In the last quarter of 2020, the price of solar modules fell to historic lows.
No wonder, according to a recent survey by the Pew Research Center, nearly half of US homeowners have considered installing panels in their homes.
It pays to think ahead when deciding whether a residential solar system is right for you. Switching to solar should ideally not cost more than your electricity bill, experts say. And since solar panels are quickly becoming affordable for the average homeowner, it’s a practical project to consider.
Solar panels use photovoltaics (PV) to use sunlight and convert it into electricity. A solar system helps to reduce the carbon in the atmosphere, which ultimately protects our environment. Solar panels can save homeowners money on utility companies, and special solar loans are available for this purpose. Tax credits are also possible.
Pro tip
Enter your zip code here to make solar energy for residential buildings as affordable as possible local solar tax breaks in your state.
How much do solar panels cost and should you invest in residential solar systems? Remember, how much money you can save by switching to solar energy depends on how much electricity you use and what kind of financing you choose. Please note the following.
How much do solar panels cost?
The price for a private solar system has halved in the last ten years. According to the Solar Energy Industries Association, a national trade association, the average cost of a housing system today is $ 20,000.
However, the size of the system you need to provide enough performance will vary depending on the person and the house. One of the most important factors is the monthly electricity consumption. Your location also plays a big role in the cost.
For example, suppose you live in an area with high solar radiation; You won’t need that many plates. If you live in a cloudy area with less sun, you will typically need more modules to get enough power each month.
“It really depends where you are. It’s very different in the northeast than in Arizona, ”says Terri Mickelsen, CEO of Clean Energy Credit Union, a financial institution.
The best options for financing solar panels
Many homeowners finance their home solar systems. You have several options for financing solar energy for residential buildings.
Solar credit
This is a loan from a lender who specializes in financing residential solar projects. Many of these loans are unsecured so you don’t need to use your home as collateral. But make sure you understand the fees and terms of the loan so that in the end you don’t end up paying more than the solar system saves on energy bills.
Traditional loan
Some homeowners opt for traditional loans to finance their solar systems. A couple of options to consider are a home equity loan or a home equity line of credit (HELOC). These loans are usually backed by your home.
HomeStyle Energy Mortgage from Fannie Mae
This program allows you to use up to 15% of the estimated real estate value of your home – either on a new mortgage or a payout refinance – to make energy efficient improvements to your home, including residential solar panels.
Solar lease and electricity purchase agreements
If you don’t care about owning your solar system, you may be able to finance your home solar system with little or no money.
“Options include leasing modules or signing a power purchase agreement where the solar company owns the modules and the customer buys the solar power from the system at a set price. Neither of these options brings tax benefits. In many cases, however, the homeowner can save money immediately, ”says Becca Dr. Jones-Albertus, director of the US Department of Energy Solar Energy Technologies Office.
How Much Money Can You Save With Solar Energy?
How much money you can save by switching to solar energy, in turn, depends on how much electricity you use every day and what type of financing you choose. In general, the rule of thumb is that the loan installments for the solar system should not exceed the monthly electricity bill.
Be sure to discuss the loan with your bank or credit institution. Knowing what the solar system can do is an inexpensive tool for powering your home.
Careful planning with solar systems is important. If your home needs more repairs, it can make sense to include the cost of the solar panel in the total cost of home improvement.
“Think about how quickly you need to replace your roof – because some solar and roofing companies have partnerships that allow you to save money by doing both together,” says Dr. Jones-Albertus.
What are the tax benefits?
The Solar Investment Tax Credit (ITC) is offered nationwide by the US government for the construction of residential solar systems. The ITC grants a 26% tax credit for systems installed before 2023. After 2023, the ITC will grant a 22% tax credit. The ITC will expire from 2024 unless Congress decides to renew it.
Homeowners can use this tax credit to offset the cost of expenses such as solar panels, energy storage devices, contractor labor costs, and solar system equipment such as wiring and assembly equipment.
“Talk to a tax advisor before installing solar systems,” advises Mickelsen.
The use of the ITC by homeowners is restricted and converting solar system costs into tax credits certainly requires a lot of know-how.
“It’s not extra money you get when the government writes you a check. ITC credits are based on taxes that you have paid. So if you don’t have tax liability it could be years before you get that money back – or you may not get everything back, ”says Mickelsen.
Aside from the state solar tax credit, many states offer local tax incentives designed to help make solar systems more affordable.
“The DSIRE website is a great resource for looking for government incentives and tax breaks,” says Dr. Jones-Albertus with reference to the Database of State Incentives for Renewables and Efficiency. When you enter your zip code, you will find a full list of financial incentives and regulatory guidelines.
Check the DSIRE database to see what types of solar tax incentives exist in your state.
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It is important to think about the financial benefits of solar panels beforehand before investing in them. Get a clear idea of how much electricity you need and learn about the solar tax incentives that you can take advantage of in your state.
“Do your homework to make sure you get the best deal,” says Mickelsen.
Make sure you have a good understanding of the market just like you did when shopping for anything else. Different lenders offer different conditions for solar financing. Look around until you find terms that work for you.
