How to Recoup an Investment in Solar Panels
Solar panels are good for the environment, and they also can be good for your wallet. If you’d like to get solar panels for your home, here’s how you can recoup your investment — and possibly even get more back — over time.
Lower the Cost of Installation with Discounts
First and most immediately, you can likely get a discount on the cost of solar panels or installation.
Available specials vary, but many solar panel service providers have some sort of discount program that homeowners can take advantage of. Occasionally there will be deals that can include a few free solar panels within minimum purchase, but however much you can get off the cost of a solar panel system is money saved.
A discount, of course, doesn’t net you a return on your investment. It does lower your initial investment, though, which means you can recoup your full investment sooner. If you can find a special that’s on the lower end of the price range, you could save a few thousand dollars.
Get an Income Tax Refund with the Investment Tax Credit
Second, the investment tax credit (ITC) provides a sizable initial return when you file your income taxes for the year. The ITC is a federal tax credit that gives you 26 percent of the cost of a solar panel system back on your tax return.
How this credit is returned to you depends on your tax return. If your federal tax bill at the end of the year exceeds your credit, the amount due will be reduced by your credit. If you owe less than the credit is worth, your bill will be eliminated, and you’ll receive a refund for whatever remained of the credit.
Of note, the ITC for residential solar panel systems is being phased out over the next two years. The credit is worth 26 percent of a system’s cost in 2020 and 22 percent of a system’s cost in 2021. Thus, you should take advantage of this credit in 2020 in order to maximize its potential value.
Save on Electricity Costs
Third and most obviously, a solar panel system provides a direct return by reducing your electricity costs. How much you’ll save on electricity depends on electric rates in your area, your home’s electric consumption, and the capabilities of the solar panel system that you get. In most cases, though, the savings are substantial and far exceed the cost of a system over time.
To see how much potential savings can add up to, consider a home here in California where the average electric bill is $170 per month. If this were your home and you purchased a solar panel system that generated all the electricity your home used, you’d save $170 per month. That’d be $2,040 annually and $51,000 over 25 years, which is a common lifespan for a solar system.
Increase Your Home’s Value
Likely you’ll be able to recoup much or all of your investment when you sell your home. Homes that have solar panels usually sell for 3.73 percent more than comparable houses that aren’t solar-equipped. This results in an average home value increase of $16,995, but exact increases vary depending on home value.
Even if you have an inexpensive home that sells for far less than average, you can still recoup thousands of dollars when you sell a home that has solar. For example, a 3.73-percent increase on a home sale that’d normally be $500,000 would result in an increase of $18,650. If you are interested in upgrading your home with a solar panel system, contact Mauzy Heating, Air & Solar to schedule a consultation.