Solar Tax Exemptions: Sales Tax and Property Tax (2021)

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, we’ll 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, or fill out the form below to get a free, no-obligation quote from a solar installer near you to see how much can save on a solar panel system.

Disclaimer: This article is for informational purposes only. It should not be relied on for 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 Solar Energy Industries Association, 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 waived on purchases of solar panels,
solar batteries and other forms of solar equipment. Naturally, this can reduce the total purchasing cost considerably, making a solar investment a bit more affordable.

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

Solar 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 this means: A solar panel installation typically results in a significant increase in your property values. (On average, homeowners see a
solar-related property value increase of about 4.1%.) In states that have renewable energy property tax exemptions, homeowners whose property values rise are protected from a comparable increase in property taxes. In other words, the worth of the home goes up, but homeowners do not have to pay anything more come tax time.

Solar Tax Exemptions: State By State Breakdown

Different states have different laws when it comes to sales and property tax exemptions for solar installations. To learn about the tax incentives available in your area, check 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 assessment

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

South Carolina

No exemption

No exemption

South Dakota

Exemption of either $50,000

or 70% of total property value

No exemption

Tennessee

Tax value no more than 12.5% of installed cost

100% exempt

Texas

100% exempt

No exemption

Utah

No exemption

Exemptions only for systems

over 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

*Accurate as of time of publication.

Federal Solar Tax Incentives

In addition to these state-specific incentives, there is also a federal tax incentive that is available to all Americans who invest in solar power. The solar investment tax credit (ITC) is currently valued at 26% of the total solar installation cost, meaning homeowners can essentially deduce 26% of that up-front cost.

This tax credit covers:

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

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

Frequently Asked Questions: Solar Tax Exemptions

Are solar panels exempt from sales tax?

In states that have a solar sales tax exemption, yes, the purchase of solar panels is shielded 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 do not currently include a sales tax exemption.

Is solar exempt from property taxes?

Currently, there are 36 states that offer solar property tax incentives. Take a look at the chart included above to find out whether your state offers a solar property tax exemption. Some municipalities may have local property tax abatements as well, so property owners considering going solar should check government websites for additional information about incentives and rebates.

Are solar roofs tax deductible?

Your
solar roof shingles can be claimed via the federal solar investment tax credit, allowing you to deduct 26% of your total clean energy system costs.

Do solar panels decrease property taxes?

Solar projects usually increase residential property values, which in some states may actually mean an increase in 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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