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Texas has a 100% property tax exemption for solar. But there is no sales tax exemption, no state income tax credits, and the federal 25D ITC is dead. Here is the full truth about solar taxes in Texas.
100% exempt under TX Tax Code §11.27. File Form 50-123 by April 30. Saves $8,000-$15,000 over 25 years.
6.25% state + up to 2% local (8.25% max). No solar exemption. On $22,000 system = $1,375-$1,815 in sales tax.
Texas has no state income tax. Therefore no state solar tax credits are possible — unlike MA, CT, or NJ.
Residential solar tax credit expired December 31, 2025. $0 for homeowner cash or loan purchases.
30% commercial ITC for third-party system owners (lease/PPA). Begin construction before July 4, 2026. Not for homeowners.
This is the biggest solar incentive in Texas. It prevents your property taxes from increasing when you install solar — saving thousands over the life of your system.
Your home is appraised at $300,000. You install a $22,000 solar system. Your home is now worth $322,000.
At a 2.2% county tax rate, you would pay an additional $484 per year in property taxes — $12,100 over 25 years.
You are penalized for going solar.
Your home is appraised at $300,000. You install a $22,000 solar system. Your home value goes up — but the $22,000 solar value is exempt from taxation.
Your property taxes remain based on $300,000, as if the solar system does not exist. You save $484 per year — $12,100 over 25 years.
No penalty for going solar.
Get Form 50-123 from the Texas Comptroller website. It is the solar/wind-specific form — not the standard homestead form.
Fill in your property ID, solar system details (size, cost, installation date), and installer information.
File with your county appraisal district (not the state) by April 30 of the year following installation.
The exemption applies for as long as the solar device is operational. No annual re-filing needed.
SB 419 clarified that the exemption applies to the full appraised value added by the solar device, including both equipment and installation costs. The exemption is automatic upon proper filing and lasts as long as the solar device is operational. Some county appraisal districts had previously tried to limit the exemption to only the equipment cost — SB 419 closed that loophole.
If you miss the April 30 deadline, most county appraisal districts accept late filings. The exemption will typically apply starting the next tax year. Some counties allow retroactive exemptions for up to 2 prior years if you can prove the system was already installed. Contact your county appraisal district directly — do not assume the exemption is lost.
Unlike many states, Texas does NOT exempt solar equipment from sales tax. You pay the full rate on hardware, which adds $1,375-$1,815 to a typical system cost.
Applies to all solar equipment
Combined max 8.25%
At 6.25%-8.25% combined rate
How your solar installer structures the contract affects your sales tax liability. Texas sales tax applies to tangible personal property (solar panels, inverters, racking, wiring). Labor and professional services may be taxed differently depending on how the contract is written.
If the installer separates equipment from labor in the contract, sales tax may apply only to the equipment portion. Labor for installation services is generally not taxable.
If the contract is structured as a single lump sum (equipment plus labor), the entire amount may be subject to sales tax. Ask your installer about their contract structure before signing.
Many states exempt solar equipment from sales tax, including Massachusetts, New Jersey, Connecticut, Arizona, Colorado, and Florida. Texas has not adopted a similar exemption. The absence of a sales tax exemption adds $1,375-$1,815 to the upfront cost of a typical Texas solar system compared to states with full exemptions.
Texas has no state income tax. While this is generally a benefit, it means there is no mechanism for state-level solar tax credits.
The federal tax credit situation changed dramatically in 2025. Here is what is still available and what is not.
Residential Clean Energy Credit
Expired December 31, 2025 under the OBBBA (signed July 4, 2025).
$0 for homeowner cash or loan purchases.
The 30% credit that homeowners expected is completely gone. There is no phase-down — it went from 30% to 0% overnight.
Commercial / Third-Party ITC
30% credit for projects beginning construction before July 4, 2026.
Third-party system owner claims the credit.
In a lease or PPA, the financing company owns the panels and claims the ITC. Savings are passed to you as lower monthly payments. You do not claim anything on your tax return.
Home Energy Rebates (HEAR) are direct rebates, not tax credits — they remain funded through 2031. Up to $8,000 for low-income and $4,000 for moderate-income households. HEAR is pending in Texas (SECO RFP phase, ~$690M allocated). HEAR covers energy efficiency upgrades like heat pumps and insulation, not solar directly — but solar + heat pump bundles may qualify when the program launches.
Property tax rates vary significantly across Texas counties. Higher tax rates mean more savings from the solar exemption. Here are the 10 largest metros.
| County | Metro | Tax Rate | System Cost | Annual Saving | 25-Year Saving |
|---|---|---|---|---|---|
| HarrisHigh Savings | Houston | 2.31% | $22,000 | $508 | $12,710 |
| Dallas | Dallas | 2.17% | $22,500 | $488 | $12,210 |
| Travis | Austin | 1.98% | $23,000 | $455 | $11,390 |
| Bexar | San Antonio | 2.23% | $22,000 | $491 | $12,270 |
| Tarrant | Fort Worth | 2.26% | $22,000 | $497 | $12,430 |
| El PasoHigh Savings | El Paso | 2.48% | $21,500 | $533 | $13,330 |
| Collin | Plano/Frisco | 2.07% | $22,500 | $466 | $11,640 |
| Nueces | Corpus Christi | 2.16% | $21,500 | $464 | $11,610 |
| Lubbock | Lubbock | 2.02% | $21,500 | $434 | $10,860 |
| HidalgoHigh Savings | McAllen | 2.35% | $21,000 | $494 | $12,340 |
Annual savings = system cost multiplied by county tax rate. 25-year savings accounts for system depreciation (100% years 1-10, 80% years 11-15, 60% years 16-20, 40% years 21-25). Actual savings depend on your specific tax jurisdiction — school district, city, and special district rates may differ from county averages.
El Paso County (2.48%) and Hidalgo County (2.35%) have the highest tax rates in this comparison, translating to the largest annual savings from the solar property tax exemption. Combined with lower installation costs ($1.90-$2.35/W in these areas) and strong sun exposure, South and West Texas offer some of the best solar economics in the state.
Select your county and system cost to see how much the 100% property tax exemption saves you over 25 years.
See how much the 100% solar property tax exemption saves you
$508
Annual property tax savings
$9,656
25-year property tax savings
$15,400
Added home value (tax-free)
Based on TX Tax Code §11.27 — 100% property tax exemption for solar energy devices. File Form 50-123 with your county appraisal district by April 30. Savings assume system cost as appraised value with depreciation schedule (100% years 1–10, declining thereafter).
The exemption is not automatic. You must file Form 50-123 with your county appraisal district by April 30. Without filing, you lose hundreds of dollars per year in savings.
If you lease your solar system, the third-party company owns the panels. In most cases, they claim the property tax exemption — not you. Only system owners can file Form 50-123. This is one advantage of purchasing versus leasing.
Common questions about solar taxes and exemptions in Texas.
In-depth guide to filing, county details, and maximizing your exemption under Tax Code Section 11.27.
Read guide25D is dead. Is solar still worth it in TX? Yes — here is why and how to make it work.
Read guideCity-by-city pricing, cost factors, and how to get the lowest price per watt.
Read guideLast updated: February 18, 2026. Tax rates, exemptions, and filing requirements may change. Consult a tax professional or your county appraisal district for current information.
Understand your real costs, tax savings, and payback period. NuWatt Energy provides honest assessments that account for the property tax exemption, the loss of 25D, and your specific county tax rate.