest and easiest ways to acquire a solar package but the truth of the matter is that if you did lease your solar package , this complicates selling your home quite a bit.
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Adding Solar Panels Are A Home Renovation That Can Add Significant Value To Your Home In Some Places This Also Means Paying Higher Property Tax
If youâre a homeowner whoâs ever done a major home renovation, youâll know that certain upgrades will mean an increase in property taxes. When you do a home renovation, in most municipalities this will involve getting permits for things like electrical, plumbing, or construction work.
When property tax assessment time rolls around, the assessorâs office will typically review any permits for the property. If it looks like significant renovation work was done, your taxes could go up.
And sometimes, assessors simply drive around looking for visible exterior upgrades. If a home suddenly has a big deck that wasnât there in the last assessment cycle, an assessor can catch that – even if you didnât take the step of getting proper permits for the work.
Like any home renovation, adding solar panels can increase your property taxes. Solar panels carry a significant price tag, costing tens of thousands of dollars before tax credits and rebates. This can mean a significant increase in your property taxes. However, unlike most home upgrades, there are many states and cities that offer property tax exemptions for solar panels.
Plus, solar panels are a visible addition to your home. Because of all this, thereâs no hiding your solar panels from the taxman.
New York State Property Tax Exemption For Solar And Wind
This special exemption is part of New Yorks billion-dollar initiative to advance solar energy adoption across the state. Generally, when you add a valuable upgrade to your homelike a new addition or extra bathroomyour appraiser will include that added value when determining how much property tax you should pay.
This exemption was created to make it as affordable as possible for New York families to add solar cells and photovoltaic panels to their homes. The exemption is available statewide, but counties, towns, and school districts can choose to opt out of the exemption. The exemption for solar power lasts for 15 years from the date of installation.
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Solar Tax Exemptions Guide
There are financial incentives available that make it easier for homeowners to invest in solar energy systems, including a number of solar tax exemptions at the state and local levels. These solar tax exemptions can vary by location and may include relief from sales taxes, property taxes and more.
In this article, well discuss which tax exemptions are available to homeowners who invest in renewable energy systems in each state, as well as the federal solar tax credit. Read on to learn more.
To see what exemptions are available in your area, get a free, no-obligation quote from one of our trusted EcoWatch solar installers below.
How Solar Property Tax Exemptions Work
Houses that generate their own renewable energy from solar photovoltaic systems are worth more than boring old houses without solar. The thing is: its hard to pin down exactly how much value solar adds to homes, and assessors dont seem to be able to agree on a single method.
A recent study from Zillow suggested a 4% increase. That seems strange, since houses can have vastly different values before adding solar panels, and the same sized system probably shouldnt increase that value differently based on the initial assessed value of the home.
More robust studies have suggested a first-year home value increase about equal to the cost of the system after incentives, with the additional value decreasing with the years as solar panels age.
The good news is twenty-nine states have statewide rules exempting some or all of the value added by solar panels from additional local property taxes. Four other states allow local governments to set their own solar property tax incentives.
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Solar Tax Credit Calculator:
It is easy to give you the rate of the solar tax credit. But it is much harder to give you the dollar value for your specific home. Luckily SolarReviews.com has developed one of the most accurate solar calculators. Using data from local solar installs in your area we can give you a very accurate cost guide for your specific home.
It will show you the dollar value of the federal solar tax credit and include any state tax credits if eligible. This gives homeowners who use our calculator the opportunity to figure out if solar is worth it for their home, before talking to solar companies.
Calculate the dollar value of the tax credit
Faq: Does Going Solar Increase My Property Taxes
by Cody McGowan, on Jul 17, 2020 11:04:00 AM
Find Out If More Property Taxes Will Be Added to Your Solar System Cost
You want to save energy and money not pay more taxes! However, its a big concern when homeowners remodel, renovate, or add on to their homes. Will the boost in your homes value increase your property taxes? Property assessors are always on the lookout for opportunities to bring in more revenue from home improvements.
Converting a spare room to a home theater is not something an inspector will notice, but you cant hide a new solar panel system. Fortunately, you dont have to worry about taxes being added to your solar system cost. In most cases, homeowners in Decatur, IL, that install a solar energy system will not see a property tax increase. Find out why by reading our blog.
A Green, Tax-Free Home Renovation
Switching to solar increases your propertys value, but not your property taxes. It seems odd because nearly all home improvements result in higher taxes. So, why are solar panels different? Its because they are green energy additions to your home, and the State of Illinois looks favorably on green energy.
According to Article 10, Division 1 of the Illinois Tax Code, It is the policy of this State that the use of solar energy systems should be encouraged because they conserve nonrenewable resources, reduce pollution and promote the health and well-being of the people of this State.
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How Is Texas Property Tax Calculated
In Texas, your local authority calculates your property tax by multiplying the local tax rate by the assessed value of your real estate.
Your local tax rate is set annually by your municipality and takes into account the amount of money needed to fund local services, such as:
- Public schooling
The second part of the property tax equation is the assessed value of your real estate. The county you live in assesses the value of your property based on 100% of its fair market value, and the appraisal takes into account prices that similar properties have recently been sold for.
The result is that you may need help paying your property tax, as you could face an annual bill that puts a significant dent in your finances. Fortunately, there are ways to reduce your property tax by investing in renewable energy for your home. DoNotPay can help you take advantage of this tax break and secure any available discounts.
How Much Will You Pay In Other States
To help you understand what these taxes might look like over the life of your photovoltaic system, the table below lists how much in total taxes you might expect to pay over the life of a typical $20,000 system. The numbers are the total taxes paid by the year listed. Remember that the value of the system is the gross cost, and not the net cost after incentives.
For example, Year 15 lists the total taxes you will have paid after 15 years of owning your system.
Property taxes range from a high of 1.89% in New Jersey to as low as 0.18% in Louisiana, but keep in mind that rates also vary by counties and local governments.
Total property taxes paid for a $20,000 system
As you can see, while the average cost every year isnât too bad, these taxes can really add up over time.
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How Much Do Solar Panels Increase Home Value
Many homeowners, buyers, and appraisers know that the installation of solar panels and solar batteries can increase a propertys market value. In fact, one study confirmed that solar installations increase a homes resale value by up to $5,911 for each kilowatt of solar panels installed, and another estimated an increase of 4.1% of the homes value.
Where do these figures come from, exactly? To begin with, consider a Zillow study, which notes that homes with solar installations tend to sell for about 4.1% more than homes without. Of course, this is an average. Some locations show a higher value add , and some show lower .
An older study from Lawrence Berkeley National Laboratory reveals an increase in resale value of approximately $5,911 for each kilowatt of solar power thats installed. So, how much do solar panels increase home value? Lets take a look at some averages:
|Home Solar System Size|
*Figures based on study by Lawrence Berkeley National Laboratory.
Its worth noting that these amounts are roughly in line with the total cost of a solar panel system, which may be just the incentive you need to finally take the plunge into solar power.
Expert Q& a: Ben Hoen Of Berkeley Labs On Solar Home Value
As of 2016, there are 1 million photovoltaic systems installed nationwide, and that number is growing. Ben Hoen, a research scientist with Berkeley Lab Electricity Markets and Policy Group, a U.S. Department of Energy National Laboratory, was the co-author of a recent study on the impact solar panels make on home resale values and answered Lets Go Solars questions about the studys findings.
If you get a good return on investment, why not? Determining solar resale values is complicated, but if you can get a clear, immediate return on investment , then its pretty easy math.
There are some risks when it comes to market resale pricing. The resale value might not be as rosy as projected. In assessing an investment, a buyer should factor in the PV systems warranty, performance guarantee, operation and maintenance costs over time and the reputation of the solar company.
Fundamentally, buying solar is just like purchasing any higher-cost appliance, like a car. So approach it with the same questions: Is there a warranty? Are the first years of operation covered by a performance guarantee? What is the resale value given past resale values of the same product?
Assessing these factors is a dynamic process since the cost of replacement will likely decrease over time, but on the other hand, incentives may decline. However, those are trends. The fact is that at any given time, you can figure in these variables and come up with an estimate for market price.
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The Lone Star State Supports Your Green Agenda With A Texas Solar Property Tax Exemption
Texas is a state traditionally known for its oil, yet it is now one of the front-runners in the race to provide renewable energy to the nation.
Since 2015, Texas has been one of the net exporters of electricity in the U.S., thanks to a huge investment in solar power. This investment is backed up by property tax incentives for you to convert your home to solar energy.
Texas has no state income tax, so municipalities are forced to generate revenue through exorbitantly high property tax rates. While the U.S. national average sits at 1.07%, there are at least five municipalities in Texas with a property tax of over 2%, and the statewide average is 1.83%.
This is a hard annual blow for many homeowners, so many are looking for whatever ways they can find to lower their tax liability. Converting to solar power is an excellent way of achieving this and going green at the same time.
DoNotPay can help you find the best way to secure a Texas solar property tax exemption by switching to solar power.
Affordable Solar Power Is Within Reach
Another concern of homeowners interested in going solar is the overall affordability of solar panel systems. Thats why were glad to tell you how solar power has evolved recently.
Solar energy has become a more affordable option over the last few years with technological advances in the manufacturing processes for solar panels. Pink Energy is proud to offer high-quality, American-made solar panels to our customers. These customers can then own a lasting source of solar power for years to come and the potential savings and environmental benefits that come along with that.
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How Much Does This Exemption Save You
Letâs say that you live in New Jersey, which has the highest taxes listed at 1.89%. The average cost-per-watt of residential solar panels in New Jersey is $3.30 per watt installed. That means a pretty typical 6 kW system will cost $20,000.
If you were paying property taxes on that additional value, that would mean your annual property taxes would go up by $378.
Thatâs a lot, but now consider that photovoltaic systems last a really long time. Most solar panels include at least a 10 year manufacturerâs warranty and a 25 year power warranty.
This means, over 25 years, you could pay an additional $9,450 in property taxes. Thatâs a lot of money! And it could even be higher than that, because many counties and cities add their own property taxes on top of that.
Thankfully, New Jersey has a property tax exemption, saving you from having to shell out $9,450 over the life of your system.