Real Estate Tips: All You Need to Know About Solar Panels
/I recently did a sale where my clients (the buyer’s) were purchasing a home with existing leased solar panels. We came across a lot of questions such as, should they keep them? Should they buy them or keep leasing? Does this add or take away value from my home? Then in perfect timing (as always) I came across an article from Realtor’s* magazine that talked through all this in more. Thus, I decided to draft up the below referencing a lot of the information they shared to make sure you’re informed when making the decision, to solar or not solar? That is the question :)
Photo by Vivint Solar on Unsplash
The Cost Savings
Currently, the U.S. has a whopping $2 million solar PV (photovoltaic) residential and commercial installations, up from $1 million a mere three years ago, according to the Solar Energy Industries Association. The total is anticipated to keep increasing and is expected to reach $3 million by 2021.
The primary benefits that are obvious around solar is one, paying less for electricity and two, locking in the price for electricity for the next 20 or 30 years. Generally, once the panels are installed, a homeowner will pay a small monthly charge to be connected to the utility. This means they can divide the cost of the system by the monthly cost they have been paying for electricity for find out how long it will take to break even; after that, the savings continue to grow indefinitely.
Example: If your electric bill is $215, and $15 of that is the connection to the utility, you can install a PV system costing $20,000. This will save you $200 per month and pay off the cost of the system in just over eight years.
$20,000 (cost of system)/$200 (electric bill minus connection cost to utility) = $100
100/12 (months per year) = 8.3 years to pay off system
Another bonus that solar can offer is battery storage. For areas where power outages are common, you can store electricity for times when the grid is down. Battery storage is growing in California, the top state for solar installations, where concern over wildfires has cause utilities to be shut off.
Survey Findings
In a 2019 sustainability survey by the National Association of REALTORS(R) in which 69% of REALTORS(R) said energy efficiency promotion in listings was very or somewhat valuable, and 77% said a home’s utility bills and operation costs were either very or somewhat important to clients.
Talking Taxes
Homeowner’s who purchase or install solar PV systems this year can look forward to filing their returns because they can claim a 26% federal tax credit, on top of whatever state incentives they qualify for, for the full cost of their PV systems.
The federal Residential Energy Efficient Property Credit (also known as Investment Tax Credit) covers not only the cost of solar panels, but also the installation of the system, so the homeowners who spent $20,000 on a PV system for their home in 2020 can deduct $5,200 ($20,000 * 26%) from their 2020 federal tax bill. If the credit exceeds what they owe, they can roll the remaining credit over to 2021.
“IRS guidance is unequivocal that only solar roofing (tiles or shingles that generate electricity), not standard roofing, qualifies for the credit.”
One caution: Some solar companies try to sweeten the incentive by claiming that homeowners who have a new roof installed as part of this process can claim a tax credit for that cost as well. IRS guidance is unequivocal that only solar roofing (tiles or shingles that generate electricity), not standard roofing, qualifies for the credit. Moreover, a solar installation must be owned, not leased to qualify for the tax incentives.
*Referencing “The Sun Is Shining on Solar” by Sharon Bloyd-Peshkin in the April-May 2020 issue of Realtor magazine.
