How Solar Panels Affect Property Taxes in California - HomePro Solutions Solar Company

How Solar Panels Affect Property Taxes in California

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How Solar Panels Affect Property Taxes in California 1

There are many good reasons for switching over to solar energy in California. Not only is the move good for the environment, but it can also help your household become more self-sufficient. It can also help you qualify for federal tax savings. However, did you know that installing solar panels on your property can also help with your California property taxes?

The solar energy industry in California is the largest in the United States and continues to grow rapidly. In fact, nearly 16 percent of the state’s energy needs are currently being met with solar power. As good as this seems, the California state government hopes to be using solar energy exclusively by 2045. To that end, the state legislature passed a bill requiring all new homes in California to have solar panels installed beginning in 2020. They also offer an attractive property tax exemption for homeowners who install solar panels on their residence.

How installing solar panels affects your California property taxes

Under the California solar property tax exemption, homeowners who install solar panels will not be taxed on the amount that those panels increase the value of their home until January 1, 2025. In other words, the installation of solar panels on a California home cannot increase (or decrease) the property’s tax assessment. This 100 percent exemption gives homeowners an opportunity to realize some of the savings associated with the panels before they have to start paying taxes on that particular home improvement.

To qualify for the exemption, you must install an active solar system. This includes water heating systems, heating and air conditioning systems, electricity-producing systems and solar mechanical energy systems. The California Revenue and Taxation Code defines active solar systems as ones that “are thermally isolated from living space or any other area where the energy is used, to provide for the collection, storage, or distribution of solar energy”. The property tax exemption does not include solar heaters for hot tubs and swimming pools, passive energy systems and wind energy systems.

Other solar tax benefits

In addition to the California property tax exemption, the United States federal government offers a 26 percent rebate on the cost of materials and installation of a qualifying solar panel system for homeowners who install the system in 2020. The rebate reduces to 21 percent in 2021 before expiring at the end of that year. Claiming this rebate is easy. You simply buy and install a qualifying system, save the receipts and other documentation and complete IRS form 5695 when you file your taxes.

In addition, there are a number of local tax rebates and exemptions associated with installing solar panels. It’s a good idea to check with your city and county tax offices as well as your local energy provider.

While installing solar panels can be expensive, you can partially recoup your investment by not having to pay property taxes on your improvement for several years as well as taking advantage of other tax incentive programs designed to reward homeowners for being environmentally responsible, such as the US solar tax credits and checking out if there are any local tax credit programs in your area.

If you have further questions about installing solar panels on your home or business or how you can save money with solar, the best thing you can do is explore your solar power options with a qualified professional. Contact HomePro Solutions today. We have the technical know-how and customer service expertise necessary to ensure that every solar power project is a success.

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