The biggest incentives homeowners could get from solar energy installs are lessened taxes and maximized savings. These are even furthered by the different solar cash rebates offered by the federal government and solar installer providers. Such include tax credits from investment and state, cash rebates, solar renewable energy certificates (SRECs), and performance-based incentives (PBIs).
Similarly, solar tax exemptions allow homeowners and even business owners to lessen the upfront or long-term cost of the solar panel system. The added costs of the solar installs are excluded from the property value and are much easier to obtain since they don’t require you to have income for you to claim them.
However, not all states offer this incentive. This article will provide information on the different types of exemptions and help you identify the states with the highest solar tax exemptions.
Types of Solar Tax Exemptions:
There are two types of tax exemptions available: Solar Sales Tax Exemptions and Solar Property Tax Exemptions.
Solar Sales Tax Exemptions
Solar sales tax exemptions reduce the upfront or long-term cost of going solar. States with sales tax allow the homeowners and business owners to use 2.9% to 9.5% of sales tax to pay for the solar system installation.
There are 18 states with this type of exemption, all with varying qualification requirements. In Arizona, solar sales tax exemptions are granted to the retail sale of solar energy devices and their installation by contractors. Whereas in Colorado, exemptions are given to all sales, storage, and usage of components from any renewable energy source.
Property Tax Exemptions
Property tax exemptions help taxpayers with their tax payments by excluding the value of their solar systems from the valuation of their property. Moreover, the exemption also provides businesses and homeowners a more economically friendly option in installing their solar installs. This tax exemption is available in 36 states including New Jersey and Nevada.
In New Jersey, this is granted to those who meet on-site electricity, heating, cooling, or general energy needs. While in Nevada, this tax incentive is beneficial to both homeowners and businesses. They can apply for up to 55% tax abatement that can last for 20 years. This is applicable to business and personal properties with a capacity of at least 10 megawatts.
State By State Breakdown of Tax Exemptions
States have diverse laws on property tax and sales tax. As shown in the table, property tax exemptions are available in 36 states while sales tax exemptions are only offered to 18.
States with the highest solar property tax exemptions include Arizona, California, Colorado, Connecticut, Florida, Hawaii, Indiana, Kansas, Louisiana, Maryland, Michigan, Minnesota, Missouri, New Jersey, New Mexico, Oregon, Rhode Island, Texas, Vermont, Washington DC, and Wisconsin. All these states are granted a 100% tax exemption. Other states not mentioned either offer lesser exemptions with a time limit or do not have exemptions at all.
States with the highest solar sales tax exemptions include Arizona, Colorado, Connecticut, Florida, Iowa, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Ohio, Rhode Island, Tennessee, Vermont, and Wisconsin.
|State||Solar Property Tax Exemption*||Solar Sales Tax Exemption*|
|Alabama||No exemption||No exemption|
|Alaska||Local exemptions||No sales tax|
|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|
Exemption of either $50,000
or 70% of total property value
|Tennessee||Tax value no more than 12.5% of the installed cost||100% exempt|
|Texas||100% exempt||No exemption|
Exemptions only for systems
over 2 MW
|Vermont||100% exempt||100% exempt|
|Virginia||Local exemptions||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|