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With the costs of traditional electricity rising, as your energy bill goes up, a solar energy system may begin to appear attractive. As a homeowner, you may be interested in this form of renewable energy, but there is a ton of information available regarding the true cost.

To break it down, solar panel installation costs vary based on the size of your home, the shape of your roof, and the direction it faces. On average, both the cost of installation and the system can run between $15,000 and $25,000. This can seem a bit steep to some homeowners, but after solar tax credits, and financing options, you may be surprised at how affordable it can be and how much money solar can save you in the long run!

Impacting Factors on the Cost of a Home Solar Power System

Typically when you obtain a home solar system quote, it will be a price that includes everything from installation to equipment. When performing your solar calculations, you will find that there are three primary factors involved, equipment quality, labor, and the design of your home.

1. Equipment

Not all solar panels or inverters are of the same quality. More efficient equipment will provide you many benefits that may end up being worth that slightly higher cost. Because higher-quality hardware produces more electricity, it can also work to pay off itself in the long run. Often these higher-quality systems come with a comprehensive warranty as well. Be sure you learn a little bit about how solar panels are installed before venturing into the next steps.

2. Labor

Equipment is a large portion of a solar system, but permits and labor must also be factored in. Unless you are a solar contractor, you will need to employ solar installers to connect your system to the grid. You will also require a team to design the system, which involves a site visit, and other hours of installation.

3. Roof Design

If your home has a south-facing roof with a 30-degree angle slope, then you have the easiest installation imaginable. This will allow you to install without additional accommodations. If your home has many levels, skylights, or other unique aspects, the installation may be a bit more expensive.

Estimating Your Solar Cost

There are two main parts of solar energy for your home. Most of the expense that comes along with solar panels is the cost to install solar panels, and the cost to purchase the panels themselves. You can even reduce the cost of solar installation by taking the proper steps beforehand.

The upfront cost is really the only struggle for many homeowners. Otherwise, there are minimal long-term expenses, and systems are designed to last for 20 years or more.

The best way to calculate how much your solar panels will cost is by taking a look at your energy usage. How much energy do you regularly consume? Your energy usage is typically listed on your utility bill, this is important to note.

The average residential 5kW size system cost per watt is between $3 and $5. This results in system costs of $15,000 to $25,000 range. Despite this number, this is the cost before federal tax credits and incentives.

After the tax credits and incentives, the cost of a 5.76kW system in the United States will range between $10,068 to $12,305. This is after claiming the 22% federal solar tax credit for installs during the 2021 calendar year. This leads to the average solar panel costing $2.49 per kilowatt-hour of solar installed.

Understanding Tax Incentives

The government offers incentives and business grants for installing solar panels. The purpose of this is to push more homeowners to install alternative energy sources. These tax benefits are nonrefundable, which means you cannot receive a refund for these savings. Instead, you are able to reduce and even eliminate what you owe on your taxes.

Federal Tax Credits 

In 2020, the residential United States federal solar tax credit allowed taxpayers to claim 26% of installation costs. This was offered for systems placed in service by Dec. 31, 2020. Now, in 2021, the federal tax credit has moved to 22% in 2021 and expires on Dec. 31, 2021. Because these tax incentives are steadily decreasing, it is essential to jump on the solar train sooner rather than later.

dditional Tax Credits

Depending on the state that you live in, there are additional tax credits and incentives. These may include:

CashbackExpedited permitsProperty tax exemptionWaived feesAbility to sell excess power to utility companies

Buying vs Leasing

Although you may think that you cannot afford the initial investment of solar panels, buying is not the only option. You can also lease solar panels for a number of years and still benefit from the overall savings.

Buying Solar Panels

There are different types of financing that you can use when purchasing solar panels, this is usually to the tone of a home equity loan or solar loan.

Home Equity Loan: Typically the most cost-effective way to finance solar panels is to do so with a home equity loan. This can also be done with a home equity line of credit. By doing this you are using your home as collateral, which offers you low-interest rates, typically under 5 percent. What is good to note is that the interest you pay is also tax-deductible.Solar Loan: When it comes to the different types of loans available, there are both unsecured and secured solar loans. Unsecured loans do not require you to put up your house as collateral. In this case, the interest also is not tax-deductible. Fannie Mae also offers consumers financing for solar system installations when buying a new home or refinancing.

Buying solar panels is best for homeowners who want to maximize the financial benefits of a solar system. Especially if you are looking to reduce your federal and state tax liability, or you are a business looking to utilize tax benefits. Buying is also great for homeowners looking to increase the market value of their home.

Leasing Solar Panels

Buying solar panels is not for everyone. Overall, leasing allows you to save between 10 to 30 percent off of your standard electricity rates and electricity bill. You will usually have a payback period of 20 to 25 years.

Leasing solar panels can be a good idea if you are more interested in going green, rather than maximizing the financial benefits they offer. Leasing removes the responsibility of maintenance or repairs because the solar company owns and maintains the solar power system for you.

When it comes to installation, you may be able to obtain a solar system by putting nothing, or a very small amount of money down. It is good to note that leasing also does not allow you to benefit from federal or state investment tax credits.

Is Solar Right for You?

Whether you live in an area where the energy rates are high, or you are considering a change to benefit the environment, solar is a great option. Overall, solar panels will save you money, but buying and leasing are both options. Since leasing negates the upfront cost, you will be able to benefit from the cost savings rather than the incentives and tax breaks. You also need to make sure your house is a good candidate for solar in the first place!

If you are able to afford the initial down payment, solar panels are an incredible purchase and investment for your home. Do not hesitate to take advantage of the 22% tax break while it still exists. Contact Harmon Solar to learn more about how much it will cost to install solar panels on your home. For a better idea of the cost of a solar panel installation, give Harmon Solar a call today at 800-281-3189!

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