Do solar panels increase property taxes? In most of the country, no. More than 30 states offer a property tax exemption that keeps the added value of a residential solar system out of your assessment, so your annual tax bill stays where it was before the panels went up. In the roughly dozen states without a statewide exemption, an installation can raise your assessed value like any other permanent improvement. Whether you benefit comes down to your state, your local jurisdiction, and whether you file the right paperwork on time.
Why an Installation Could Raise Your Assessment
Property taxes are calculated by multiplying your home’s assessed value by a local tax rate. Any permanent improvement that raises market value can raise the assessment behind that bill. Rooftop solar is a permanent improvement, and it adds real value: a Lawrence Berkeley National Laboratory study found homes with solar sold for a premium of roughly $15,000 on average, with a separate analysis putting the bump at about 4.1% of sale price for a median-valued home.1Lawrence Berkeley National Laboratory. Selling Into the Sun: Price Premium Analysis of a Multi-State Dataset of Solar Homes Without a specific exemption, that added value would flow into your assessed value the same way a finished basement or a new garage would.
Does Your State Exempt Solar From Property Tax
Most states have concluded that taxing the value of a solar installation works against the goal of expanding renewable energy, and they’ve responded with a property tax exemption. The exemption removes the solar equipment’s value from your home’s assessed value. You still get the resale premium when you sell; you just don’t pay higher property taxes for it while you own the home.
The structure varies. Some states offer a full exclusion of every dollar the system adds. Others provide a partial exemption or assess solar equipment at a reduced rate. A handful put a time limit on the exemption, commonly somewhere between 15 and 25 years, after which any remaining value of the aging system could be added to your assessment.
About a dozen states have no statewide solar property tax exemption. In those places, your local assessor will likely treat the panels like any other improvement and add the value to your assessment. Even in states that do exempt solar, some programs are local-option: your county or municipality has to opt in before the exemption applies to your property. Your local assessor’s office is the only reliable source for what actually applies to your address.
What the Exemption Covers
Exemptions generally apply to active solar energy systems that collect, store, or distribute solar energy. Standard rooftop photovoltaic panels and solar water heating systems are covered in virtually every state that offers an exemption. Solar roofing tiles and solar shingles also qualify in most places, because they generate electricity even though they serve as roofing material.2Internal Revenue Service. Instructions for Form 5695 (2025)
Battery storage is a newer addition. A growing number of states now include home batteries in their solar exemptions, recognizing that storage is increasingly paired with rooftop solar. If you’re adding a battery, ask whether it’s covered where you live.
Some items usually fall outside the exemption. Purely structural components, such as reinforced roof trusses or new decking installed solely to support the panels, typically don’t qualify because they serve a structural rather than an energy-generation function. Solar pool heaters and hot tub heaters are also commonly excluded.
Leased Systems and Power Purchase Agreements
How you finance the system changes the answer. If you buy the panels outright or through a solar loan, you own the equipment and can claim whatever exemption your jurisdiction offers.
Leases and power purchase agreements work differently, because a third-party company owns the panels on your roof. In some jurisdictions, the assessor may still attribute added value to your home because the panels are physically attached to it. In others, third-party ownership means the equipment isn’t assessed as part of your real property at all. The lease agreement should spell out who is responsible for any property tax increase the installation causes. If it doesn’t, you could end up paying higher taxes on equipment you don’t own. That’s a conversation to have with the solar company before signing.
Third-party ownership also affects the federal income tax credit. Because you don’t own the system, you can’t claim the Residential Clean Energy Credit yourself. The solar company claims it and should reflect that savings in the price they quote you.
How to Claim the Exemption
Solar property tax exemptions are rarely automatic. Most jurisdictions require you to file a specific application with your local assessor’s office, and missing the deadline can mean paying higher taxes for a full year before you can try again. Some states require filing within a set window after installation. The time to sort this out is before or right after the panels go up, not when the next tax bill lands.
Call your county assessor or local tax authority and ask three things:
- Whether an exemption exists in your state, county, or city, and whether your local jurisdiction has opted in.
- What documentation is required. Common items include proof of installation, equipment specifications, system cost, and sometimes a manufacturer’s certification that the equipment meets performance standards.
- What the filing deadline is. Some jurisdictions require the application before a specific date in the tax year; others give you a window after the installation is complete.
Keep your installation contract, invoices, and any manufacturer certifications in one place. You may need them for the property tax exemption and again for the federal credit, and some jurisdictions require updated documentation if you expand or replace equipment later.
The Federal Credit Is a Separate Benefit
Don’t confuse the property tax exemption with the federal tax credit. The exemption is a state or local program that keeps solar out of your property assessment. The Residential Clean Energy Credit is a federal income tax credit worth 30% of the cost of a qualifying installation, claimed on IRS Form 5695 when you file your federal return.3Internal Revenue Service. Residential Clean Energy Credit2Internal Revenue Service. Instructions for Form 5695 (2025)
The two programs are independent. Claiming one doesn’t affect the other. A homeowner who installs a $25,000 system could receive a $7,500 federal credit, avoid a property tax increase through a state exemption, and still benefit from a higher resale value when they eventually sell.