Solar Panels and Property Taxes: Tax Exemptions by State
Solar panels increase your home's value. A typical residential system adds $15,000-$30,000 to your home's market value. Without an exemption, that means a higher property tax bill. But about 36 states have passed laws that exempt the added value of solar energy systems from property tax assessment.
Here's which states protect you and which don't, how much the exemption saves, and how to make sure you're getting it.
TL;DR
- Solar panels increase home value by $15,000-$30,000, which can raise property taxes
- About 36 states exempt the added value from property tax assessment
- In exempt states, you save $300-$600+ per year in property taxes
- Some exemptions are automatic; others require an application
- The exemption doesn't affect your solar tax credit or other solar incentives
How Solar Panels Affect Property Value
Research from Lawrence Berkeley National Laboratory found that solar panels add roughly $4 per watt to a home's sale price. For a typical 7 kW system, that's about $28,000 in added value. The Department of Energy estimates that homes with solar sell for 4.1% more than comparable homes without it.
Without a property tax exemption, that added value gets folded into your assessment. At a 2% tax rate, a $28,000 increase in assessed value means $560 per year in extra property taxes. Over the 25-30 year life of the system, that's $14,000-$16,800 in additional taxes, enough to wipe out a big chunk of your solar savings.
States With Solar Property Tax Exemptions
| State | Exemption Type | Duration | Application Required? |
|---|---|---|---|
| Arizona | 100% of added value exempt | Permanent | No (automatic) |
| California | 100% of added value exempt | Until 2025 (being extended) | No (automatic) |
| Colorado | 100% of added value exempt | Permanent | Yes |
| Connecticut | 100% of added value exempt | Permanent | Yes |
| Florida | 100% of added value exempt | Permanent | No (automatic) |
| Illinois | 100% of added value exempt | Permanent | Yes |
| Maryland | 100% of added value exempt | Permanent | Yes |
| Massachusetts | 100% of added value exempt for 20 years | 20 years | Yes |
| Minnesota | 100% of added value exempt | Permanent | No (automatic) |
| Nevada | 100% of added value exempt | Permanent | No (automatic) |
| New Jersey | 100% of added value exempt | Permanent | Yes |
| New Mexico | 100% of added value exempt | 10 years | Yes |
| New York | 100% of added value exempt | 15 years | Yes |
| North Carolina | 80% of added value exempt | Permanent | Yes |
| Oregon | 100% of added value exempt | Permanent | No (automatic) |
| Rhode Island | 100% of added value exempt | Permanent | Yes |
| Texas | 100% of added value exempt | Permanent | Yes |
| Vermont | 100% of added value exempt | Permanent | No (automatic) |
| Virginia | 100% of added value exempt (local option) | Permanent | Varies |
| Wisconsin | 100% of added value exempt | Permanent | No (automatic) |
This is not an exhaustive list. About 36 states have some form of solar property tax exemption. Check your state's energy office or department of revenue for the most current information.
States Without Solar Property Tax Exemptions
A handful of states don't offer solar property tax exemptions, meaning your assessment will go up when you install panels. These include:
- Alabama
- Arkansas
- Georgia (limited local exemptions available)
- Idaho
- Michigan
- Mississippi
- Oklahoma
- West Virginia
If you're in one of these states, factor the additional property tax cost into your solar ROI calculations. The tax increase doesn't usually make solar a bad investment, but it does affect the payback period.
How Much the Exemption Saves
The savings depend on your system size, your home's market, and your local tax rate:
| System Size | Estimated Added Value | Tax Rate 1.5% | Tax Rate 2.0% | Tax Rate 2.5% |
|---|---|---|---|---|
| 5 kW | $20,000 | $300/yr | $400/yr | $500/yr |
| 7 kW | $28,000 | $420/yr | $560/yr | $700/yr |
| 10 kW | $40,000 | $600/yr | $800/yr | $1,000/yr |
| 15 kW | $60,000 | $900/yr | $1,200/yr | $1,500/yr |
Over the 25-year life of a system, a $560/year savings adds up to $14,000. That's on top of the energy savings and federal tax credit.
How to Make Sure You Get the Exemption
In some states, the exemption is automatic. The assessor knows not to add solar to the assessed value. In others, you need to file an application. Here's how:
- Check your state's rules. Is the exemption automatic or application-based?
- If application-based: Contact your county assessor's office and ask for the solar/renewable energy exemption form.
- File the application. You'll typically need documentation of the solar installation including the date, system size, and cost.
- Verify on your next assessment. Check that your assessed value didn't increase to reflect the solar installation.
What If Your Assessment Went Up After Solar?
If you're in an exempt state and your assessment increased after installing solar, the assessor may not have applied the exemption correctly. Contact the assessor's office with your exemption documentation. If they don't fix it, file a formal appeal citing the state exemption law.
Solar Leases and PPAs: Different Rules
If you lease your solar panels or use a Power Purchase Agreement (PPA), you might not own the system. In that case, the property tax situation changes:
- Leased systems: The leasing company owns the panels. In most cases, the leased equipment isn't assessed as part of your property. However, some assessors do include it. If your assessment went up after a leased installation, it's worth challenging.
- PPA systems: Similar to leases, the PPA provider typically owns the equipment. Property tax treatment varies by state and even by county.
- Owned systems: You clearly own the panels, and the exemption definitely applies (if your state offers one).
Solar Batteries and Storage
Battery storage systems (like the Tesla Powerwall) are increasingly common alongside solar. Most states that exempt solar panels also exempt battery storage systems that are connected to the solar array. However, standalone batteries without solar may not be covered. Check your state's specific language.
Combining Solar Exemption With Other Savings
The solar exemption stacks with all other property tax savings programs:
- Homestead exemption: Reduces your assessed value; solar exemption prevents the assessment from going up
- Senior exemption: Additional assessment reduction for qualifying seniors
- Federal solar tax credit (ITC): The 30% federal tax credit for solar installation is completely separate from property tax exemptions. You can and should claim both.
- Energy efficiency exemptions: Some states offer additional exemptions for other energy-efficient improvements
Frequently Asked Questions
Do solar panels raise property taxes?
In about 36 states, no, thanks to solar property tax exemptions. In the remaining states that don't have exemptions, solar can increase your assessed value and therefore your property taxes. The increase is typically $300-$800 per year depending on system size and local tax rates.
Does the solar property tax exemption expire?
In most states, it's permanent. A few states have time limits: New York exempts for 15 years, Massachusetts for 20 years, and New Mexico for 10 years. After the exemption period ends, the remaining value of the system (which has depreciated) may be added to the assessment.
Do I need to apply for the solar tax exemption?
It depends on your state. About half the states with exemptions apply them automatically. The other half require you to file an application with your county assessor. Even in automatic states, it's worth checking your assessment after installation to make sure it was applied correctly.
Does the exemption apply to commercial solar installations?
Many state exemptions cover both residential and commercial solar, but some are limited to residential properties. Commercial installations may have different rules or separate exemption programs. Check your state's statute language.
What happens to the solar exemption when I sell my home?
In most states, the exemption transfers to the new owner because it applies to the equipment, not the person. The new buyer benefits from both the solar energy and the tax exemption. This can make your home more attractive to buyers.
Can my HOA prevent me from getting the solar exemption?
An HOA can't affect your property tax exemption. They may have rules about solar panel placement and appearance, but property tax exemptions are between you and the county assessor. HOA approval (or disapproval) of your solar installation doesn't affect the tax treatment.
Does a solar roof (like Tesla Solar Roof) qualify for the exemption?
Generally yes, if it generates electricity from solar energy. Solar roof tiles function the same as traditional panels for property tax purposes. The exemption covers the value of the solar energy generation capability, regardless of the form factor.
What if I add more panels later?
The exemption should cover any additional panels as well. If you expand your system, check with your assessor to make sure the updated system is still fully exempt. You may need to file an updated application in states that require applications.
Go Solar Without the Tax Penalty
Solar makes financial sense for most homeowners, especially when the property tax exemption prevents your bill from going up. If you've already installed solar and noticed a tax increase, check whether your state's exemption was properly applied.
PropertyTaxFight helps homeowners make sure their assessments are accurate and that all applicable exemptions are in place. If your taxes went up after installing solar in an exempt state, we can help you get them corrected.