A generous federal tax credit makes solar panels more attractive to the average homeowner, especially if electric bill are sky high.So our topic today is about solar panels.
Incentives lower cost of solar
Solar-panel systems are classified by watts
of capacity. Systems under 10 kilowatts—1 kilowatt equals 1,000 watts—are
primarily for residential use. The average size of a residential solar-panel
system is 5.2 kilowatts. In 2008, the installed cost of a system that size was
$44,200, according to a report
from the U.S. Department of Energy’s Lawrence Berkeley National Laboratory, or
$8.50 per watt.
However, once local, state, and federal tax incentives were
factored in, the installed cost of a 5.2 kilowatt system in 2008 fell to
$29,120, or $5.90 per watt. Costs vary by state, but in general systems are
cheaper in places like Arizona and California, where electricity is expensive,
sunshine is plentiful, and solar has gained wider acceptance. Search the Database of State Incentives for Renewables &
Efficiency for state and local incentives.
IRS expands federal tax credit
An expansion of the federal
energy-efficiency tax credit should slash the cost of solar even more. Systems
installed between Jan. 1, 2009, and Dec. 31, 2016, are eligible for a tax
credit equal to 30% of the cost. To qualify, the system must supply electricity
to a residence and meet local building codes. In 2008, the federal tax credit
was capped at $2,000.
That means a 5.2 kilowatt system installed
between 2009 and 2016 that costs $44,200 would, in theory, earn a federal tax
credit of $13,260 vs. just $2,000 before 2009. That’s an extra $11,260 in
savings, in addition to local and state incentives. (This is a simplified
example. Consult a tax adviser.)
The tax break can be applied to a solar-panel
system installed at your primary residence or second home. Take the credit for
the tax year the system becomes operational. Use IRS Form 5695. The credit
can’t exceed the total amount owed in federal taxes for that year, but it can
carry over to future years. Save receipts and certification statements.
Reduce your electric bills
A typical residential system should lower
your electric bills by 25% to 50%, says Monique Hanis, a spokeswoman for the Solar Energy Industries Association. The
average household pays about $100 a month for electricity, according to the
Energy Department, so a solar-panel system should save you between $300 and
$600 a year.
The payback period will vary greatly
depending on where you live, the size of your system and its post-incentives
price tag, and future swings in electricity costs and consumption rates. Figure
it’ll take anywhere from six to 18 years, says Hanis. Solar panels have a life
span of 20 to 30 years.
Producing excess energy can accelerate how
quickly you’ll recoup your investment. A battery can store extra electricity
for later use, or you can sell surplus energy back to the utility company in a
practice called net metering. Many cities have net metering in place, but check
with your utility company before you install solar panels.
Breaking down the expenses
Fifty-six percent of the cost of a
residential system goes toward the solar modules themselves, the Berkeley Lab
report found. The inverter, a device that converts thermal energy into
household electrical current, accounts for 9% of the total bill. The remainder,
35%, goes toward things like labor and profit for the installer. A typical
residential installation takes a day or two.
Before you install solar panels,
be sure your roof is in good shape. If it isn’t, you might need to shell out
$5,000 or more on repairs to make your roof structurally sound. This expense
doesn’t count toward the federal tax credit. You might also need to cut down
trees that block direct sunlight.
Energy Star, the federal program that promotes
energy efficiency, doesn’t rate solar panels. Look for an installation company
that offers a warranty on the system for at least 20 years. If feasible go with
an installer that’s familiar with the permit process of your local zoning
board. According to Hanis, getting a permit can be one of the most challenging
aspects of a solar project.
Make your home efficient first
Take fundamental steps to improve your
home’s energy efficiency before resorting to solar panels. Conduct your own energy audit,
seal windows and doors, and replace old appliances. Simply adding insulation
to an attic can lower heating and cooling bills by 10% to 50%. A tube of caulk
and a few rolls of fiberglass insulation cost a whole lot less than solar
panels.
This article provides general
information about tax laws and consequences, but is not intended to be relied
upon by readers as tax or legal advice applicable to particular transactions or
circumstances. Readers should consult a tax professional for such advice, and
are reminded that tax laws may vary by jurisdiction.
resource from: http://www.houselogic.com/home-advice/tax-credits/tax-credits-installing-solar-panels/
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