What is the solar sales tax exemption?
Through the Washington State Department of Revenue, homeowners and businesses are able to take advantage of a sales tax exemption on the purchase and installation of solar energy systems generating up to 100 kilowatts (kW). This covers all sales tax, which ranges from 7.5% up to 10.6%. Local tax rates continue to climb, with the most recent increases occurring January 1, 2024.
Solar energy system sales tax exemption 2024
In Washington state, the cost to install solar energy systems (100kW or less) is completely exempt from sales tax until the end of 2029.
How it works
For sales of systems ranging between 1 and 100kW a complete tax exemption. This is an upfront tax exemption, rather than a rebate, so CapStone Solar won’t charge you any sales tax at all, and you’ll see the savings right from the start. With the sale and installation of your new solar system, we’ll just have you complete a sales tax exemption. That’s it!
The tax exemption is valid for solar energy systems purchased July 1, 2019 until Dec. 31, 2029.
For solar power systems producing 101kW to 500 kW AC purchasers eligible for a 50% tax exemption. Typically, systems of this size are for commercial applications, not residential use. Unlike the smaller systems, this benefit is processed as a remittance and refund. This exemption is part of Washington’s initiative to promote clean energy under Engrossed Second Substitute Senate Bill 5116.
Example Savings
In a typical scenario of a home that needs a 20kW solar system, with [[battery storage]], the total solar investment may be ~$60,000. In this case, the family would save $6,000 in sales tax exemptions.
Solar Tax Credit
What is the residential clean energy credit?
Residential Clean Energy Credit
Internal Revenue Service (IRS),
The Residential Clean Energy Credit, also known as the solar tax credit, offers a tax credit for expenses related to new clean energy property:
- Solar electric panels
- Solar water heaters
- Wind turbines
- Geothermal heat pumps
- Fuel cells
- Battery storage technology (beginning in 2023)
This incentive is structured as an investment tax credit, and was recently extended to 2034 through the Inflation Reduction Act.
Solar Tax Credit 2024
The solar panel tax credit for 2024 is 30% of eligible costs (which includes everything related to your installation, including the cost of the solar panels).
How it works
To benefit from this credit, you’ll need to install an eligible solar energy system in your residence and claim the credit when filing your federal taxes. The process involves completing the relevant sections on your typical tax return forms and filing Form 5695.
The solar tax credit is 30% for residential solar (it does not cover commercial solar installations). The incentive will remain at 30% until 2032, then will decline before fading out completely in 2035:
| Solar system Installed | Credit amount |
|---|---|
| 2020 – 2021 | 26% |
| 2022 – 2032 | 30% |
| 2033 | 26% |
| 2034 | 22% |
| After 2034 | 0% |
The solar tax credit is especially powerful because it applies directly to your tax liability (rather than deduction, which is used to reduce your taxable income).
Example Savings
Consider our same homeowner investing $60,000 in a new solar energy system. With the solar tax credit, they would be eligible for an $18,000 reduction in their tax liability.
What if I my credit is greater than the taxes I owe?
If you’re solar credit is more than your current taxes, you can roll the remainder over and use them the next year. Source: IRS
Commercial Example – Recoup 89% of Investment
Additional Programs
Commercial
Financing
- Loans up to $1M Washington State Housing Finance Commission
- Grants to public institutions Department of Commerce
