Solar panels convert sunlight into electrical energy. Last year, residential installations topped 702,000, more than double the total for 2018, according to data from the Solar Energy Industries Association. The group estimates that 15 percent of homes in the United States will have solar panel systems by 2030.
The solar tax credit reduces your tax bill dollar for dollar; if you don’t owe federal tax, you won’t get any of the credit as a refund. You can, however, carry over any unused credit to future tax years, said April Walker, lead manager of tax practice and ethics at the American Institute of Certified Public Accountants.
The typical residential solar system size is nine kilowatts, said Vikram Aggarwal, chief executive of EnergySage, an online marketplace that connects consumers with solar companies. Based on pricing reported by the National Renewable Energy Laboratory, the bill for such a system would be about $27,000 installed, and a credit would help you recoup $8,100.
Larger systems can be much more expensive, but there’s no cap on the credit. On average, lower electric bills, along with tax credits and incentives, help homeowners recoup the cost of the system in about eight years, Mr. Aggarwal said.
Your actual savings depend on factors like how much electricity you use, the number of panels installed, the orientation of your home (south-facing roofs get the most sun in the Northern Hemisphere) and how shady your lot is, said Josh Kossman, senior director of sales with SunPower, a national solar installer. SunPower has an online calculator that can estimate your potential savings.
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