Solar panels on homes have become fairly popular in recent years. Take a quick drive throughout many South Florida neighborhoods and you will quickly realize the prevalence of solar panels on many houses. Of course, having solar panels installed at your home does come at a significant cost. As with everything, you will want to weigh the pros and cons of this approach for your specific situation and time horizon. First, let’s discuss some advantages and disadvantages of solar panels.
Advantages and disadvantages of solar panels
|Renewable energy/environmentally friendly
|Some pollution concerns
|Protection from rising electric bills
|High front-end cost
|Increased home value
|Require a lot of space
|Seasonal & sun dependence
|Not aesthetically pleasing
|Reduce your carbon footprint
|Cost of energy storage
|Federal tax credits
|Uncertain for some purposes
Solar tax credit & “The Inflation Reduction Act”
On August 16, 2022, President Biden signed “The Inflation Reduction Act” into law. Interestingly, many in this administration refer to this law as more of a climate bill than actually an inflation reduction bill. With this said, there are some built in tax savings for solar panel installation. For starters, if you install solar energy equipment in your residence any time this year through the end of 2032, you are entitled to a non-refundable credit off your federal income taxes, equal to 30 percent of eligible expenses. Furthermore, there is no dollar limit on these expenses. According to the Department of Energy, solar expenses that are covered under this new solar tax credit include:
- Solar photovoltaic (PV) panels.
- PV cells used to power an attic fan (but not the fan itself).
- Contractor labor for onsite preparation, assembly, or original installation.
- Permitting fees, inspection costs, and developer fees.
- All equipment needed to get the solar system running, including wiring, inverters, and mounting equipment.
- Storage batteries. (You can claim the tax credit for these even if you buy and install them a year or more after you install the solar system.)
- Sales taxes on eligible expenses.
In short, the solar tax credit can lower your federal taxes. For example, if you spend $20,000 on a solar panel system, you can subtract 30% of this cost ($6,000) from your federal taxes. It is important to note that you must take this tax credit in the same year that the installation is completed.
As with any investment, it is important to analyze your personal situation when deciding on whether or not to install solar panels. Typically, the longer you live in your home, the more practical it becomes to embark on such a large expense. In addition to determining the initial cost for the equipment and installation, you will also need to determine your energy utilization and what amount you will likely save on a monthly basis. In doing this, you will be able to better estimate your “pay off” period. In other words, how long will it take for the amount in energy savings to pay off your initial investment costs? You will also want to determine your roof’s sun exposure as well as the slope of your roof when analyzing the feasibility of solar panels. Typically, a roof slope that angles between 15 – 40 degrees should suffice for most solar power systems. From a resale perspective, homes with solar panels spend 13.3% less time on the market than homes without solar panels. In addition, homes with solar panels are 24.7% more likely to sell over asking price.
Do you have any questions about the South Florida real estate market? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, don’t forget to download our free Florida Home Search App today!