Solar power is a rising star in the world of energy. The green tech is a renewable resource with well-developed tools for harvesting sun-infused energy. It also has a clear path to utility on both corporate and individual levels.
The cost is the main issue for many homeowners who want to go solar. For those operating on a tighter budget, it’s difficult to justify (let alone afford) the hefty price tag that solar systems are known to come with.
If you’re considering making the shift to solar, but you aren’t sure if you can handle the costs involved, you have options. Quite a few, in fact. Here are several of the best ways you can make the transition to solar power on a budget.
1. Lease the equipment
Solar power is expensive. In July of 2023, the Center for Sustainable Energy reported that the average cost of a new system is down from past highs. However, it still hovers in the $10,000 to $15,000 range. Others still put the number much higher.
Either way, this puts a new system and its installation on the same level as buying a used car. It’s a serious investment, and the high barrier to entry, in particular, is what drives many people away.
Fortunately, one way to bypass the upfront costs is to work with a solar lease contractor. While there are many other options on this list, this is by far the simplest and fastest way to tap into solar power on a budget.
Posigen is a good example of this method in action. The veteran energy brand has been leasing solar power systems since the wake of Hurricane Katrina. The programs consist of an initial energy audit to assess the home, see where the homeowner can make improvements, and decide if it’s worth installing a system in the first place.
If a residence qualifies, the company installs a solar system. From there, the homeowner pays a monthly fee to offset initial set-up costs and ongoing maintenance. The result of a lease program is a win-win where homeowners don’t have to worry about installation, efficiency, or upkeep, and they are able to split the savings with the contractor.
Posigen has numerous testimonials on its website from homeowners who were able to access solar power without huge upfront costs. In other words, the leasing option works well and has a good track record. While the next option on this list focuses on paying for installation yourself, a lease avoids exorbitant setup expenses and offers an effective and affordable path of least resistance. It is certainly worth a cost-benefit analysis.
2. Take out a solar loan and start saving (aggressively)
If you’re interested in tapping into the full range of long-term cost-efficient savings that a solar system offers, then you need to tackle all of the costs, too. In that case, you need to come up with the installation costs on your own.
The good news here is that you have multiple options available. One of these is to find a solar loan. Energy Sage has gathered many of the top lenders offering loans specifically for solar equipment installations.
There is also the unique option for new homeowners to add the expense of a solar power upgrade right into their existing mortgage. According to Energy.gov’s Office of Energy Efficiency & Renewable Energy, a new homeowner can access federal loans through Fannie Mae and the Federal Housing Administration. When this happens, the loan is integrated into the mortgage payments, spreading it out over a much longer period of time.
There are also state government-backed options. NY-Sun, for instance, works with solar contractors in NY to reduce costs for the transition to solar. The program offers a variety of loan options depending on each person’s financial status.
While a loan makes solar power possible, it isn’t preferable. On the contrary, integrating additional interest costs can offset much of the savings involved in going solar.
The best bet for homeowners is to rework their budgets and start saving aggressively before committing to a loan. Even if you can’t save up $10,000 to pay for everything at once (that’s why you’re reading this, right?), it’s still worth putting in the effort to build up a chunk of cash ahead of time.
This can help offset your initial costs as much as possible. If you can set extra money aside on a monthly basis, too, you can put extra payments toward your loan principal, undercutting the interest in the process.
3. Tap into federal solar tax incentives
Federal tax breaks have been available for years to those who use solar energy. To make the most of this for your solar power budget, you need to keep up with the current tax incentives available.
For instance, the IRS offered a 26% tax credit on systems that were installed during the years 2020 to 2022. The tax dropped to 22% for systems put in during the year 2023 and phased out in 2024.
However, in 2023, the government renewed and expanded the energy credit. It turned it into a 30% return on the cost of qualified equipment installed between 2022 and 2023, phasing down to 26% and so on after that.
So, while the tax credit seemed to be declining, claiming a 2023 credit ultimately went up. It’s also worth noting that this is a nonrefundable credit at the moment, so it only reduces tax bills and can’t go beyond the amount you owe.
The point here is that the Federal government continues to support the adoption of solar power, but that support varies over time. It’s important to keep up with the latest data to ensure you’re making the most of available budget-trimming incentives in that department.
4. Look for other tax savings, too
When the goal is to tackle something as big as the transition to solar power on a budget, it’s important to maximize savings wherever possible. With that in mind, it’s important to look beyond the basic, bigger federal tax incentives. You also want to scour state and local government documentation for any smaller add-on tax breaks you can find.
Those going solar in the sunny state of Arizona, for example, can cash in on multiple tax-related savings options. The first is to combine a 25% state tax credit up to $1,000 along with the Federal 30% credit. Solar equipment is also exempt from sales tax.
There are also local incentives scattered across the state. Organizations like the Valley of the Sun Clean Cities Coalition and the Salt River Project work to provide unique financial advantages that complement larger tax breaks. Net metering is also an option in many places (more on that below).
New York state residents also have access to two separate solar tax options. The first is also a 25% state tax credit. Homeowners can combine this with the federal 30% credit when installing solar panels on their primary residences.
Certain parts of the state also have access to the NY-Sun Initiative Megawatt Block Program. This offers cash incentives that are based on a per-watt analysis of solar capacity.
The point here is that the state and local tax incentives are out there. You just have to find the ones that are applicable to your situation.
5. Make the most of your system once it’s installed
Once you have a solar system installed, you want to continue to steer into the cost-cutting and savings. One of the best ways to do this is through net metering.
Net metering is a process that many states have in place where homeowners generating their own solar power can sell electricity back into the power grid. This doesn’t just reduce costs. It can generate income.
Remember that your home value will likely rise once you have solar power, too. While this isn’t an immediate cash bonus, it does improve your overall net worth.
As an additional note, having solar may increase the value of your home’s taxes, too. If that happens, look into tax breaks again. Some states have ways to offset this additional cost. Arizona, for instance, has an energy equipment property tax exemption in place for this very reason.
Finding the silver lining when paying for solar power
Solar power may be expensive, but it is well worth the investment. An effective solar system can reduce your energy bills, improve your property value, and help you live in a more sustainable manner.
While it may be effective, paying for a solar system can be challenging. It may be hard, but it’s not impossible.
There are multiple ways to reduce costs, from leases to loans, extra payments, and tax incentives. Once you have your system, you can also benefit from greater property value and things like net metering.
Use the above tools to create a financial plan that works for you. That way, you can successfully transition to solar power on a budget — and improve both your finances and the planet in the process.
Featured Image Credit: Photo by Kindel Media; Pexels; Thank you.
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