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February 24, 2021
Solar power is popular for good reason. It’s a renewable energy source that has the potential to save consumers thousands of dollars each year. Solar systems can reduce your carbon footprint and protect the environment from unnecessary harmful emissions. You should evaluate the cost, benefits and return on investment before making a final decision.
Here are five questions you’ll want to consider before investing in solar renovations.
How much do solar renovations cost?
Solar renovation costs vary based on your location and the size of the project. Many people think of panels when they consider solar energy, but there may be other options. For example, solar water heaters harness power to heat the water for a house. There are also solar-powered lights, cameras and generators available for residential purchase.
Residential solar water heaters can cost an average of $3,304, depending on the model. In comparison, a solar panel system generally costs between $15,000-$25,000 before tax credits. These numbers can vary based on the number of kilowatts needed on the property. While each product has different prices, they all help to mitigate climate change and curb pollution. If society widely implemented solar renovations, they could prevent up to $167 billion in adverse health and environmental impacts.
What tax credits are available to homeowners?
In 2020, the president passed a federal spending package that extended the solar investment tax credit (ITC). The ITC was going to decrease from 26% to 22% in 2021, but those percentages were drawn-out. Now, homeowners can receive a 26% tax credit until 2022. The residential ITC allows people who purchase solar systems for their homes to apply a credit to their personal income taxes.
If you live in a rental property, you can still take advantage of solar power without investing in the system yourself. Community solar projects are located in 39 states across the country and are expanding. Participating in one of these programs would allow you to receive the perks without the corresponding maintenance.
What is the average ROI?
To calculate your estimated return on investment (ROI), you’ll need to consider the payback period. To determine your break-even point, you’ll need to divide the system’s upfront cost by the amount of money you save each year. For example, if you paid $20,000 after tax breaks for your system and saved $2,500 annually, it would take you eight years to reach the end of the payback period.
After you reach this stage, each year is pure savings. Since a solar system’s average lifespan is 20-30 years, homeowners can quickly achieve an ROI of 200% without factoring in increased home value.
How much does solar improve home value?
On average, solar systems can increase a home’s value by $15,000, although market factors can impact this amount. Most homebuyers view solar panels as a significant benefit and will be willing to pay a premium if your home already has a system installed. Your investment can help your property stand out from the competition and give you an advantage when selling.
How can you maximize the return on your solar investment?
The energy gained from your solar panels saves you money and improves your home’s value. With enough time, you’ll break even and make back your initial investment. After that stage, you’ll be able to enjoy the energy and money-saving benefits of your solar system. However, it’s also possible to profit from your investment by selling your excess power back to energy companies.
By sending your extra energy back to the grid, you are essentially selling electricity and turning a profit. This is the ultimate way to maximize your ROI.
The power of solar to boost your bottom line
Solar renovations can change your life and the value of your home. The high initial investment can deter some individuals from committing to the change, but federal tax credits can offset the cost. When maximized, your solar system could help you earn money while simplifying your life.