Solar energy is still a relatively new technology for people, and as such, a majority of people are not fully aware of the benefits and incentives that accompany a solar system. This article will take you through the property value advantages of going solar and will answer the question, “Do solar panels increase property value?”

Do Solar Panels Increase Property Value?

It is common knowledge that installing solar panels and batteries in your residential or even commercial property can appraise the value of the property, and a majority of homeowners, buyers, real estate agents, and appraisers are aware of this fact. As such, it is not a matter of whether solar panels increase property value but rather how much they increase the value of a property.

As a matter of fact, according to the National Renewable Energy Laboratory (NREL), for each $1 of savings your solar energy system generates, the market value of your home will go up by $20. Furthermore, you will not only observe a growth in your home’s value but having a solar panel system will also help you sell your home 20% faster than homes without it.

With that said, installing solar panel systems is one of the best investments a homeowner can make. Your solar energy system will, within a few years’ time, pay for itself, after which it will enable you to earn consistent savings on your utility bills, and finally, when you’re ready to sell your property, your system will also make it so that your property goes for a higher price than other non-solar homes.

By How Much Does Solar Energy Increase Value of Home?

Now that we have answered the question, “do solar panels increase property value?” We can move on to evaluate just how significant this increase is. According to the findings of various studies, installing solar panel systems on your home can increase the resale value of the property by $4,020 to $5,911 on average. This means that installing a typical 5kW residential system can boost the resale value of your home by nearly $30,000.

A survey conducted by Zillow reports that homes that have solar panels tend to have a 4.1% higher appraised value compared to properties without solar panels. This is, of course, an average value and will vary depending on certain factors.

For instance, some locations, such as Riverside, California, observe a more modest value bump up, around 2.7%, in the value of a home on installing solar panels, while other locations such as New York City have a larger value add of around 5.4%.

To put things into better perspective, the table given below gives a rough estimate as to how much value certain solar energy system capacities will add to a home on average compared to the cost of the system.

Size of Solar Energy System The average increase in the value of a home The installation cost of the system after factoring in tax credits
4 kW $23,644 $8,526
6 kW $35,466 $12,579
8 kW $47,288 $16,309
10 kW $59,110 $20,225

 

One can clearly see that the average increase in a home’s value by installing solar is much greater than the cost of the system itself. Additionally, the greater the size of the system, the greater the difference between the increase in the home’s market value and the installation cost of the system.

Factors That Determine How Much Value Solar Energy Adds to Your Property

While the figures presented above may give you a general idea of how much value solar energy can add to your home, it is important to remember that these are just average values that will vary depending on certain factors. Explained below are some of the factors that decide how much value solar energy adds to your home:

Geographic Location

The cost of utility varies depending on which state you belong to. Generally, the higher the cost of electricity, the greater the value added to your property as a result of solar energy. Furthermore, the amount of sunlight exposure you receive, as well as the social benefits of installing solar panels, are also influenced by your location, which in turn will determine how much value is added to your property.

Local Solar Installation Prices

The cost of installing a new solar energy system in your area is another factor that is influenced by which state you are located in. In case you are located in an area where the installation cost of a new system is high, so much so that it would be more cost-effective for a buyer to purchase a home already equipped with a solar energy system instead of a non-solar home and make it solar. Your solar energy system will be more effective in increasing the value of your property.

System Output

As is evident from the table given above, a larger system that generates a greater output will help appreciate the value of your home much higher than a smaller system. However, this does not by any means entail that an average American home should strain their budget and get a system that far exceeds their energy requirements just so that their home would appraise better when selling. In fact, your roof might not even have enough space to accommodate a larger system.

The Age of Your System

When selling a house that has an older system on it, the increase in the resale value of the home will not be as significant as it would’ve been with a new solar system. This is so because solar energy systems tend to depreciate in value as they age.

This depreciation can primarily be associated with the buyer’s need to make repairs or replace system components in the near future due to the prolonged wear and tear that will have occurred through years of usage. This would not have been a problem with a newer system.

System Replacement Value and Difficulty

Along the same lines as the age of your system, the cost or difficulty of replacing and sourcing the components of your system has an impact on the overall value the system will contribute to your home.

Naturally, a system that is more difficult and expensive to repair due to the unavailability of parts will not be very effective in enhancing the resale value of your home. However, you’ll be glad to know that with the rapid growth of solar energy in the US, parts availability of any system should not be a problem regardless of which state you’re located in. The cost of repairs, however, will likely vary from one state to another.

Solar Tax Exemptions

Do Solar Panels Increase Property Taxes?

Needless to say, when a house goes up in value, the property tax of the house also increases accordingly. However, as of 2022, some states in the US started offering property tax exemptions for property owners who have invested in solar energy or are going to, but of course, there are some conditions that need to be met.

These property tax exemptions essentially mean that residential and commercial property owners can omit the value of their solar system from their property’s valuation for tax reasons. Naturally, this protects property owners from increased property taxes, and therefore, the exemption makes it more budget-friendly for a taxpayer to invest in a solar panel system on a commercial or residential property.

Seeing as how property taxes are collected state-wise, the state taxing bodies hold the authority to offer property tax incentives for purposes such as going solar. Keeping this in mind, whether or not you can benefit from property tax exemptions depends on which state you belong to and whether or not the taxing bodies of your state offer this incentive.

According to current reports by the SEIA, 36 states in the US are offering property tax exemptions for property owners that are going solar.

For instance, Solar systems in New Jersey are excluded from property taxes given that they are utilized to accommodate electrical, cooling, or heating needs.

One of Nevada’s renewable energy property tax exemptions commercial property owners to qualify for a 55 % property tax omission for personal and actual property used to produce solar energy for a period of up to 20 years. However, the property tax incentive subjects the property owner to the requirement that their system’s generation capacity must at least be 10 megawatts or above.

Sales Tax Exemptions

Sales Taxes, just like property taxes, are governed by state taxing bodies and therefore will differ from one state to another. Sales tax exemption allows property owners to buy solar systems and related components without levying sales tax on the purchase. This helps lower the installation cost of the system. Currently, there are a total of 25 US states that give a sales tax exemption.

Seeing as how property and sales tax exemptions are governed by state taxing bodies, they tend to vary from state to state. Check the table below to confirm if property tax exemptions or sale tax exemptions are an available option in your state.

 

State Solar Sales Tax Exemption* Solar Property Tax Exemption*
Alaska No sales tax Local exemptions
Alabama No exemption No exemption
Arkansas No exemption No exemption
Arizona 100% exempt 100% exempt
California No exemption 100% exempt until 1/2/2025
Connecticut 100% exempt 100% exempt
Colorado 100% exempt 100% exempt
Delaware No state sales tax No exemption
Florida 100% exempt 100% exempt
Georgia No exemption No exemption
Hawaii No exemption 100% NHL only
Illinois No exemption Special assessment
Idaho No exemption No exemption
Iowa 100% exempt 100% exempt for 5 years
Indiana No exemption 100% exempt
Kansas No exemption 100% exempt
Kentucky No exemption No exemption
Louisiana No exemption 100% exempt
Maryland 100% exempt 100% exempt
Maine No exemption No exemption
Massachusetts 100% exempt 100% exempt for 20 years
Minnesota 100% exempt 100% exempt
Michigan No exemption 100% exempt
Missouri No exemption 100% exempt
Mississippi No exemption No exemption
Montana No state sales tax 100% exempt for 10 years
Nevada No exemption Exemptions only

for certain systems over 10 MW

Nebraska No exemption Exemptions only

for systems over 100 kW

New Jersey 100% exempt 100% exempt
New Hampshire No state sales tax Local exemptions
New York 100% exempt 100% exempt for 5 years
New Mexico 100% exempt 100% exempt
North Carolina No exemption 80% exempt
North Dakota No exemption 100% exempt for 5 years
Ohio 100% exempt Exemptions in Cincinnati

and Cleveland

Oregon No state sales tax 100% exempt
Oklahoma No exemption No exemption
Pennsylvania No exemption No exemption
Rhode Island 100% exempt 100% exempt
South Carolina No exemption No exemption
South Dakota No exemption Exemption of either $50,000

or 70% of total property value

Tennessee 100% exempt Tax value no more than 12.5%

of installed cost

Texas No exemption 100% exempt
Utah Exemptions only

for systems over 2 MW

No exemption
Vermont 100% exempt 100% exempt
Virginia No exemption Local exemptions
Washington Exemptions only

for systems up to 10 kW

No exemption
Washington DC No exemption 100% exempt
West Virginia No exemption No exemption
Wisconsin 100% exempt 100% exempt
Wyoming No exemption No exemption

 

Frequently Asked Questions (FAQs)

How Much Does Solar Increase Home Value in California?

In California, a small 3.1kW system can add an average of $18,324 to your home’s value. The property value advantages further increase as you install a higher capacity system.

Does Tesla Solar Roof Increase Home Value?

Yes! Similar to rooftop solar panel systems, tesla roofs also enhance property value.

How Much Will Solar Panels Increase My Property Value?

According to Zillow, homes with solar energy systems tend to sell for 4.1% times more than homes without.

Do Solar Panels Increase Property Value in Texas?

Solar energy systems in Texas, on average, tend to appreciate the value of a home by $4 for every watt of solar capacity installed. This means that a standard 6kW residential system can add $24,000 to the market value of your home.

Do Solar Panels Increase Property Taxes?

The appreciation in your property’s value as a result of installing solar naturally comes accompanied by higher property taxes. However, certain states in the US offer property tax exemptions to make it more feasible for property owners to go solar. More information regarding this is available above.

Conclusion

Among the many advantages of going solar, one of the most tempting one for homeowners is that their solar system can substantially appreciate the value of their property. Even better is the fact that depending on your state, you may not even have to incur higher property taxes. With that said, now is the best time to go solar!

The team at Firefly Solar is ready to answer your questions and give you a no-obligation price quote. Feel free to call us at 864-252-7858 or book a consultation online. And we’ll get in touch within 24 hours.