The economic stimulus plan [1] lifted the maximums on the solar energy tax credits, making the purchase of solar panels very appealing.
Since we decided not to downsize [2] and stay in our house long term, we’re considering installing solar panels this summer.
I thought it would be fitting to celebrate Earth Day with some details about the financial considerations behind installing solar panels!
Solar Energy Tax Credits
Federal Tax Credits. The solar tax credit is now a 30% tax credit on the installed price of solar panels and solar water heaters. Beginning in 2009, there is no maximum on the tax credit (in 2008 there was a $2,000 maximum).
The energy efficient tax credits [3] detail all the available products and credits. In addition, if you have a home business, you can qualify for accelerated depreciation and a 50% bonus depreciation for the portion of your home that is devoted to your home office.
State Tax Benefits. You can use the map from the database of state incentives [4] to see if your state offers grants, rebates, or tax incentives. Our state offers a cash back rewards program of 25% of the cost, with a $35,000 maximum.
Additional Financial Incentives
Beyond the tax benefits, there are multiple programs offered by the state, electric company, and government programs. Here are some examples of the ones in our area.
- Property Tax Exemptions. Our state will exempt the solar system from property tax, which will be a nice break, since we are in a very high property tax area.
- Energy Star Home. Because our house was green-built when we built 3 years ago, and qualifies as an energy star home, we could qualify for an additional $500 bonus.
- Electric Company Incentives. Our electric company offers tier rates and time of use metering, which help increase the savings by going to solar power.
- Selling Excess Energy. In addition, our electric company offers net-metering, which will allow us to sell our excess energy!
Solar Power Calculators
It’s hard to figure out the total cost of installing the solar panels, since there are so many tax credits and financial incentives. When figuring the cost, look at the total cost of the system, less the tax savings, and financial incentives. Divide the cost by the monthly savings to determine your break even points.
There are various calculators that help you determine the overall cost. You’ll want to get your average kilowatt hours of electricity from your electric company before you start. Here are some that I liked:
- My solar estimator [5]. This calculator, which is my favorite, gives you a solar rating, along with an estimate, and a breakdown of the costs, incentives, cash frow and break even point.
- Find Solar [6]. Another calculator that I liked, which is good if you want a really quick estimate.
- RoofRay This one is pretty neat. It uses Google maps to draw the solar panels on your house. Unfortunately, our house doesn’t show up on the Google maps yet; but it was fun to play with!
Solar Power Quotes
We’re planning to obtain at least 3 quotes to compare the cost for the system. We’re also considering a site assessment, which is an independent third party consultant to help us analyze our needs and recommend a correct size and site plan.
Action Plan
We have more research to do before we jump right in. But, the initial break even point of 8 years from the solar estimator calculator was promising. And the additional financial incentives from the electric company and being able to sell excess energy will bring it down even further.
We need to find out the regulations of our homeowners association, and we need to have a site assessment done. In addition, our state requires that we submit an application before we begin if we want to use the 25% rebate program. We also have to apply with our electric company because we plan to connect to the utility grid to sell our excess electricity.