As the price per kWh (kilowatt-hour) increases in relation to the price of fuels, what does one do to keep their utility costs either more stable, reduced drastically or to zero? The one method that thousands of homeowners have opted in to do is using solar panels. This has assisted them in considerably reducing their electric bills by capturing the sun’s “free energy” rays and converting them to electricity. This will make their electric meters go in reverse and potentially store electric credits for future use, especially when their CAC/ACs are being in use during the summer months.
There are various types of solar panels from the standard rectangular types to Elon Musk’s Solar City’s small square-styled panels. One must due their due diligence to determine which style will best fit and function on their specific roof. What are the total costs? Is the home situated in the most advantageous location with adequate sunlight to produce the necessary and desired results to make the investment? If not, can trees be pruned or cut down with the approval of the local municipality to enable the installation and investment to increase the value of the home? Should one lease or purchase? Are there any state and federal tax credits available to homeowners?
A study done by Zillow and Berkeley National Laboratory revealed that solar panels increase the value of a home by $5,911 for each kilowatt of solar panels installed and another estimated an increase of 4.1% of the home’s value. New York City had one of the highest returns at 5.4%. Zillow notes that selling prices are 1.4% more than those homes without them. This is based on owning the system and not leasing it which generally is not the most beneficial path to take.
Geographic location (the higher the local electric costs the greater the savings), local solar installation prices (new systems installed might make the value a bit less than a home with a system already installed), system output and system age (older systems will have depreciated the most and whatever repairs and replacement parts will cost the new buyer, this will not add as much increase in value as a new system) will all contribute to the actual greater or lesser increase in the value of your home.
Federal and state tax credits are extremely lucrative for the homeowner who installs a solar panel system. The Federal ITC (investment tax credit) is currently 26% (was 30% up until 2020 and will be reduced to 22% in 2023 and will end in 2024 unless Congress extends the benefit) of the total cost of materials and labor until December 2022.
ITC credits have been available since 2006 when Congress initially adapted it. The solar industry has grown by 10,000% and solar capacity has increased by 42% in the last decade. In 2021, solar energy accounted for 46% of all new electricity-generating capacity added in the U.S. State tax credits are currently 25% of the total cost of materials and labor, with a maximum credit of $5,000 based on a total cost of a $20,000 installation.
Form IT-255 for the state and IRS Form 5695 for the federal must be filed. These tax credits are a direct dollar-per-dollar reduction on your actual income taxes that would be owed.
There are specific terms that must be met to qualify for all the state and federal tax credits:
1.) One must own the system and not lease it
2.) Primary, secondary or off-site community project must be located in the U.S.
3.) Date of installation must have been from Jan. 1, 2006-Dec. 31, 2023.
4.) Tax credit can only be claimed on the original or new system and not the repurposing or reuse of an existing system.
There is no sales tax on a new system. For battery storage systems, the owner will receive $250 per kWh. As an example, for installing a Tesla Powerwall Battery with a capacity of 13.5 kWh, a rebate of $3,375 is provided in addition to the federal and state ITCs.
Commercially installed solar panels or energy cells also are a very smart investment for most commercial properties. Not only do you receive ITCs but you can sell the more economically produced electricity to your tenants at a lower cost than what they are paying now. Lastly, the payback period can be as little as three years and as the commercial property owner you can earn additional money on their electricity, but at the same time save your tenant’s money, a win-win situation.
Installing a system, providing that your location is more than adequate for the necessary savings to minimize or potentially eliminate your electric bill, can be a huge benefit for adding value to your current or future home. Moreover, the tax benefits will go a long way in reducing your taxable income during the year of installation (speak with your CPA for more details). Today’s buyers are much more environmentally conscious, would prefer a smaller carbon footprint if possible, and put saving money high on their list. When you are ready to consider selling, a solar system will attract more purchasers and the time it takes to sell will be faster.
So do your homework and determine the added value and benefit to your home by installing solar panels and live almost or completely free and send your utility company walking.
Credit for some information via Nancy Collela (516) 650-9378
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Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has 40 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S) as well as the new “Green Industry” Certification for eco-friendly construction and upgrades. He can be reached by cell: (516) 647-4289 or by email: [email protected] Just email or snail mail (regular mail) him.
