A Homeowners Guide to Financing and Solar Power Savings

Jessica PirroJuly 23, 2020 7835 3

A Homeowners Guide to Financing and Solar Power Savings

When it comes to getting a solar panel installation, most homeowners are going to want to know two things, how much are solar panels going to save them, and how can they finance solar panels.  

Here are some tips on how you can save on the cost of solar panels and some financing options that you will have.

Financing for Solar Tips

Because a solar panel installation is going to be a significant investment, it is going to take most homeowners several years for a lot of homeowners to achieve a return on their investment. It is going to be very important to consider the specifics of your home and energy use and as well as getting to know the different types of solar incentives and financing for solar panels options that will help homeowners be able to afford a solar panel installation.

The Federal Investment Tax Credit (ITC)

Federal ITC is one of the most well-known solar incentives in the United States. It is one of the best ways to save on your project if you are paying for your solar panel installation upfront. This solar incentive currently offers a tax credit that is worth 26% of your solar panel installations total costs.

This percentage will be calculated from the costs of your solar panel installations equipment in addition to any associated qualified expenditures. The government defines these as labor costs for on-site preparation, assembly or solar panel installation, and for piping or wiring to interconnect a solar panel installation to the house.

Buyers might apply for these credits when they file their federal income taxes. After calculating taxes, the value of the credit is deducted from the taxability, or the amount that is owed after calculating yearly earning assets, and deductions. If the tax liability is less than the value of the credit, the filer might roll over the remaining amount to use on next year’s taxes.

If you aren’t planning on getting a solar panel installation anytime soon, you should keep in mind as of now the ITC is set to decrease 12/31/2020 to 22%. If you want to use the ITC to purchase your solar panel installation, you are going to need to plan around these changes.

State Government Solar Incentives

Some state governments are going to offer their programs for solar panel installation in addition to the federal ITC. Depending on the state, the details of the different solar incentives are going to vary. There are going to be certain states that are eligible for a tax credit that is going to be worth 25% for their solar panel installation, but others are going to be offering less. The statewide tax credit programs aren’t that common, but they are going to exist in certain states. Check with your state government for more information.

There are going to be some states that will also offer exclusions in property taxes. This is going to be a solar incentive that is more common that is offered by the state governments. The value of your solar panel installation is going to add to your home isn’t going to be reflected in your property taxes, which will provide some financial relief to solar households.

Often, states are going to offer exemptions to sales tax on solar panel installations. What this means is, you can buy your solar power equipment free of sales tax applied to retail purchases. Depending on the cost of your solar panel installation and the sales tax rate in your state, this can represent a value of several hundred dollars.

Another common type of state solar incentive is a rebate that is going to be offered per-kilowatt hour up to a certain dollar amount. You will want to keep in mind that the state legislatures frequently revise, amend or annul certain laws around statewide solar incentives. The details of these projects are subjected to change.

Solar Saving Tips

Look at Your Electric Bill

Solar panels generate solar power to run your home can have a huge impact, or completely offset your monthly electric bill. The higher the electric bill, the more likely you are going to benefit from a solar panel installation. Keep in mind that electricity rates and use and the main charges on your statement will be liable to change.

When the cost of electricity from a utility company changes, the amount of how many solar panels can save you. It will be the same if the changes are made with energy consumption.

The location is also going to play a big role in affecting electricity rates. The national average is 12.95 cents per kilowatt-hour. If you live in an area that has higher electricity rates, you are going to save more when you generate your power with solar panels.

Estimate the Cost of Solar for Your Solar Panel Installation

Note, solar panels are not going to be cheap. On average, a 5 kW solar panel installation is going to cost anywhere between $3 and $5 per watt, or between $15,000 to $25,000. These cost estimations are going to be before any solar energy tax credits and solar incentives.

But, in the long run, the cost of solar is going to be minimal and will make up for the upfront expenses. In most cases, solar panel installations aren’t going to require a lot of maintenance.

When calculating the total cost of solar, you should consider how much solar power you are regularly want to consume and what size solar panel installation will generate the amount of solar power that you will need.

There are going to be certain solar companies that will offer a lower cost of solar through certain rebates for solar panels and other solar incentives. It is recommended that homeowners get quotes from 3 to 5 solar installers if they want to find the best deals.   

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