Solar property tax exemptions explained

solar property tax exemptions

Aside from the Solar Investment Tax Credit (ITC) provided by the federal government, which covers 30 percent of your solar project's cost in income tax credits, many states offer their own tax incentives to help you go solar. One popular incentive is a solar property tax exemption. Read on to learn how they work and which states have these policies.

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Solar property tax exemptions give homeowners the right to remove the added value of a solar panel system from the valuation of their home for tax purposes. This means that even when the value of your home increases due to a solar system installation, your property taxes will still reflect the pre-solar value of your home (which is almost always lower).

Here's an example: installing a solar array on your roof adds $15,000 in value to your property. If your state's property tax rate is 1.5%, that increase in home value will result in an additional $225 on your property taxes each year. However, suppose your state has a solar property tax exemption policy. In that case, you are exempted from paying that extra $225 in taxes – you don't owe any more property tax than usual, even though your home is now markedly more valuable. Your tax savings will vary depending on how much value solar adds to your home.

In total, 25 states have an active solar property tax exemption policy. Of those 25 states, 21 have policies that give tax exemptions to residential solar projects, like a small rooftop or ground mount solar array. The other four states only offer solar property tax exemptions to non-residential solar projects. The chart below lists every state with a solar tax exemption program for residential and non-residential properties.

Solar property tax exemptions by state

State
Residential Solar Property Tax Exemption?
Non-residential Solar Property Tax Exemption?
Alabama
Alaska
Arizona
Colorado
Connecticut
Hawaii
Idaho
Indiana
Iowa
Kansas
Maryland
Massachusetts
Missouri
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Dakota
Ohio
Rhode Island
Texas
Vermont
Virginia

Some places, like New York City, have an additional tax incentive for solar installations: property tax abatements. A tax abatement is an incentive that allows building owners to deduct some or all of the cost of installing solar from their property taxes.

In New York City's solar tax abatement program, you can take 5% of your solar panel system installation expenses and deduct that amount from your property taxes for four years. Importantly, abatements are calculated before other tax exemptions (like the federal tax credit for solar), meaning you can claim an abatement based on the full price of your solar installation.

Several cities other than New York City offer tax abatement programs, all varying in value and duration. For example, Cleveland provides a 100% tax abatement for photovoltaic projects (among other eligible home improvements) to be paid out over 10-15 years, depending on your property type. Their program deducts 100% of the cost of a solar panel installation from your property taxes, spread out over 10-15 years. Cincinnati offers a similar program. Aside from Cincinnati and Cleveland, there are other abatement programs, but most are geared toward commercial solar installations and large-scale projects.

There are many ways to save money on a solar installation. That process begins by finding a reputable solar installer who will provide high-quality equipment at a competitive price. On the EnergySage Solar Marketplace, you can solicit quotes from qualified, pre-vetted installers personalized for your home. Combining EnergySage solar prices with local property tax incentives can make going solar affordable and stress-free.

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