Looking for a new home to build your dreams in? You might want to consider purchasing a solar energy system, as several states offer significant sales tax exemptions for homeowners who purchase these systems.
There are 25 states, including California and New York, that offer some type of sales tax exemption for solar energy systems. These states typically either have a consumption tax or an additional 4% sales tax on top of the standard sales tax rate.
Find out which states offer favorable sales tax treatment for solar energy home projects in the following article.
The home-building hotbed of California offers some of the most attractive solar sales tax exemptions in the country. Energy produced by rooftop solar systems is considered ‘sales’ for tax purposes and is therefore not subject to state sales tax.
California is well-known for its stringent energy policies and for leading the country in terms of green building standards. Its ‘Net Energy Metering’ (NEM) policy specifically provides that electricity generated by rooftop solar systems is “not subject to federal income tax and will not be subject to state income tax.” These exemptions make purchasing a solar system in California a good deal.
New York, the Empire State, offers another favorable solar sales tax environment. According to the NY Sales Tax Law, “electricity from an electric generator connected to the National Grid … shall be exempt from sales tax… provided that the total annual consumption of electricity does not exceed 500 kilowatt hours per year.” In other words, rooftop solar energy systems in New York are exempt from sales tax as long as you comply with a few simple guidelines.
Like in California, New York is a progressive energy state, and its utility companies also offer generous rooftop solar leasing programs that can help homeowners reduce their energy costs and improve their lives. With the right resources, homeowners can ensure that their electricity bills are as low as possible while still having the lights and appliances they need to stay connected and busy.
Arizona is yet another state that offers favorable solar tax treatment. Under the Arizona Consumer Protection Act, electricity generated by rooftop solar systems is exempt from sales tax as long as the system produces at least 5 kilowatts of power and is connected to the national grid. This is a generous tax exemption that makes homeowners reconsider their decision to not purchase solar energy.
Not only does Arizona offer a renewable energy exemption, but the SunPass Solar System offers consumers the ability to sell the energy they produce and receive monetary benefits that can be tax-free.
Washington is yet another state with a significant amount of sunshine and plenty of green spaces for homeowners to install a solar system. The state offers a ‘community solar’ program through which homeowners can benefit from purchasing a solar energy system that generates electricity for the whole neighborhood.
In 2018, Washington passed a law that exempts any system that provides energy to a community (such as a neighborhood solar system) from state and local sales tax. While this is a significant step forward for the solar industry, the law does require that you register your system with the state.
Solar energy has come a long way in the last few years, and it is exciting to see homeownership as an option for those who want to reduce their energy consumption and cut costs. With the right state and local incentives, mortgages, and tax deductions, it is possible to purchase a high-quality solar energy system that will produce power and heat for your home.