Is Solar Actually Exempt from Property Taxes? (Avoid this Mistake) + FAQs

Yes – in many places, solar panels are exempt from property taxes, but not everywhere (and assuming they are everywhere is a big mistake).

Over 36 U.S. states now offer property tax exemptions for solar installations, so adding panels usually won’t raise your property’s assessed value or tax bill there. In other areas without these incentives, however, solar can still increase your home’s value – and that could mean higher taxes unless you plan ahead.

Did you know? Installing solar can boost a home’s value by around 4–7% on average. Normally, a higher home value leads to a bigger tax bill – yet thanks to solar tax exemptions in most states, you often won’t pay a penny more in property taxes because of your panels.

Here’s what you’ll learn in this comprehensive guide:

🏠 Residential vs. Commercial – how solar installations impact homeowners and business properties differently when it comes to property tax assessments.
🗺️ State-by-State Breakdown – which states fully exempt solar panels from property taxes, which offer partial or temporary breaks, and where solar still increases your tax bill (covering all 50 states).
⚖️ Laws, Programs & Cases – key laws (and even court cases) that shape solar tax exemptions, from IRS credits to state renewable energy programs, plus how federal vs. state rules differ.
❌ Avoiding Costly Mistakes – common misconceptions (like confusing the federal tax credit with a property tax exemption) and pitfalls that could cost you money if you’re not careful.
❓ FAQs Answered – clear Yes/No answers to the most frequent questions from homeowners about solar panels and property taxes, so you can make informed decisions with confidence.

Understanding Solar Property Tax Exemptions

Property Tax Basics: How Home Improvements Increase Your Tax Bill

Property taxes are an annual charge based on your property’s assessed value. When you improve your property (for example, by adding a new room, a pool, or solar panels), the assessor typically increases your home’s value to reflect the upgrade. A higher assessed value means you owe more taxes. This process is known as an “ad valorem” tax (Latin for “according to value”) – essentially, you pay a percentage of your property’s worth each year.

Under normal circumstances, installing an expensive new feature on your home raises its market value – and local tax assessors would usually capture that added value in the next assessment cycle.

If you install a $20,000 solar panel system, your home might be worth about that much more; without any special exemption, an assessor could add $20,000 to your property’s taxable value. In a city with a 1% tax rate, that would mean an extra $200 in yearly property taxes (because 1% of $20,000 is $200). Over the life of the solar panels, that tax adds up.

Solar Panels and Home Value: Why Added Value Can Mean Higher Taxes

Multiple studies have confirmed that solar panels increase home resale value. Estimates vary, but a commonly cited figure (from a Zillow study) is around 4% higher sale price on average for homes with solar. In real numbers, for a $300,000 home, that’s an additional $12,000 of value thanks to solar energy features. Other research and recent market trends suggest the premium could be even higher (5–10% in some regions), as more buyers prioritize energy efficiency and lower electric bills.

Normally, any significant rise in home value would be great for your equity but would also trigger a higher property tax assessment. Local governments reassess property values periodically (some annually, others every few years or when the property is sold). So, if solar panels make your home worth more, you’d expect the tax assessor to notice and bump up your valuation accordingly – unless there’s a policy preventing that.

Why Many States Exempt Solar Panels from Property Tax

Seeing the potential tax hurdle, many U.S. states decided to intervene. The idea is simple: don’t punish homeowners for investing in clean energy. If people fear their property taxes will go up after going solar, they might hesitate to install panels – which runs counter to renewable energy adoption goals. To remove this disincentive, states have enacted solar property tax exemptions (or similar mechanisms) that exclude the added value of a solar energy system from a home’s valuation for tax purposes.

In states with these exemptions, adding solar panels does not increase your property’s assessed value (for a certain period or indefinitely, depending on the law). In other words, the added value from solar is invisible to the tax man. This encourages more homeowners and businesses to go solar, since they can enjoy higher property value and energy savings without a higher tax bill. Lawmakers essentially decided that promoting clean energy and reducing carbon emissions is important enough to warrant a tax break.

These exemptions also recognize that solar installations often come with upfront costs that homeowners are trying to recoup through energy savings. If property taxes ate into those savings, the financial payback period for solar would lengthen, making it less attractive. By eliminating the tax increase, states help ensure going solar is a better deal economically.

Exemption, Exclusion, Abatement – What’s the Difference?

When researching solar incentives, you might encounter terms like “property tax exemption,” “tax exclusion,” “tax abatement,” or “special assessment.” Though related, they have specific meanings:

Exemption: This usually means a law that completely frees certain property value from taxation. In context, a solar property tax exemption means the value added by solar panels is entirely exempt from your property’s tax assessment. You don’t pay tax on that portion at all.
Exclusion: An exclusion functions similarly to an exemption but is often phrased as excluding the improvement from being considered “new construction” for tax purposes. For example, California uses a New Construction Exclusion for active solar energy systems. Practically, it achieves the same result: the solar addition is not included in taxable value. The terminology differs mainly in legal nuance, but for homeowners it means no added tax due to solar.
Abatement or Credit: These terms usually refer to a reduction in the actual tax owed, rather than removing value from assessment. A tax abatement might reduce your tax bill by a certain amount or percentage for a period of time. Some local governments offer abatements for solar (for instance, a city might give a yearly credit on your property tax bill for having solar panels, effectively offsetting some tax). This is less common than exemptions/exclusions but is another tool.
Special Assessment (or Special Valuation): In a few places, instead of outright exempting solar, they use a different formula to assess its value for taxes. Illinois is one example – it uses a special assessment method for solar farms and sometimes residential systems, ensuring the taxable value of the solar equipment is minimal (often based on its production or a depreciated value, not the added market value). This approach still ends up significantly reducing the tax compared to normal valuation.

Regardless of the term, the goal is the same: prevent your property taxes from shooting up solely because you chose to install solar panels. In most of this article, we’ll use “exemption” broadly to cover all these concepts, since that’s the common way people refer to it.

Solar Tax Exemptions by State: Where Are Solar Panels Exempt?

Policies differ widely across states. Some states offer generous, permanent exemptions for all solar installations; others provide partial or temporary relief; and a handful offer no property tax benefit at all for going solar. Here’s a breakdown:

States with Full Exemption (No Property Tax on Solar Value)

A significant number of states fully exempt the added value of solar panels from property taxation, typically with no time limit. In these places, if you install solar, your assessor will ignore the solar system’s value when calculating your property’s worth.

States that offer a 100% property tax exemption for residential solar (and often commercial too) include: Arizona, Colorado, Connecticut, Florida, Indiana, Kansas, Louisiana, Maryland, Michigan, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, Texas, Vermont, Wisconsin, and Washington D.C. (among others). In these states, a homeowner’s property tax will not increase due to the solar installation. For example, Florida’s constitution was amended to ensure solar panels (and other renewable energy devices) are completely excluded from property tax assessments on both residential and commercial properties. Similarly, Texas law (Tax Code §11.27) explicitly allows homeowners to claim a 100% exemption for the value added by solar or wind devices – Texans must file a form, but then their solar equipment is untaxed.

It’s worth noting that while these exemptions are “permanent” for the life of the solar equipment, laws can sometimes change. California, for instance, used to be in this category – it has long provided a full property tax exclusion for solar systems (since the 1980s) via the Active Solar Energy System Exclusion.

However, that program is scheduled to expire at the end of 2024 (unless extended by new legislation). As of now, Californians installing solar before the sunset date get a full exemption on the added value (meaning their tax base won’t go up due to solar at all). States occasionally set expiration dates on these incentives to periodically review their impact.

States with Partial or Time-Limited Solar Exemptions

Some states offer property tax breaks for solar that are partial, conditional, or last only for a set number of years. These can still be very valuable, but they aren’t an unlimited pass. Here are a few examples:

New York: Provides a 15-year 100% exemption for solar (and other renewable systems) under Real Property Tax Law §487. For 15 years after installation, the solar added value is tax-free. After that, the system’s value could be taxed (though solar equipment value often depreciates by then). Importantly, New York’s exemption allows local jurisdictions to opt out – meaning a county or town can decide not to offer the exemption, in which case solar in that locality would be taxed normally. Many places in NY honor the exemption, but some opt out, so you must check with your local assessor.
Massachusetts: Offers a 20-year property tax exemption for solar energy systems that primarily supply the property on which they’re located. After 20 years, the exemption lapses. (Massachusetts also allows alternative arrangements like PILOT agreements – Payments In Lieu of Taxes – for larger solar facilities not qualifying under the exemption.)
Iowa & North Dakota: Both states grant a 5-year 100% exemption for solar installations. Your solar system’s value won’t be added to taxes for five years after it’s installed. After five years, the protection ends (though again, your panels will have depreciated in value by then, possibly softening the tax impact).
Montana: Grants a 100% property tax exemption for the first 10 years on residential and commercial solar equipment. (Montana also has special classifications for larger solar farms – after 10 years, utility-scale projects gradually ramp up to full taxable value, but the first decade sees a reduced tax rate.)
North Carolina: Uses a partial exemption – by law, 80% of the appraised value of a solar energy system is exempt. In other words, only 20% of the solar system’s value is subject to property tax. This is a permanent reduction (no expiration), but it means homeowners still pay a little bit of tax on their solar investment (a much smaller amount than normal).
South Dakota: Offers an exemption on the first $50,000 or 70% of the value of the solar energy system, whichever is greater. This effectively means most residential systems (which are usually under $50k in value) get 70% of their value exempt (since 70% of the system value will typically exceed $50k only for very large systems). For bigger installations, the first $50k is always exempt at minimum. The result is a significant reduction, though not a full exemption for large projects.
Tennessee: Rather than a straight exemption, Tennessee law caps the assessed value of solar equipment at a fraction of its total cost. Specifically, solar installations in TN are assessed at only 12.5% of their installed cost for tax purposes. This is effectively an 87.5% exemption because only a small slice of the value is taxed.
Illinois: Uses a special assessment model for solar farms and has provisions that effectively make small residential solar additions nominally taxable at a very low value. Illinois law treats solar energy systems (used primarily for a property’s own electricity) as having no added real estate value – meaning the panels themselves aren’t counted in the home’s assessment. (In technical terms, they might be considered as having value only as personal property or via a set formula.) So while not called an “exemption” outright, the effect for homeowners is the same: no increase in property tax due to solar panels.
California (Upcoming): As noted, California’s full exemption is set to expire. If it does, California would move into the “no exemption” column for new installations in 2025 and beyond. However, there are efforts in the state legislature to extend or replace it, because California has a strong interest in promoting solar adoption. This is a reminder that time-limited exemptions can change; homeowners should stay up-to-date on their state’s current law.

In summary, these partial or time-limited exemptions reduce property taxes on solar either for a number of years or by a certain percentage. They still ensure a solar owner isn’t paying full freight on the added home value. If you live in one of these states, it’s important to mark your calendar for when the exemption ends (if it has a sunset), so you’re not caught off guard by a tax increase later on.

States with No Solar Property Tax Exemption

What about the rest of the states? There are unfortunately still some states where installing solar can lead to a higher property tax bill because no special exemption exists. In these states, the added value from solar panels is treated like any other home improvement – meaning your assessor may well increase your assessment.

As of now, states without any statewide solar property tax exemption include: Alabama, Arkansas, Delaware, Georgia, Idaho, Kentucky, Maine, Mississippi, Nevada, Oklahoma, Pennsylvania, South Carolina, Utah, Washington (state), West Virginia, and Wyoming. If you’re in one of these states, don’t despair – it just means you need to be mindful that your property taxes might inch up after you go solar. How much they increase depends on your local tax rate and how much value the assessor attributes to your solar system.

For example, in a state like Pennsylvania (no exemption), a homeowner who installs a solar array might see the next county assessment notice reflect a higher home value. Some Pennsylvania solar homeowners have reported their taxes rising because the assessor tacked on the value of their panels. It’s often still worth going solar (because the energy savings and home value boost can outweigh the relatively modest tax increase), but it is a factor to budget for. In Georgia and South Carolina, likewise, there’s no protective state law – so while your home might sell for more with solar, you could be paying a bit extra in taxes each year in the meantime.

Local practices vary: not every assessor aggressively values solar. If solar installations are uncommon in a non-exemption state, sometimes assessors don’t immediately increase a home’s value, or they might assign a lower-than-cost value recognizing some depreciation. However, you shouldn’t count on leniency. The safe approach is to assume an added value (perhaps 50-70% of the system cost might be counted) and calculate the possible tax impact. For instance, a $15,000 solar system in a 1% tax area could mean roughly $150 more in yearly tax if fully valued – still a small price relative to the energy savings, but something to note.

Local Option and Special Cases

In a few states, the decision to exempt solar from property tax is left to local governments (counties or cities). These are “local option” exemptions: the state authorizes an exemption, but your county/city has to adopt it for you to benefit.

Alaska: Alaska doesn’t have a statewide mandate, but it allows local boroughs to offer a property tax exemption for renewable energy systems. Some local governments in Alaska choose to exempt solar, so if you’re in Alaska, you’d check with your borough assessor.
New Hampshire: Similarly, NH law lets cities and towns decide whether to offer a solar property tax exemption. Many New Hampshire towns have adopted exemptions (often through a vote at a town meeting). If you live in NH, you might find that your town gives, say, a 100% assessed value exemption for solar – but a neighboring town might not. Always verify with your town office.
Virginia: Historically, Virginia allowed localities to offer an exemption for solar equipment (and many counties did for residential systems). In 2022, Virginia went a step further and passed a statewide exemption for residential and mixed-use solar installations up to 25 kW. Now, homeowners across Virginia automatically get a tax exemption for typical home solar setups. Larger commercial systems in VA still fall under partial exemption rules: generally, projects up to a certain size (like 5 MW) are exempt for a large portion of their value (for instance, an 80% exemption for large systems for several years, then a reduced percentage thereafter). The key point is that Virginia moved from a local-option model to a uniform state policy at least for small systems.
Ohio: Ohio provides a property tax exemption for renewable energy facilities of certain sizes, but it’s somewhat conditional. Large solar farms can be exempt if they meet certain requirements and payments (often through a PILOT program negotiated with counties). Meanwhile, at the municipal level, some Ohio cities like Cincinnati and Cleveland have introduced incentives or local tax abatements to encourage residential solar. Always check city programs in Ohio, since there isn’t a blanket state rule for home solar exemption as of now.
Illinois (Local nuance): Illinois’ state-level approach (special assessment) covers a lot of ground, but note that some local Illinois jurisdictions also use agreements for large projects. For typical homeowners, Illinois effectively feels like an exemption state – but always clarify with your township assessor if any documentation is needed to get the special valuation.
Hawaii: Hawaii doesn’t have a statewide property tax (all property taxes are county-level). There isn’t a state solar exemption, but the City and County of Honolulu (Oʻahu) offers a generous property tax exemption for solar and wind systems – currently a 25-year, 100% exemption on the added value of the system (and even an 80% exemption on the land value under the system, for ground-mounted units). Other Hawaiian counties may have different rules or none, so Hawaiian residents should inquire with their county tax office.
Missouri: Missouri was previously touted as having a full solar tax exemption by statute. However, a 2022 Missouri Supreme Court decision (Johnson v. Springfield Solar) invalidated the state’s exemption for solar farms on constitutional grounds (the state constitution didn’t authorize that exemption). This has introduced uncertainty. Residential solar in Missouri might still often be treated as exempt in practice (especially since the court case centered on a commercial project), but legally, Missouri’s situation is in flux. It’s an example of how legal challenges can alter tax incentive programs. If you’re in Missouri, stay tuned for potential new legislation – or consult local authorities on how they’re currently treating solar arrays for tax purposes.

As you can see, “local option” states and special cases mean you must do a bit more homework. The upside is, many local governments, even in states without a mandate, have decided to grant relief on their own to encourage clean energy. The downside is, there’s inconsistency – and you, the property owner, must find out what your particular city/county offers.

Residential vs. Commercial Solar: Different Tax Treatments

Not all solar installations are treated equally. Many property tax exemption laws were initially designed with homeowners in mind – to encourage residential solar adoption. But what about businesses, factories, or large solar farms? Let’s break down how solar property tax rules can differ by the type and scale of the installation.

Residential Solar – Homeowners Benefit from Most Exemptions

If you’re a homeowner putting panels on your roof or in your backyard, you are likely the target beneficiary of your state’s solar tax exemption (if one exists). Residential systems (typically in the range of 5 to 15 kW capacity for a home) are almost always covered by the state exemptions we discussed. This means whether you’re in New Jersey, Texas, Maryland, or another exemption state, your home solar upgrade won’t trigger a higher property tax assessment.

A few points specific to homeowners:

Virtually all full and partial exemptions apply to residential systems. States usually don’t carve out owner-occupied homes from the incentive – in fact, they prioritize them. For example, New York’s 15-year exemption and Florida’s constitutional exemption explicitly list residential solar installations as qualifying property.
No distinction between owned vs. financed panels: If you purchased your solar system outright or financed it with a loan, the treatment is the same. Even if you have a solar lease or power purchase agreement (PPA) (where a third-party company owns the panels on your roof and you buy the power), in many states the property tax exemption still applies. Generally, the law cares that qualifying renewable energy equipment is installed – not who owns it. (In a few cases, the solar company might owe personal property tax on the equipment they own, but homeowners usually are not taxed for leased panels. And in many states, even third-party owned systems are exempt from any property taxation.)
Home value increases without penalty: As discussed, a big selling point is that you get the boost in home equity from solar without the accompanying tax increase. Down the line, if you sell your solar-equipped home, you can likely command a higher price – and during your years of ownership, you didn’t have to pay extra taxes for that added value. It’s a win-win for homeowners in exemption states.

Commercial and Utility-Scale Solar – Special Rules and Limitations

Larger solar installations, like those on commercial properties (office buildings, shopping centers, factories) or standalone solar farms, often face a different set of rules:

Many state exemptions cover commercial properties too… but sometimes with size limits. If a state law says “solar energy systems” are exempt without specifying only residential, it usually covers business installations as well. For instance, Arizona, Colorado, or New Mexico – their exemptions don’t exclude commercial sites, so a store or a farm adding solar panels also gets the benefit. Similarly, Florida’s amendment extending the solar exemption to commercial properties means businesses in Florida now enjoy the same 100% tax exclusion as homeowners.
…However, utility-scale projects often excluded or partially taxed: States commonly draw a line when it comes to very large installations (like multi-megawatt solar farms that sell power to the grid). They might still allow some break, but not a full free pass. For example, Virginia exempts residential and small commercial solar up to 25 kW completely, but for bigger projects (say a 5 MW solar farm), the state only gives an 80% exemption for a certain period, after which the project might be taxed on 20% of its value (or the exemption percentage might decrease over time). This ensures large developers contribute to the tax base while still getting some incentive.
Payment in Lieu of Taxes (PILOT) agreements: Large solar energy developers often negotiate with counties or towns to pay a fixed annual fee instead of traditional property taxes. These PILOT deals provide revenue to the locality (often comparable to what taxes would have been, but with more certainty and sometimes a slight discount) while giving the developer a predictable expense. PILOTs are common in states like New York or Illinois for big solar farms, especially when the default law grants an exemption. For example, a 50 MW solar farm in New York (which would technically be exempt under state law) will usually enter a PILOT agreement so the local town still receives some funds each year. Homeowners typically don’t deal with PILOTs – they’re just for large commercial projects.
Business personal property vs. real property: Another nuance is how tax law classifies commercial solar equipment. In some jurisdictions, solar panels on a business property might be deemed “business personal property” (like machinery or equipment) rather than part of the real estate. This matters because the tax treatment could differ. For instance, before Virginia’s recent law change, many Virginia counties treated solar panels as personal property and exempted them as such for homeowners. In other cases, a commercial solar array might be subject to a personal property tax (which is separate from real estate tax) unless exempted. This can get complex, but many state-level exemptions explicitly cover “solar energy equipment and devices,” aiming to eliminate any tax, whether it would’ve been counted as real property or personal property.
Limits on commercial exemption duration: As noted, if a state does allow big commercial systems to be exempt, they often cap the years. Montana, for example, treats large solar farms as a “new industry” and gives them a reduced tax rate for 10 years, after which normal taxation applies. North Dakota’s 5-year exemption applies to commercial renewables too, but then ends. The idea is to give a break during initial years to help recoup investment, but eventually add these projects to the tax rolls.

Bottom line for businesses: If you’re a business owner installing solar on your facility, check your state’s specific provisions. Many times you’ll get the same benefit as homeowners (no immediate tax hit), especially for moderate-sized rooftop systems. But if you’re building something larger or a dedicated solar farm, expect either partial taxation or the need to arrange payments to the local government. The rationale is that extremely large installations can significantly impact local tax revenue, so states strike a balance between incentivizing green energy and maintaining funding for public services.

In summary, residential solar is almost universally a tax win in states with exemptions, whereas commercial and utility solar may involve more conditions. Yet, even businesses often enjoy substantial tax relief on solar investments – it’s just a matter of navigating the particular rules (and sometimes negotiating with local authorities).

Common Mistakes and Misconceptions (Avoid These!)

Even with solar tax breaks available, people can (and do) get tripped up by misunderstandings. Here are some frequent mistakes to steer clear of:

Mistake #1: Assuming Solar Is Tax-Free Everywhere

The #1 mistake is thinking that just because you heard “solar is property tax-exempt,” it automatically applies in your state or town. In reality, as we’ve detailed, not every state offers this benefit. If you jump to install solar expecting a tax exemption that doesn’t actually exist in your area, you could be in for an unwelcome surprise when your home’s assessed value (and tax bill) goes up. Avoid this by researching your state’s policy (and even your county’s, if local opt-out or local option applies). Never assume – double-check the rules for your specific location.

Mistake #2: Not Filing Required Paperwork or Informing the Assessor

In many states with solar exemptions, the benefit isn’t always automatic; you might need to claim it. For example, in Texas, you must fill out a specific form (often called something like the “Solar Energy Device Exemption” form) and submit it to your county appraisal district to get your exemption. Similarly, some local jurisdictions want you to notify the assessor when you add solar so they know not to count it. If you just install solar and do nothing, the assessor might see new equipment on your roof (via permit records or aerial imagery) and could increase your value by default. Avoid this by understanding the process: Ask your solar installer or local tax office if any form is needed. It’s usually a simple one-time application. Don’t leave money on the table by failing to file!

Mistake #3: Confusing Property Tax Exemptions with Solar Tax Credits

Solar incentives come in different flavors. A common point of confusion is mixing up the federal solar tax credit (an income tax credit on your federal return) with a property tax exemption (a break on your local property tax bill). They are completely separate. Some folks hear “solar tax credit” and think it means they get money off on property taxes, or vice versa. Then they might budget incorrectly. Avoid this by keeping them straight: The 30% federal credit reduces your income taxes (or yields a refund) when you install solar – it has nothing to do with property taxes. The property tax exemption, on the other hand, is typically a state/local benefit that prevents an increase in your annual property tax. Both are great, but they operate independently. (There are also state income tax credits and sales tax exemptions in some places – the jargon can be confusing, so make sure you know which incentive is which.)

Mistake #4: Thinking “Exempt” Means You’ll Pay Zero Property Tax

Words can be misleading. When we say “solar is exempt from property tax,” it specifically means the value of the solar panels isn’t taxed. It does not mean your entire property becomes tax-free. Yet some homeowners hear this phrase and briefly think their whole house will now be off the tax rolls. (Wouldn’t that be nice? But no – you’ll still pay taxes on your home value as usual, just not on the solar addition.) Similarly, if your exemption is partial (e.g. 80% of solar value exempt in North Carolina), don’t think that you pay 80% less of your whole tax bill – it’s only about the portion of value from the solar. Avoid this misunderstanding by clarifying what’s exempt: only the solar equipment’s added value.

Mistake #5: Ignoring Exemption Expirations or Policy Changes

Property tax exemptions for solar can last a long time, but not necessarily forever. If your state gives a 5-year or 10-year exemption, mark your calendar for when that period ends. A mistake would be to assume it’s permanent, only to have your taxes jump in the year after the exemption expires. Similarly, states can change laws: an exemption might sunset (like California’s is slated to) or a locality might repeal a previously offered break. Avoid this by staying informed. If you have a time-limited exemption, plan for the future – perhaps setting aside some savings from your solar energy bill reduction to cover the eventual tax, or be ready to appeal an assessment if something seems off. Also, keep an ear out to state policy news; for instance, if you hear your state legislature is debating an extension of a solar tax incentive, that’s something to watch if it affects you.

By steering clear of these mistakes, you can fully enjoy the financial benefits of going solar without unintended costs. A little due diligence goes a long way – know your local rules, file the right forms, and keep everything in perspective.

Comparing Scenarios: Solar Panels and Property Tax Outcomes

To tie everything together, let’s look at a few common scenarios and how solar property tax rules play out in each. This highlights the contrast between having an exemption and not having one:

Scenario	Tax Outcome
*Homeowner in a state with* a full solar exemption** (e.g. Arizona or Florida)	No increase in property taxes. The added value of the solar panels is completely ignored by the tax assessor. The homeowner’s tax bill remains the same as if no solar was added.
*Homeowner in a state without* an exemption** (e.g. Georgia or Pennsylvania)	Higher assessed value, higher taxes. The solar system’s value is added to the home, raising the assessed value. The homeowner pays more in property tax each year (e.g. a $20k system might add ~$200/year in taxes at a 1% tax rate).
Large commercial or utility-scale solar project (varies by state policy)	Partial or negotiated tax treatment. Often not fully exempt – may get a reduction (e.g. 80% exempt) or pay agreed fees instead of taxes. The project contributes something to local taxes, but less than it would without incentives.

In short, homeowners in solar-friendly states get to improve their property and save on taxes, whereas those in non-exemption states should budget for a bit of a tax bump. And big solar installations usually land somewhere in between – they don’t escape taxes entirely, but they often get sizable relief through special arrangements.

Pros and Cons of Solar Property Tax Exemptions

Every policy has two sides. Here are some advantages and potential drawbacks of property tax exemptions for solar:

Pros	Cons
Lowers the cost of going solar for homeowners and businesses by reducing their tax burden.	Reduces revenue for local governments (less money for schools, fire/police, etc., if not offset elsewhere).
Encourages more solar installations, helping states meet clean energy and climate goals.	Other taxpayers might indirectly pay slightly more to make up for the lost revenue (or localities may cut services or find fees elsewhere).
Lets property owners increase their property value (with solar) without a financial penalty – improves return on investment.	Can add complexity: assessors must track and exclude solar improvements, and owners may need to file paperwork. Mistakes or misunderstandings can occur.
Sends a positive policy signal (state is “solar-friendly”), potentially attracting green businesses and installers to the area.	Some exemptions are temporary, which could lead to future tax increases for owners once the exemption period ends (creating uncertainty long-term).

On balance, most homeowners see the pros as far outweighing the cons for their personal situation – it’s essentially free money savings for doing something that also cuts your electric bill. From a community perspective, there’s a trade-off between promoting renewable energy and funding public services, which each locale has to consider. Many places have decided the trade-off is worth it to kickstart clean energy adoption.

Federal vs. State Incentives: Tax Credit ≠ Property Tax Exemption

It’s worth distinguishing between federal incentives for solar and the state/local property tax exemptions we’ve been discussing:

The U.S. federal government does not levy property taxes. Property taxes are purely state and local. So there is no federal property tax exemption to be had for solar – simply because the feds don’t charge property tax at all.
What the federal government does offer is the Solar Investment Tax Credit (ITC), now known as the Residential Clean Energy Credit for homeowners. This credit is equal to 30% of your solar installation cost (through at least 2032, under current law). It’s a one-time credit you claim on your federal income tax return. For example, if your solar system cost $20,000, you could get a $6,000 reduction in your federal taxes owed (or as a refund if your tax liability is smaller than that in a year, you can roll over unused credit to future years).
State vs. federal: complementary roles. The federal credit helps you afford the system initially, whereas the state property tax exemption helps you avoid ongoing costs down the road. One doesn’t affect the other – you can claim the federal credit and also enjoy a property tax break; they operate independently.
Business incentives: On the federal side, businesses installing solar can take advantage of not just the ITC but also accelerated depreciation (Modified Accelerated Cost Recovery System, or MACRS) which lets them deduct the solar asset’s cost from taxable income quicker. These reduce federal income taxes, but again, the business may still care about local property taxes on their solar asset – which is where state exemptions or local PILOT deals come in. Many states align these incentives so a commercial solar project can benefit from federal tax write-offs and pay reduced local taxes.
Other state incentives: Besides property tax, some states offer income tax credits, rebates, or sales tax exemptions for solar equipment. These are separate programs. For instance, New York offers a state income tax credit for small residential solar, and many states (like New Jersey or Arizona) waive sales tax on solar panels. These are great perks, but distinct from property tax issues. It’s a whole bundle of incentives that can make solar more affordable.

Key takeaway: The federal solar tax credit is a big deal for your wallet, but it doesn’t directly touch your property taxes. Your property tax relief will come from state or local policies. Make sure you’re taking advantage of both levels of incentives – claim that federal credit and, if available, file for your local property tax exemption. This way you maximize your solar savings on all fronts.

How to Claim Your Solar Property Tax Exemption

If you’re in a state (or city) that offers a solar property tax exemption, you’ll want to actually get that benefit. Here are steps to make sure you don’t miss out:

Research the Rules Early: Before or during your solar installation process, confirm what the property tax exemption requirements are in your area. A quick call to your county assessor’s office or a visit to your state energy department’s website can clarify if an application is needed. You can also look up your state on the DSIRE (Database of State Incentives for Renewables & Efficiency) website for a summary of solar tax incentives.
Complete Any Required Application: If your state/county requires you to file for the exemption, obtain the form. It might be called an “Application for Renewable Energy Tax Exemption” or similar. Fill it out with details about your solar system (size, install date, cost) and submit it as instructed (often to the local assessor or property tax office). In Texas, for example, you’d submit Form 50-123 to claim the solar exemption. Make sure to meet any deadlines (some places ask you to apply by a certain date after installation, such as within 30 days of project completion).
Provide Documentation (if needed): Be prepared to supply supporting documents. This could include a copy of your solar installation permit, final inspection certificate, or an invoice showing the cost of the system. These help the assessor verify that you’ve indeed installed a qualifying solar energy system and what its value is. Some assessors use this to adjust their records (in exemption states, they’ll adjust it by removing that value from taxation).
Verify Your Assessment: After your solar is installed and you’ve applied (if required), keep an eye on your next property assessment notice or tax bill. Ensure that the value of the solar panels has been excluded. If you don’t see any change when you expected one (or worse, if you see your assessed value went up by roughly the cost of the solar and you’re in an exemption area), follow up with the assessor. Sometimes bureaucratic oversight or miscommunication can happen – a polite inquiry can resolve it. Say, “I installed solar and under state law it should be excluded from my assessment; can you confirm this has been applied?”
Renew or Refile if Necessary: Most solar exemptions are a one-time setup – once it’s on record, you’re good year after year. However, a few jurisdictions might ask for periodic renewal or simply re-confirmation that the equipment is still in use. Make note if your exemption approval or state law indicates any renewal interval. Also, if you make changes (like expanding your solar array later), you may need to file an update to exempt the new addition’s value as well.
Stay Informed: Laws can change, and new opportunities can arise. Keep an ear out for any updates to tax laws in your state. For example, if you were in a state with no exemption and legislation gets proposed to create one, you might want to support it or at least know if it passes. Or if your state’s exemption is nearing a sunset date, watch legislative news on whether it gets extended.

Following these steps will ensure you actually get the property tax savings you’re entitled to. Solar installers often can guide you too – many will know the local procedure or even help file the paperwork as part of their service. Don’t be shy about asking them, “What do I need to do for the property tax exemption?” Taking initiative here can save you hundreds or thousands of dollars over the life of your solar panels.

FAQs: Solar Panels and Property Taxes

Do solar panels increase property taxes? – No. In most states, installing solar panels will not increase your property taxes because of exemptions. Even where there’s no exemption, the tax increase is usually modest relative to the savings.

Are solar panels exempt from property taxes in California? – Yes. California has a solar property tax exclusion (100% of solar value) in effect through 2024. If you install solar before the deadline, your home’s assessed value won’t increase due to the panels.

Is there a solar property tax exemption in Texas? – Yes. Texas provides a 100% property tax exemption for solar installations. You must file a form with your county appraisal district, but once approved your solar system’s added value isn’t taxed.

Are solar panels exempt from property taxes in New York? – Yes. New York offers a 15-year property tax exemption for solar installations. Keep in mind, though, that counties or towns can opt out of this exemption – so check your local jurisdiction’s stance.

Do I need to file paperwork to get a solar tax exemption? – Yes, often. Many places require a one-time form or application to officially claim the exemption. Always confirm with your local assessor’s office so you don’t miss out on the tax break.

Does the federal solar tax credit affect my property taxes? – No. The 30% federal solar tax credit only reduces your federal income taxes. It has no direct impact on your property tax bills, which are decided by state/local policies.

If I lease solar panels, do I still get the property tax exemption? – Yes. In most cases, a leased solar system is treated the same as owned for tax purposes – the home’s assessment still qualifies for the exemption (the solar’s added value isn’t taxed).

Will installing solar increase my home’s assessed value? – Yes, solar often boosts your home’s market value. However, if you’re in an area with a solar tax exemption, the assessor will exclude that added value when determining your taxable assessment.