Using Solar Panels and get a Tax Credit.
Trying to convert the sun’s rays into electricity doesn’t make sense for every homeowner. For the solar panels that typically sit on your roof to be really effective, they need exposure to direct sunlight for at least five hours a day.
Fortunately, living in California, there is no shortage of sun so solar panels can be a great way to take advantage of the sun’s energy.
If your electric bills are high and your house receives sufficient sunlight, solar panels are probably a sustainable and energy-efficient alternative to consider. An expanded federal tax credit for solar-panel systems, also known as photovoltaic systems, makes them even more affordable to install.
Solar-panel systems are classified by watts of capacity. Systems under 10 kilowatts—1 kilowatt equals 1,000 watts—are primarily for residential use. The average size of a residential solar-panel system is 5.2 kilowatts.
Costs vary by state, but in general systems are cheaper in places like Arizona and California, where electricity is expensive, sunshine is plentiful, and solar has gained wider acceptance.
Systems installed between Jan. 1, 2009, and Dec. 31, 2016, are eligible for a tax credit equal to 30% of the cost. To qualify, the system must supply electricity to a residence and meet local building codes. In 2008, the federal tax credit was capped at $2,000.
That means a 5.2 kilowatt system installed between 2009 and 2016 that costs $44,200 would, in theory, earn a federal tax credit of $13,260 vs. just $2,000 before 2009. That’s an extra $11,260 in savings, in addition to local and state incentives. (This is a simplified example. Consult a tax adviser.) The tax break can be applied to a solar panel system installed at your primary residence or second home.
A typical residential system should lower your electric bills by 25% to 50%, says Monique Hanis, a spokeswoman for the Solar Energy Industries Association. The average household pays about $100 a month for electricity, according to the Energy Department, so a solar-panel system should save you between $300 and $600 a year.
The payback period will vary greatly depending on where you live, the size of your system and its post-incentives price tag, and future swings in electricity costs and consumption rates. Figure it’ll take anywhere from six to 18 years, says Hanis. Solar panels have a life span of 20 to 30 years.
Producing excess energy can accelerate how quickly you’ll recoup your investment. A battery can store extra electricity for later use, or you can sell surplus energy back to the utility company in a practice called net metering. Many cities have net metering in place, but check with your utility company before you install solar panels.
Before you install solar panels, be sure your roof is in good shape. If it isn’t, you might need to shell out $5,000 or more on repairs to make your roof structurally sound. This expense doesn’t count toward the federal tax credit. You might also need to cut down trees that block direct sunlight.
You can also take fundamental steps to improve your home’s energy efficiency before resorting to solar panels. Conduct your own energy audit, seal windows and doors, and replace old appliances. Simply adding insulation to an attic can lower heating and cooling bills by 10% to 50%. A tube of caulk and a few rolls of fiberglass insulation cost a whole lot less than solar panels.