A couple of decades ago, solar panels were one of those advanced technologies you only saw in sci-fi movies. These days, however, the benefits of solar energy are far from fiction. Every year more and more people are taking the initiative to install solar panels on their homes in an effort to be more energy efficient and save money on their utility bills – not to mention take advantage of the significant tax incentive.
In case you haven’t heard, the federal government has been handing out a 30 percent tax credit to homeowners who invest in solar technology. The Solar Investment Tax Credit has been available for nearly 10 years following an 8-year extension in 2008. Now, we face the end of the federal policy that has helped annual solar installation grow by over 1,600 percent.
Under current law, the Solar Investment Tax Credit will expire on December 31, 2016. With only 16 months between now and the deadline to qualify, Americans are feeling the pressure to take action. As a result, the number of homes with solar roofs grew 70 percent year-over-year for the most recent quarter. That brings the total U.S. households with solar panels to approximately 700,000.
While the federal tax credit may get extended again, especially if a solar-friendly president is elected, there are no guarantees. If you’ve been on the fence about installing solar panels on your home, you’ll need to do it soon if you want to take advantage of the 30 percent tax credit. Here’s a short guide to how the Solar Investment Tax Credit works and whether installing solar panels on your home makes sense for you.
How does the Solar Investment Tax Credit work?
Like all tax credits, the Solar Investment Tax Credit is a dollar-for-dollar reduction in the income taxes you would otherwise pay the federal government. In other words, you get to take 30 percent of the amount you invest in solar energy directly off your tax payment instead of as a deduction from your taxable income.
Why is the Solar Investment Tax Credit important?
Aside from reducing pollution and lowering energy bills for homes and businesses, solar energy also creates new jobs. In fact, according to the Solar Energy Industries Association (SEIA), the solar industry is creating jobs at a rate nearly 20 times higher than employment growth in the overall economy.
How much would it cost to install solar panels on my home?
Tom Kimbis, SEIA’s Vice President of Executive Affairs, estimates that a “nice sized system” would cost about $15,000. Keep in mind you’d also have to pay for maintenance and upkeep of the system moving forward. On the bright side, using solar energy would reduce your monthly energy bills by as much as 50 percent. Plus, with a $15,000 installation you’re looking at a $4,500 credit to your federal tax bill.
Should I take the plunge?
If you have the resources to cover the up-front costs, installing solar panels on your home may be a good idea. You’ll save thousands of dollars on your energy bills over the life of your system, and you can take advantage of that tempting tax credit through the end of next year. On top of all this, implementing solar technology can increase your property value, helping you recoup your initial investment when it comes time to sell.