More and more local small business owners are looking at adding solar energy equipment to their facilities, and with good reason. Solar allows them to cut their electricity costs by producing power on site. Solar installations can increase the value of their buildings. It can mean more reliable power in areas that are subject to blackouts and power disruptions related to adverse weather events. It is also a sustainable source of energy that can cut down greenhouse emissions and conserve fossil fuels. In addition to all these benefits is that solar equipment can help take a bite out of your tax bill through the Fairfax County’s Solar Energy Equipment Tax Exemption.
What Solar Equipment Qualifies for the Exemption?
Property owners can qualify for the exemption when they install solar equipment that fills a need otherwise provided for with conventional energy sources. Most people realize that systems that include solar water heating, air conditioning, heating and electricity for the facility qualify for these sorts of clean energy exemptions. However, many are surprised to learn about less obvious equipment that could save them money, such as south-facing windows that heat your building in winter or shades that cut down cooling costs during summer heat. A few examples of systems include:
- passive solar systems.
- solar hot water heaters.
- solar heating.
- south-facing windows that function as solar collectors.
- shading devices that assist in summer cooling.
- greenhouses that are integrated into the heating system.
- thermal storage systems (also known as thermal batteries).
- trombe walls that act as thermal mass heaters for the structure.
- movable insulation.
The exemption is available for both residential and commercial properties. Both the cost of equipment and installation qualify for the exemption.
How Does the Exemption Work?
The exemption is a percentage that is outlined in Virginia’s Administrative Code. On some items, like solar panels and hot water systems, you can use the exemption for 100% of the cost of your equipment and its installation. On other items, like south-facing windows, you are able to take off a percentage of the cost. The exemption is deducted from your property tax bill every year for five years.
Consider a scenario where you are having a solar hot water heater installed at your place of business. Imagine the water heater costs $10,000 and installation costs $3,000, for a total cost of $13,000. Your tax savings would be based on your tax rate. So, if you pay $1.09 per hundred dollars of assessed value, the exemption each year would come to around $141.70. This becomes a tax credit that is deducted from your property tax bill each year until the exemption period runs out.
How Do I Sign Up?
To sign up for this exemption, you’d have to full out an application form and send it in with the required back-up documents. You’ll need to submit the plans and specifications for your solar device, as well as receipts, canceled checks or other documents that show the cost. Additionally, you must write a brief narrative that describes what your solar equipment does. You’ll also need any applicable permits that are required.
Once all of those have been submitted and your equipment is installed, Land Development Services will forward your application to the Department of Tax Administration. The Tax Administration reviews your application and estimates the value of your tax exemption. You’ll receive a letter confirming that your application has been accepted and how much your exemption is worth.
Help with Tax Exemption Applications
Managing all of the forms and documentation for this and other tax credits can be onerous. As experienced small business tax preparation and accounting professionals, we are familiar with the requirements for this credit and can help you ensure you dot every I and cross every T. Our careful team members will help you ensure that you identify every item that qualifies for the credit and that you have the proper documentation to back up your claims and get the tax credits you have coming to you. Get in touch to learn more our this solar tax exemption and other programs that your business might qualify for.