Property taxes can be a significant added cost to owning property, and no one is looking to pay more taxes.
However, most property owners will make improvements to their property over time that will increase the property's value and subsequently increase their property taxes.
Are solar panels one of these investments?
Not only will Installing solar panels help you save more of your hard-earned money but owning a solar system will also increase your property value. Solar is an asset that buyers are willing to pay more for.
Is a solar system an asset that will increase your property taxes? We answer this question and more in the blog below.
Will Installing Solar Panels Increase Your Property Taxes?
Installing a solar panel system could potentially increase your property taxes. However, this will depend on your state and your local property tax codes.
As of the time of writing this blog, 32 states in the country have some sort of a solar-panel-related property tax exemption. If you’re located in one of these states, your real estate tax won’t go up by adding a solar system to your property, assuming your system meets their standards.
This is just one of many solar tax incentives utilized by state and local governments to encourage homeowners, farmers, and businesses to install their own source of emissions-free renewable energy.
However, if you don’t live in one of the states with a specific exemption, that doesn’t necessarily mean your property taxes will increase after a solar project.
Learn More: Find out what solar incentives are available in your state.
This is Why Your Taxes May Not Increase, Even if There's No Property Tax Incentive for Solar
If you install solar and live in a state without specific regulations prohibiting a property tax increase, there won’t necessarily be an increase. It simply means that there’s nothing specifically stopping the state from levying those taxes.
In fact, in our experience of installing well over 1,500 solar systems across the Mid-Atlantic and Ohio, we haven’t heard from a customer that had an increase in their property taxes that was a result of the solar system.
That said, if you’re looking to develop a large-scale solar farm spanning several acres and generating many megawatts (MW) of solar electricity, your property taxes will likely increase. But if you’re installing a smaller system intended to offset your home, business, or farm’s electricity usage, it’s less likely that you’ll see an increase in your property taxes.
Why is this? While solar can increase the selling price of your property, it isn’t necessarily included in the value of the property itself.
The thought process behind this is that while securely affixed to your roof or installed as a ground mount on your property, it is technically removable.
Typically, panel manufacturers guarantee solar panels for 25 or even 30 years, meaning they can last at least this long. While your solar system will work for decades, it won’t last forever, or likely for as long as the rest of the property. Therefore it isn’t a permanent part of your property.
So in some ways, you could equate it to large appliances like refrigerators. Buying a new, expensive smart fridge probably won’t increase the tax-assessed value of your property. But, large appliances are often left behind when selling a house.
If you don’t plan on taking your fancy fridge to your new house, it may be a bonus for the prospective buyers—one that they’ll be willing to pay a little extra for. However, a solar system likely has much more value to a prospective buyer than a fancy fridge! Who doesn't want a house that produces free electricity?
Save More with A Sales Tax Exemption for Solar
In addition to waiving property taxes, some states waive sales tax on solar-related costs. This solar incentive helps keep the installation costs of solar systems a little bit lower.
The amount of money this will save you will, of course, depend on how much you’re spending on your solar equipment and installation fees, as well as your state’s sales tax rate.
Of the Mid-Atlantic states, Maryland, New Jersey, New York, and Ohio waive sales tax on solar-related costs. Delaware, of course, does too, but as there is no sales tax in the state on anything, it’s not necessarily a solar incentive.
Breakdown of Solar Tax Incentives for the mid-Atlantic States
Even if your state does have property tax exemptions, they may not be available for all systems. Some states limit the exemption according to system type and size.
Check out the chart below for more specifics on your state.
|State||Property Tax Exemption||Sales Tax Exemption|
|Delaware||No Specific Exemption||No Sales Tax on Costs Related to Solar Equipment & Installation|
|Maryland||Specific Exemption for Systems Installed on All Types of Buildings. No Size Restrictions. Applies to State and Local Property Tax.||No Sales Tax on Costs Related to Solar Equipment & Installation|
|New Jersey||Specific Exemption for Systems Installed on All Types of Buildings. No Size Restrictions. Applies to State and Local Property Tax.||No Sales Tax on Costs Related to Solar Equipment & Installation|
|New York||Specific Exemption for 15 Years. Individual Municipalities Can Opt-Out||No Sales Tax on Costs Related to Solar Equipment & Installation|
|Ohio||Specific Exemption for Businesses Only; Residential Solar in Cleveland and Cincinnati Also Exempt||No Sales Tax on Costs Related to Solar Equipment & Installation|
|Pennsylvania||No Specific Exemption||No Sales Tax on Costs Related to Solar Equipment & Installation|
|Virginia||Specific Exemption for Systems for Commercial, Agricultural, School, or Industrial Properties. 100% for Projects Under 5 MW or 20 MW if Higher Education or Private College. 80% Exemption for Projects 50 MW to 150 MW. Individual Municipalities are Allowed to Opt-In to Exemptions for Residential Property Tax Exemptions.||Sales Tax is charged on Costs Related to Solar Equipment & Installation|
|West Virginia||No Specific Exemption||Sales Tax is charged on Costs Related to Solar Equipment & Installation|
Please note we're not accountants or tax experts. We do recommend speaking with your local tax expert to confirm if you qualify for property tax exemptions, the federal solar tax credit, and any other related tax questions before investing in a solar energy system.
Most solar owners will not receive an increase in their taxes. However, even if a solar installation would result in higher property taxes, they may be a drop in the bucket compared to the money you’ll save with the federal tax credit and by offsetting your monthly electric bill (which will continue to increase).