Can Going Solar at Home Save You Money?

Updated on 03/29/2023

Can Going Solar at Home Save You Money?

Switching to home solar panels for your energy needs could save you thousands of dollars over time. Depending on where you live, you could significantly lower – or even eliminate – your monthly electricity bill. The cost savings alone are enough to sway any homeowner to consider changing to solar energy.

But switching to solar energy isn’t just about the money. The number of solar installation programs provided by federal, state, and local government bodies is evidence of a greater need for clean energy. Some utility companies even offer perks to homeowners who make the switch.

These programs offer incentives that can offset the solar panel cost of installation and maintenance, such as cash back or tax credits. If you are looking for ways to lower your energy bills and help combat greenhouse gas emissions, consider the following programs that could make it worth your while.

The solar federal tax credit offered by the U.S. government is by far the best incentive for switching to solar energy. You can claim the federal residential solar energy credit for a percentage of the cost of installing a solar photovoltaic (PV) system.

You can count the following costs and expenses when calculating your savings through this incentive program:

  • Home solar panels
  • Photovoltaic cells to power fans (excluding the cost of the fan itself)
  • Contractor costs and labor expenses
  • Wiring
  • Inverters
  • Mounting equipment
  • Energy storage devices
  • Sales taxes

Claiming a solar federal tax credit reduces your overall taxable income, saving you money during tax season. Your federal income tax liability is calculated based on your income; the lower your income, the less you pay in taxes.

The total amount of money you can save through the solar federal tax credit depends on when you install or plan to install a solar energy system.

  • If you installed home solar panels between 2020 and 2022, you could claim a tax credit of 26% of the cost of installation.
  • If you plan to install a solar energy system between 2023 and 2032, you could claim a tax credit of 30% of the cost of installation.
  • If you plan to install a solar energy system in 2033, you could claim a tax credit of 26% of the cost of installation.
  • If you plan to install a solar energy system in 2034, you could claim a tax credit of 22% of the cost of installation.
  • The tax credit expires starting in 2035 unless Congress renews it.

To reap these benefits, you must own or finance the solar energy system. If you lease a solar panel system, you cannot claim the tax credit.

To qualify for the solar federal tax credit, you must meet the following requirements:

  • You installed a solar energy system between January 1, 2017 and today, OR plan to install a solar energy system before December 31, 2034.
  • Your solar energy installation took place at your primary or secondary residence within the United States.
  • You own or are financing the solar energy system.
  • The solar energy system is new or being used for the first time.

o   This means that you cannot purchase used home solar panels or secondhand equipment unless it has never been installed anywhere else.

Installing a solar system for home energy needs could provide a slew of other perks and incentives from state governing bodies. Many states offer additional tax credits and cash rebates for homeowners who switch to solar.

State-run solar energy installation incentive programs vary depending on where you live. If your state offers a tax credit, you can typically combine it with the solar federal tax credit to maximize your savings.

In some states, installing a solar system for home usage allows you to claim a rebate. This is a partial refund that is issued to you after successfully purchasing and installing a solar energy system. The amount of your rebate depends on where you live.

Another type of incentive for solar energy installation comes in the form of Solar Renewable Energy Certificates, or SRECs. If your state offers this perk, you could receive credit for the amount of solar power that your home system generates.

The idea is to incentivize the use of solar energy to lower the dependence on unsustainable forms of energy, like fossil fuels. Once you receive a certain number of credits for powering your home with solar energy, you can sell your SRECs to local utility companies, who want to purchase them in order to meet their state-mandated solar energy quota.

Depending on your home solar panels usage, energy demand and your local area, you could sell your SRECs for up to $400 to local utility companies.

Performance-based incentives (PBIs) may be offered through a partnership with your state and your utility company. This type of incentive pays you money based on how much solar energy you produce.

The more energy your home solar panels produce, the more money you could potentially earn.

Unlike SRECs, however, you cannot sell anything to local utility companies. Instead, your company tracks your energy production in kilowatts and determines how much money you get. Rates are set by the utility company, which may vary depending on where you live.

Some of the best solar programs may not be issued from governing bodies at all. Individual solar companies may offer some of the best incentives for homeowners to make the switch to clean energy through the installation of solar panels.

Solar financing companies specialize in making the move to solar power much easier for homeowners throughout the U.S. If you are worried about the solar panel cost for installation, labor and maintenance, you may benefit from financing the purchase into monthly payments.

Depending on the company, solar energy installation could cost you nothing upfront. Many companies offer zero-down options along with financing to help homeowners afford to switch. Keep in mind that you may need to qualify for these perks with minimum credit requirements or other criteria.

Some solar financing companies may have promotions available during certain periods throughout the year. For example, companies in your area may offer:

  • Discounts on solar energy installation.
  • Free upgrades or add-ons to the solar energy system.
  • Subsidized loans for the purchase of a solar energy system.
  • Extended warranties on panels and parts.Not all solar financing companies are available nationwide. Therefore, specific incentives and programs vary depending on where you live.

By Admin