Understanding Tax Incentives for Eco-Friendly Homes in Texas

Q. Is there any part of Texas where there are tax incentives for building eco-friendly houses, such as solar panels or geothermal?

It’s no secret that Texas is one of the U.S.’s friendliest tax states, with many benefits in place for retirees and state and local tax burdens being some of the lowest in the country. The Lone Star State is also home to several incentive programs for homeowners who elect to make their property eco-friendly. Property taxes in Texas are locally assessed and administered, since there is no state property tax. As such, there isn’t a statewide solar tax credit or rebate program, however, Texas does offer a 100% property tax exemption on the appraised value of an on-site solar-, wind- or biomass-power generating device.

For example, if you own property valued at $100,000 and you add a $10,000 solar panel system that boosts that property’s value, the exemption applies to the added value, and your property will only be taxed on its value before the new system is integrated. Various local governments also offer incentives for eco-friendly enhancements as well.

“The federal Inflation Reduction Act of 2022 brought about expanded options for homeowners interested in making energy-efficient upgrades,” said Brian Decker, CEO of solar company SOAR Energy, which operates in Texas. Energy-efficient home improvements completed in this year throughout the U.S. could be eligible for a tax credit of up to $3,200, or 30% of qualified expenses, including installed improvements, residential energy property costs, and home energy audits. Eligible renewable technologies include passive solar space heat, solar water heat, solar space heat, solar thermal electric, solar thermal process heat, photovoltaics, wind, biomass, storage technologies, and solar pool heating. Local solar rebate and incentive programs in Texas, meanwhile, are available from power companies such as CPS Energy, TXU, Oncor, CenterPoint, AEP Texas, Austin Energy and Green Mountain Energy, notes MarketWatch.

Among the many incentives offered across the state, two of the most notable are the High-Efficiency Electric Home Rebate (HEEHRA) program and the Homeowner Managing Energy Savings (HOMES) Rebate program. The HEERA program is part of the federal Inflation Reduction Act and provides incentives to low- and middle-income families investing in energy-efficient electric appliances. Under this program, moderate-income households can get 50% of the project cost covered, while low-income households may qualify for 100% coverage.