Recently, the popularity of solar energy has skyrocketed. More and more people are switching to this sustainable energy source to combat climate change and reduce their carbon footprint. However, while some go solar to protect the environment, many others install panels in their homes for another reason — to save money.
A lesser-known advantage of going solar is how cost-effective it is. If you install a system on your property, you generate your own energy. Therefore, you can save quite a bit on monthly energy bills. Not only that but having panels can grant you a tax exemption in 36 US states. In short, it’s very profitable, especially long term.
However, what if you took out a loan to purchase your panels? Can you save on monthly solar bills while financing the system? Here is everything you should know about your solar system, and how it can save you money even if you still owe money on it.
How Solar Panels Save Money
Solar panels may be good for the environment, but they’re even better for your wallet. Many people who hesitate to switch to solar energy do so once they realize how cost-effective the panels are.
For starters, installing panels helps you save on monthly energy bills. The average US family needs around 10,659 kilowatts of electricity to power their family home on an annual basis. When you multiply that number by the national average electricity rate, you get around $1,500 a year on electricity bills.
What’s more, the annual electricity rate has steadily been increasing by 1.3% each year. Therefore, while getting a set of panels may seem expensive, in the long run, they end up costing you less than your current electric bill. Next to power bills, solar panels also help reduce your taxes.
To incentivize the general public to make the switch to solar, the government is now offering tax credits to any property with a solar system. Federal tax credits, also known as investment tax credits or ITC for short, are a dollar-for-dollar reduction on a tax amount you owe the government. In terms of solar panels, it’s the tax percentage you claim on the cost of a solar photovoltaic system.
So if you choose to buy your own solar panels, the government will give you a 26% tax credit to cover the cost of the system. There is no limit to the amount you can claim, and the tax credit is valid until 2024. Consequently, going solar in the next year or so is guaranteed to pay off very quickly.
Can You Save on Monthly Solar Bill While Financing
The benefits of solar panels are fantastic if you’re the sole owner of your system. However, what if you took out a solar loan to finance your system? Do you still get to reap the same benefits? The answer is both yes and no.
When it comes to saving money, you absolutely still get to save the same amount on energy bills. Solar loans work much in the same way as car loans. After getting your system, you have to make monthly payments on it, plus interest until you’ve covered the cost in full.
However, since using solar energy reduces your monthly energy bills, you will be able to automatically offset the cost. Plus, unlike energy bills, your monthly solar payments aren’t going to go up in the future.
So, for example, if you swap your $100 electric bill for an $82 solar loan, you’ll save $112 in one year simply by switching. Depending on your location and the amount of electricity you use, that could end up saving you anywhere between $10,000 to a whopping $50,000 on electricity over a 20-year period.
But, keep in mind that while solar panels will help you save on electricity, they won’t help you save up on taxes. Certain states only grant tax credits to those who fully own their solar system. Therefore to start reaping some tax benefits, you’ll have to first pay off your system in full.
Solar energy is not just an eco-friendly investment but a financially beneficial one too. A solar system can help you save on your energy bills and reduce your taxes, all while giving you access to the cleanest energy source we currently have.
However, what if you took out a solar loan on your system? Will you still be able to save money even if you have to pay a monthly fee? The answer is a resounding yes! The amount you save on electrical bills is enough to offset the cost of the monthly payment. Therefore, a set of panels is a purchase you won’t regret.