As solar energy systems become more popular, many homeowners are considering the impact of installing solar panels on their property taxes. A common concern is whether the addition of solar technology to a home will lead to a higher property tax assessment. In this article, we’ll explore how adding solar panels might affect your property taxes, including how assessments are determined and any potential exemptions or benefits that could apply. Whether you’re contemplating a solar upgrade or just curious about the financial implications, we’ll provide insights to help you understand what to expect.
Adding solar panels are a home renovation that can add significant value to your home. In some places, this also means paying higher property tax – but not always.
If you are a homeowner who has ever made a major home renovation, you’re going to know that some improvements will mean an increase in property taxes. This will include getting permits for items like electrical, plumbing, or construction work in most jurisdictions when you do a home renovation.
Generally, the assessor’s office must check any approvals for the land when the time of property tax assessment rolls around. If it looks like a major renovation work has been done, your taxes might go up. And sometimes, evaluators only travel around in search of obvious external improvements. If a home unexpectedly has a large deck that wasn’t there in the last inspection process, an evaluator will spot it-even if you haven’t taken the step of acquiring proper work permits. Like any home renovation, you can raise your property tax by installing solar panels. Solar panels have a significant price tag, costing tens of thousands of dollars in advance of tax credits and rebates. This can mean that your property taxes will increase dramatically. Unlike most home renovations, though, there are many states and cities offering exemptions from property tax on solar panels.
Solar panels are allowed to be mounted in your home. There will be at least an electrical work permit, permits required by your utility, and often a structural or engineering permit before installing panels on your roof. If you have a ground-mounted system, you would certainly need a geotechnical permit to ensure that the ground in your yard is able to withstand the significant weight of the solar panels and their mounting system. Solar panels are a visible addition to your home. Because of all this, the solar panels are not safe from the taxman.
What are property tax exemptions for solar?
Several states, especially those with renewable energy goals, use exemptions from property tax as one tool to encourage solar energy production. The way it works is quite easy. For states and municipalities that have a solar energy property tax exemption, installing a solar energy device to your house does not increase your home’s assessed value. As a result, there is no rise in your property taxes.
What is included in the exemption?
The property tax exemption may only cover solar photovoltaics, depending on where you live, or may include solar thermal and other renewable energy technologies such as geothermal heat pumps, wind turbines and biofuels such as wood pellet stoves and bio-digesters.
To find out exactly what technologies qualify, you will need to check with your local property tax office.
What is the value of a solar property tax exemption?
According to Tax-rates.org, property taxes in the United States range from a high of 1.89% in New Jersey to as low as 0.18% in Louisiana.
How much does this exemption save you?
Let’s say you live in New Jersey, which has 1.89 percent of the highest taxes. Installed in New Jersey, the average cost per watt of residential solar panels is $3.30 per watt. Which means it will cost $20,000 for a pretty typical 6 kW setup. If you were to pay property tax on that additional value, that would mean that your annual property tax would increase by $378. That’s a lot, but consider the photovoltaic systems that last a very long time now. Many solar panels have a 10-year warranty from the manufacturer and a 25-year warranty. That means you will pay a further $9,450 in property taxes for 25 years. That’s a great deal of money! And it could even be higher than that, because in addition to that, many counties and cities add their own property taxes. Luckily, New Jersey has an exemption from property tax, preventing you from paying out $9,450 over the system’s life.
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