Solar Panel Exemption Application: A How-To Guide

f you’re looking for ways to save money while going green, a solar panel exemption might be just what you need. These exemptions can provide significant tax savings, reducing the upfront costs and long-term expenses of installing a solar energy system on your home.

The Benefits and Incentives of Solar Panel Exemptions

To get you started, here are some key points about solar panel exemptions:

• Lower Installation Costs: Tax exemptions can remove sales tax on solar panels.
• Reduce Property Taxes: Some states allow you to exclude solar panels from your home’s assessed value.
• Federal Incentives: The Residential Clean Energy Credit can cover up to 30% of installation costs.

Installing solar panels not only helps the environment by reducing reliance on fossil fuels but also decreases your monthly electricity bill. Moreover, through federal and state incentives, you can dramatically lower the cost of making the switch to solar energy.

Now, let’s dig into how you can apply for and benefit from these exemptions.

Understanding Solar Panel Exemptions

Solar panel exemptions can make installing solar power systems more affordable by reducing both upfront and ongoing costs. Here’s a breakdown of the key types of exemptions and incentives available:

Property Tax Exemption

Property tax exemptions allow you to exclude the added value of your solar system from your property’s assessed value. This means you won’t pay higher property taxes because you installed solar panels.

• 36 states offer property tax exemptions for solar energy.
• Example: New Jersey exempts solar systems from local property taxes if the system meets on-site energy needs.
• Nevada: Businesses can apply for up to a 55% property tax abatement for up to 20 years for solar generation facilities with a capacity of at least 10 megawatts.

Sales Tax Exemption

Sales tax exemptions remove state sales tax on the purchase of solar energy systems, reducing the upfront cost.

• 25 states offer sales tax exemptions for solar energy.
• Example: Arizona exempts retail sales of solar energy devices and their installation from sales tax.
• Colorado: Exempts all sales, storage, and use of components for producing alternating current electricity from renewable sources, including solar.

State Incentives

Many states offer additional incentives to encourage solar energy adoption.

• New York: The Clean Energy Systems Exemption under RPTL Section 487 provides a 15-year property tax exemption for various energy systems, including solar.
• Connecticut: Offers a sales tax exemption for residential solar systems installed on primary residences, reducing the cost of going solar.

Local Incentives

Local incentives can vary widely, but they often complement state and federal programs.

• Texas: Homeowners can exempt the value of their solar panels and batteries from property taxes, potentially saving $415 annually on a $25,000 installation.
• Austin Energy: Offers a rebate of $500 for PV systems and $15 per square foot for solar water heating installations.

How to Apply

Applying for these exemptions is generally straightforward:

1. Property Tax Exemption: Contact your local tax assessor's office. In some states, the exemption is automatic, while others require an application.
2. Sales Tax Exemption: Usually applied at the point of sale. Ensure your installer is aware of the exemption.
3. State and Local Incentives: Check specific requirements and deadlines for each program. Often, you’ll need to provide proof of installation and ownership.

By taking advantage of these solar panel exemptions, you can significantly reduce the cost of installing and maintaining a solar energy system on your property. This makes going green not only environmentally friendly but also economically smart.

Next, let's explore the federal solar tax credit and how you can benefit from it.

How to Apply for a Solar Panel Exemption

Applying for solar panel exemptions can save you a lot of money, but you need to follow the right steps. Here’s a simple guide to help you through the process.

Application Process

Applying for a solar panel exemption involves a few key steps:

1. Identify the Exemptions: Determine which exemptions you qualify for (property tax, sales tax, state, or local incentives).
2. Gather Required Documents: Collect all necessary paperwork, such as proof of solar panel installation, receipts, and ownership documents.
3. Submit the Application: Complete the required forms and submit them to the appropriate authorities (local tax assessor, state tax office, etc.).

Required Documents

You’ll typically need the following documents:

• Proof of Ownership: Documentation showing you own the solar panels.
• Installation Receipts: Proof of purchase and installation costs.
• Technical Specifications: Details about the solar system, such as capacity and type.
• Completed Forms: Specific forms required by your state or local government.

Eligibility Criteria

Eligibility criteria can vary by state and local jurisdiction, but common requirements include:

• Homeownership: You must own the home where the solar panels are installed.
• New Installation: The solar system should be new and used for the first time.
• On-Site Energy Use: The system must be designed to meet on-site energy needs.

Deadlines

Deadlines are crucial. Missing them can mean missing out on exemptions:

• Property Tax Exemption: Some states require you to apply within a certain period after installation. For example, New York’s Clean Energy Systems Exemption must be applied for within one year of installation.
• Sales Tax Exemption: Often applied at the point of sale, so ensure your installer knows about it beforehand.
• State and Local Incentives: Each program has its own deadlines. Always check the specific requirements.

Example: New York State

In New York, for example, the Clean Energy Systems Exemption under RPTL Section 487 provides a 15-year property tax exemption. Here’s a quick overview:

• What’s Covered: Solar, wind, and energy storage systems.
• Duration: 15 years.
• Application: Submit the RP-487 form to your local tax assessor within one year of installation.

By following these steps and ensuring you meet the eligibility criteria and deadlines, you can maximize your savings through solar panel exemptions.

Next, let's explore the federal solar tax credit and how you can benefit from it.

Federal Solar Tax Credit

The Federal Solar Tax Credit, also known as the Investment Tax Credit (ITC), is a significant incentive for homeowners investing in solar energy. Here's a clear breakdown of what it is, who’s eligible, how to calculate it, and how to claim it.

Investment Tax Credit (ITC)

The ITC allows homeowners to deduct a portion of their solar installation costs from their federal taxes. This credit applies to residential solar PV systems and is a powerful financial incentive to go solar.

Eligibility

To be eligible for the federal solar tax credit, you must meet these criteria:

• Installation Date: Your solar PV system must be installed between January 1, 2017, and December 31, 2034.
• Location: The system should be located at a residence in the United States.
• Ownership: You must own the solar PV system. Leasing the system or engaging in a power purchase agreement (PPA) disqualifies you.
• Original Installation: The credit is only available for the original installation of the solar equipment.

Calculation

The percentage of the installation cost you can claim varies by the year of installation:

• 2020-2021: 26%
• 2022-2032: 30%
• 2033: 26%
• 2034: 22%

For example, if you installed a solar system in 2023 costing $20,000, you could claim 30% of that amount, which is $6,000, as a tax credit.

Claiming Process

Claiming the federal solar tax credit involves a few straightforward steps:

1. Download IRS Form 5695: This form is necessary to claim the Residential Energy Credit.
2. Fill Out Part I: This section is where you’ll calculate your credit.
   • Line 1: Enter the total cost of your solar PV system.
   • Line 6a and 6b: Perform the calculations as instructed.
   • Line 14: Note any tax liability limitations.
3. Transfer to Schedule 3 (Form 1040): Enter the amount from line 15 of Form 5695 on line 5 of Schedule 3 (Form 1040).
4. Submit with Your Tax Return: Include Form 5695 when you file your annual federal tax return.

Any unused portion of the tax credit can be carried over to the next tax year, which is helpful if your tax liability is less than your credit amount.

Example

Let’s say you installed a solar PV system in 2023 at a cost of $15,000. You would fill out Form 5695 as follows:

• Line 1: $15,000
• Line 6a: $15,000 x 30% = $4,500
• Line 14: Check your tax liability to ensure you can use the full $4,500 credit.

By understanding and following these steps, you can take full advantage of the federal solar tax credit, significantly reducing the overall cost of your solar investment.

Next, let's dive into state-specific solar panel exemptions and how they can further improve your savings.

State-Specific Solar Panel Exemptions

State-specific solar panel exemptions can offer significant savings on your solar investment. Let's explore the exemptions available in New York, California, Texas, New Jersey, and Nevada.

New York

New York offers several incentives to encourage solar energy adoption:

• Property Tax Exemption: Under Real Property Tax Law (RPTL) Section 487, any increase in property value due to solar installations is exempt from property taxes for 15 years. This makes installing solar panels more affordable for homeowners and businesses.
• Sales Tax Exemption: Solar panels and related equipment are exempt from state sales tax, reducing the upfront cost of installation.
• State Solar Equipment Tax Credit: Homeowners can claim a tax credit of 25% of their solar installation costs, up to $5,000. This can be combined with the federal tax credit for even more savings.

California

California is a leader in solar energy, offering robust incentives:

• Property Tax Exclusion: California excludes the added value of a solar energy system from property tax assessments. This exclusion helps keep property taxes low after installing solar panels.
• Net Energy Metering (NEM): Homeowners can sell excess energy back to the grid, earning credits on their utility bills. This effectively lowers monthly electricity costs.
• California Solar Initiative (CSI): Though now closed to new applications, the CSI program previously offered rebates for solar installations, contributing to California's extensive solar adoption.

Texas

Texas provides several incentives at the state and local levels:

• Property Tax Exemption: Texas offers a property tax exemption for the added value of solar energy devices. This means homeowners won't see an increase in property taxes due to their solar installations.
• Local Rebates and Incentives: Various utility companies in Texas, such as Austin Energy and CPS Energy, offer rebates and incentives for installing solar panels. These programs can significantly reduce installation costs.

New Jersey

New Jersey supports solar energy through multiple incentives:

• Property Tax Exemption: Solar systems in New Jersey are exempt from property tax increases if the system is used to meet on-site energy needs. This exemption makes solar energy more financially attractive.
• Sales Tax Exemption: Solar energy systems are exempt from state sales tax, lowering the initial investment required.
• Solar Renewable Energy Certificates (SRECs): Homeowners can earn SRECs for the energy their solar panels produce. These certificates can be sold to utility companies, providing an additional revenue stream.

Nevada

Nevada offers incentives to promote solar energy:

• Property Tax Abatement: Businesses in Nevada can apply for a property tax abatement of up to 55% for up to 20 years on real and personal property used to generate solar energy. This is particularly beneficial for large-scale solar projects.
• Sales Tax Exemption: Solar energy systems are exempt from state sales tax, making the initial purchase more affordable.
• Net Metering: Homeowners can earn credits on their utility bills for excess solar energy sent back to the grid. This helps offset future electricity costs.

Each of these states provides unique incentives that make solar energy more accessible and affordable. By taking advantage of these solar panel exemptions, you can significantly reduce the cost of your solar investment and enjoy long-term savings.

Next, let's address some frequently asked questions about solar panel exemptions.

Frequently Asked Questions about Solar Panel Exemptions

Can you take solar panels off your taxes?

Yes, you can take solar panels off your taxes through the federal tax credit, known as the Residential Clean Energy Credit. This credit allows you to deduct up to 30% of the cost of installing solar panels from your federal taxes, covering expenses such as solar panels, labor, and additional equipment like wiring and batteries.

Eligibility: To qualify, your photovoltaic system must be installed between January 1, 2006, and December 31, 2034, and be on your primary or secondary residence in the U.S. You must also own the system outright or have financed it through a loan; leasing the panels or engaging in a power purchase agreement (PPA) will not make you eligible.

How to Claim: To claim the credit, you need to file IRS Form 5695 along with your federal tax return. Follow the instructions on the form to calculate your total deduction.

Is solar exempt from property tax in NY?

Yes, solar panels are exempt from property tax in New York under the Clean Energy Systems Exemption (Real Property Tax Law Section 487). This exemption means any increase in property value resulting from the installation of a solar energy system is exempt from property taxes for 15 years.

NYC Department of Buildings: The New York City Department of Buildings oversees the implementation of this exemption in NYC. You do not need to take any action; the exemption is applied automatically during property assessments.

Home Value Increase: While solar panels typically increase your home’s value, this exemption ensures that you won't see a corresponding increase in your property tax bill. This makes installing solar panels more financially attractive.

What disqualifies you from a solar tax credit?

Several factors can disqualify you from claiming the federal solar tax credit:

• Leasing: If you lease your solar panels, you are not eligible for the tax credit. The credit is only available to those who own their solar systems.
• Power Purchase Agreement (PPA): Engaging in a PPA, where you pay for the power generated by the solar panels rather than owning the system, also disqualifies you from the credit.
• Taxable Income: The solar tax credit is non-refundable, meaning you need to have enough tax liability to cover the credit. If your tax liability is lower than the credit, you can carry over the unused amount to the next tax year, but you cannot receive a refund beyond your tax liability.

By understanding these criteria, you can better steer the process of claiming solar panel exemptions and maximize your savings.

Next, let’s dig deeper into the federal solar tax credit, its eligibility, and the claiming process.

Latest Trends in Solar Tax Incentives for 2024-2025

The solar industry in the USA is experiencing significant growth and policy changes in 2024-2025. The federal solar tax credit remains at 30% through 2032, providing a strong incentive for homeowners and businesses to invest in solar energy.

Many states are enhancing their own solar incentives to complement the federal credit, with New York, California, and Massachusetts leading the way in generous state-level tax breaks2.

The Inflation Reduction Act has also introduced new adders for domestic content and installations in low-income communities, further boosting the appeal of solar investments.

Industry experts project that these combined incentives will drive a 40% increase in residential solar installations between 2024 and 2025, making solar energy more accessible and affordable for millions of Americans.

Conclusion

In summary, solar panel exemptions offer significant financial benefits to homeowners and businesses. These exemptions can reduce or eliminate the additional property taxes that would otherwise result from increased property values due to solar installations. Additionally, sales tax exemptions can provide immediate savings on the purchase of solar equipment.

Understanding the various incentives available, from federal tax credits to state and local exemptions, is crucial. By taking advantage of these opportunities, you can significantly lower the cost of your solar investment and enjoy long-term savings on your energy bills.

At SunValue, we are dedicated to helping you steer the complexities of solar incentives to maximize your savings. Our team of experts is here to guide you through the application process, ensuring you meet all eligibility criteria and deadlines.

For more detailed information on solar incentives and rebates, visit our Solar Incentives and Rebates page.

If you have any questions or need assistance,  contact us. We're here to help you make the most of your solar investment and contribute to a greener future.

This concludes our guide on solar panel exemptions. We hope you find it helpful and informative. Happy solar saving!