How To Overcome the Upfront Cost of Solar Panels
Residential solar continues to increase in desirability and popularity. According to a new study by Rocket Homes, 74.8% of non-solar households find the upfront cost to be the top barrier.
Despite concerns about cost, 66.5% of households that do not have solar panels are interested in getting them. When asked what would make solar more accessible to homeowners, 61.2% of homeowners without solar said lower upfront cost was the best way to increase accessibility.
Save With Tax Credits
On average, residential solar costs around $17,000 if the home in question doesn’t need a new roof or more than a 6-kWh solar system. Are you interested in installing a solar system in your home? The following options are currently available to help homeowners reduce the upfront cost.
Local Tax Exemptions
In addition to the state-level tax credits, some states also offer solar sales and property tax exemptions. Property tax exemptions exclude the value of solar panels from being added to the value of a property. Sales tax exemptions exempt homeowners getting solar from the state-level sales tax.
State-Level Tax Credit
Many states offer incentives, including but not limited to Arizona, Wisconsin, and California. These incentives can range from New York’s additional 25% tax credit to Illinois’ $0 upfront cost if homeowners fall into the low-income bracket. Furthermore, an additional state tax credit won’t take away from any federal tax credits homeowners receive.
Federal Tax Credit
Currently, homeowners can take advantage of a 26% federal solar tax credit. In 2022, the 26% solar tax credit was scheduled to be reduced to 22% but instead was extended a year. This 26% tax credit will be reduced to 22% in 2023 and 0% for residential solar in 2024. However, to use the federal solar tax credit homeowners must owe taxes during the year the solar installation takes place. For homeowners who intend to get solar soon and want to take advantage of the federal tax credit, learn how it works and how to apply sooner rather than later.
Making Solar Payments Fit Your Budget
With rising electrical rates and outages plaguing many areas in America, solar can offer a sense of financial and physical security if individuals have a way to overcome upfront costs. Solar loans and leasing are two options to fit solar panels into your monthly budget. Both remove the upfront cost and replace it with monthly payments. The benefits and disadvantages of each are dependent on your lifestyle and the level of security you have with solar panels, similar to choosing between financing or leasing a car.
Financing Options
Solar financing is another way to address the barrier of upfront cost. In the same way that financing enables Americans to buy a house or a car, solar financing can help homeowners acquire solar panels at a lower upfront cost. The cost can even be rolled into a 30-year mortgage when appropriate. However, solar loans do have interest rates that can vary depending on the market interest rates and a homeowner’s qualifications.
Solar Panel Leasing
Like solar financing, solar panel leasing is another way to get rid of the high upfront cost. But unlike solar financing, homeowners never will own the solar panels. The positive side of this arrangement is that homeowners can lease for as little as no money down. Additionally, the leasing company will take care of any needed maintenance and monitoring of the solar panels. However, this does mean that a homeowner will not qualify for any tax credits or exemptions.
Do Solar Panels Have Value Beyond Energy?
The value residential solar can provide homeowners depends on a variety of factors beyond just upfront cost. This includes energy consumption habits, the local utility provider, estimated solar electricity generation, and more. But what about outside of just energy?
According to Rocket Homes survey data, homeowners with solar believe it adds a median of $12,500 to the value of their home. On top of that, Rocket Homes’ home-listing data indicate that homes with solar are 24.7% more likely to sell over asking prices and spend 13.3% less time on the market.
In deregulated energy markets like California and Texas, where electricity prices are high and reliability can vary, homes with solar provide a clear value to homeowners and buyers. On May 7, 2022, California warned homeowners it will likely have a shortage of energy during peak times (usually in the morning and late afternoon) equal to 1.3 million homes. Homes with solar and battery storage are even more valuable in this type of climate where decreasing reliability can leave homeowners in dangerous situations without access to electricity.
About the Author
Ann Basnett is a freelance writer who graduated with a BA in Journalism. Her focus areas include environmental technology, electric vehicles, and eco-friendly home solutions. She is passionate about renewable energy advances and consumer applications.