Texas Solar Property Tax Exemption

Texas receives abundant sunshine all year round. The average daily incident solar energy is upwards of 3 kWh per square meter during winter months, peaking upto 8 kWh/sqm during summer! That is a lot of solar energy! No wonder solar adoption has increased in recent years, driven by falling cost of solar PV panels as well as state and federal incentives.

Is solar tax-exempt in Texas? What government incentives are available for installing solar panels?

Texas Property Tax Code section 11.27 allows 100% exemption on the increase in assessed value of a property for installing a solar or wind powered energy device. Say, a home's assessed value prior to installing solar energy device was $300,000. And you spent $30,000 on installing a rooftop solar energy system. Your home is not going to be assessed at $330,000. The exemption lets your assessed value remain at $300,000.

The federal solar tax credit allows homeowners to deduct 26% of the cost of installing a solar energy system from your federal taxes, available through December 2022. The credit falls to 22% through December 2023.

You still have to pay sales tax when you purchase the system though.

How do I claim exemption for solar devices in Texas?

You can claim exemption for the entire cost of solar installation by submitting Form 50-123 to your county appraiser. You must file the completed application with all required documentation beginning January 1st and no later than April 30th of the year for which you are requesting an exemption. Pursuant to Tax Code Section 11.45, after considering this application and all relevant information, the chief appraiser may request additional information from you. You must provide the additional information within 30 days of the request or the exemption may be denied.

In addition, you can claim federal solar tax credit on Form 5695. This should be submitted along with your annual federal income tax return.

What type of solar devices are exempt from property taxes in Texas?

• Solar photovoltaic panels (whether rooftop or placed on the ground), that generate electricity from sunlight.
• Solar thermal energy devices like solar water heater and solar swimming pool heater.

Do solar panels increase home value in Texas?

Yes, according to a study homes with solar panels sell for 4.1% more!. That means, a solar device in the house fetches you a higher market value without an increase in property tax! Plus, you also get a partial federal tax credit.

Do solar panels increase your property taxes in Texas?

No, they do not! The Texas Property Tax Code allows 100% exemption on the increase in assessed value of a property for installing a solar and wind powered energy device. On the contrary, according to a study by Zillow homes with solar panels sell for 4.1% more! That means, a solar device in the house fetches you a higher market value without an increase in property tax! Plus, you also get a partial federal tax credit. However, leased or financed solar panels can be tricky when you sell. Either you have to pay off the solar panels or the new buyer has to get the lease/finance transferred to their name.

Will solar panels be mandated on houses in Texas?

At this time, solar panels are not mandatory on houses in Texas. Texas homeowners could urge their political leaders to enact such a law!

Can Texas HOA stop solar panels?

No, they cannot, so long as the homeowner is installing solar panels on their own property! Texas House Bill 362 lists out what is permitted and what's not. A property owners' association may not include or enforce a provision in a dedicatory instrument that prohibits or restricts a property owner from installing a solar energy device, except if it violates a law, threatens the public health or safety or extends beyond the roof line of the property owner. Homeowners still need to get approval from the HOA/POA's architectural review committee though.

Does Texas have solar tax credit? What is the solar tax credit for 2022?

Texas does not offer a tax credit on solar energy devices. However, Texas property tax allows for 100% exemption on the increase in assessed value of a property, attributable to installing solar energy devices.

The federal solar tax credit allows homeowners to deduct 26% of the cost of installing a solar energy system from your federal taxes, available through December 2022.

Does your property taxes freeze if you get solar power?

Property taxes do not freeze for installing Solar power, nor does your property tax go up because of it. While your property's appraised value does go up when you add Solar power, Texas offers 100% exemption on such an increase. You will have to file for exemption in Form 50-123 - Exemption Application for Solar or Wind-Powered Energy Devices, available at the Texas comptroller’s website. Essentially, installing Solar will help your property's market value to rise, but without rising your property tax.

Can you lease solar panels?

Yes, you can lease solar panels from a solar company. You pay a monthly rent to the financing company in exchange for the solar power that the panels produce. However, be aware that leased solar panels will not qualify for an exemption. Leased panels are considered personal property and will not get taxed as part of your real property. Leased solar panels do not appreciate of your home's value either. Be aware of the additional paperwork with leasing solar panels or selling your home with the leased solar panels.