How To Pay For Your Solar Energy System
1 month ago
The biggest hurdle most homeowners face when considering switching to solar energy is the upfront cost. Most people know it will save them a substantial amount of money in the long run, but lack the financial resources to purchase a system.
That’s why we wanted to share some of our best tips for securing financing for your residential solar energy system.
Converting to solar energy can be more affordable thanks to incentives that are available through the federal government, as well as on the state and local levels.
Federal Tax Credit
The new solar tax credit is part of the Inflation Reduction Act, which was recently passed in August 2022. The goal of extending solar tax incentives is to make the installation of solar panels and systems more attainable for homeowners than it has been in the past.
The Residential Clean Energy Credit will allow homeowners to subtract 30% of solar costs from their federal taxes through 2032.
There is no dollar amount limit, whether you spend $20,000 or more than $100,000 on your solar energy system and related costs, you’re entitled to claim that 30% tax break.
It is available to all taxpayers for either their primary or secondary residence located in the United States. Any income level can take advantage of this tax credit whether you itemize your taxes or use the standard deduction.
Indiana State Tax Exemptions
As a property owner in the state of Indiana, you are 100% exempt from all property taxes associated when your home’s value increases due to your solar power system installation.
One of the best resources to find policies and incentives by state is the DSIRE website by NC State University: https://www.dsireusa.org/
In our experience, most of our customers can find the best rates for a solar loan through their existing bank or financial institution.
Home equity lines of credit can be the best solution, so talking to your bank or the financial institution that holds your mortgage is a great place to start.
PPAs & Solar Leases
Power Purchase Agreements (PPAs) and solar leases are other financing options that could be available.
If you have a PPA, a solar energy company will install a solar system on your property at no cost, then sell the electricity it produces back to you. It’s often at a cheaper rate than your local utility grid.
Solar leases are fairly straightforward and function like other lease agreements. As a homeowner, you pay either a part of the installation cost or none of it, then pay for the system in smaller installments over a number of years.
Keep in mind that if you go the route of a PPA or solar lease, you won’t qualify for federal or state tax exemptions.
However, if you’re a homeowner who has the ability to purchase solar panels outright, the return on investment will be much greater by buying instead of leasing or entering a PPA.
It’s also important to be aware that when a solar system is leased or under a PPA, it may be difficult to sell your home prior to paying off the solar energy system.
Energy Company Buyback
If you live in an area of Indiana serviced by NIPSCO, you could qualify for their Feed-In Tariff Program. Availability is limited, but renewable energy generators can sell power back to NIPSCO.
For more information, visit their website.
Indiana’s average cost of a solar panel installation is somewhere between $13,000 – $18,000.
If you live in an area of the state with high energy rates and can afford the initial investment, or have it financed, it’s definitely worth going solar this year.
Advanced Solar Is Here To Help
Have questions about how switching to solar energy works and if it’s the best choice for you? We’re here to answer your questions and help you find the best solution!
This article was originally published in January 2022 and has been updated to include the latest information.