Solar tax exemptions include both property and sales tax exemptions provided by state and local governments to individuals and companies that install solar energy property.
Property Tax Exemptions
Property tax exemptions allow businesses and homeowners to exclude the added value of a solar system from the valuation of their property for taxation purposes. An exemption makes it more economically feasible for a taxpayer to install a solar system on a residential or commercial property. Because property taxes are collected locally, some states have granted local taxing authorities the option of allowing a property tax incentive for solar. There are 36 states that offer property tax exemptions for solar energy. For example, New Jersey enacted legislation exempting solar systems from local property taxes if the system is used to meet on-site electricity, heating, cooling, or general energy needs. In Nevada, one of their renewable energy property tax exemptions allows businesses to apply for a property tax abatement of up to 55 percent for up to 20 years for real and personal property used to generate solar. Generation facilities must have a capacity of at least 10 megawatts.
Sales Tax Exemptions
Sales tax incentives typically provide an exemption from the state sales tax (or sales and use tax) for the purchase of a solar energy system. This type of exemption helps to reduce the upfront costs of a solar installation. There are 25 states that offer sales tax exemptions for solar energy. Arizona, for example, provides a sales tax exemption for the retail sale of solar energy devices and for the installation of solar energy devices by contractors. Colorado exempts from the state’s sales and use tax all sales, storage, and use of components used in the production of alternating current electricity from a renewable energy source. The exemption also includes all sales, storage, and use of components used in solar thermal systems.
Other Solar Tax Exemption Links
- Solar Policy Guide, Database of State Incentives for Renewables and Efficiency (DSIRE) – this guide describes provides a list and descriptions of solar tax exemptions across the United States.