Should I invest in solar energy?

Are solar panels a good investment in 2020?

Everyday, more people think about producing their own renewable energy. Others hesitate and think to themselves on whether it is worth it or not. You may have asked yourself "should I wait a few years for solar system costs to go down? Will I get a better panel for the same cost?”

In order to encourage people to move towards renewable energy, the federal government has created a financial program as a form of an investment tax credit (ITC), which allows the deduction of 26% of renewable energy installation costs from federal taxes. The tax credit only applies if you are the owner where the installation takes place, and it can also be applied on a second site with no maximum on its value(1).

For example, if your installation costs $25,000 you will be able to claim a $6,500 credit from your federal taxes, if this amount exceeds your tax liability, the excess can be transferred to the next year.

If you wonder about installing solar panels in 2020, hesitate no more! By investing before the end of 2020, you can benefit with a 26% tax credit. For 2021, the percentage will decreased to 22% and in 2022 it will disappear for residential and will only be 10% for commercial.

***In fact, by lookin at the same investment of $25,000, by the year of 2021 your tax credit will decrease to $5,500 which means a loss of $1000, and in two years the credit will be at 0$ meaning a loss of $6,500 compared to year 2020.

The installation process can take a few months and has to be completed and commissioned before 12/31/2020 if you want to be eligible to the 26% federal tax credit.

Still hesitating? You should also know that if you have a $6,500 tax credit, and you only have $4,000 in personal income taxes you can rollover the remaining $2,500 to next year income taxes. You have two consecutive years to claim your tax credit as long as the federal government has the program in place. As previously mentioned the inventive for residential will stop at the end of December of 2021.

If you think that the upgrade of solar panels will increase so fast that they will be out-of-date by the time they are installed, you should know that the estimation of energy production for year 2021 is 321 Watts per 60-cell panel compared to 310 Watts for the year 2020 that is 3.5% more efficient in a year’s time.

Regarding the prices, the 2020 panels’ cost is 42% of 2013’s and by 2021 they will be 41% (2), that means they will be 2.4% less the cost. While looking at these interesting comparisons and numbers and sitting on this opportunity for one or two more years, not only will the federal tax credit be lower, you would also be losing one or two years in energy bills instead of investing in your own solar system.

Producing renewable energy will also protect you against a possible increase of electricity cost, since you will be selling the excess of energy you will produce, and will also increase the value of your home. Definitely, 2020 is a good year to invest in renewable energy.

(1)https://www.energy.gov/savings/residential-renewable-energy-tax-credit (2)https://www.reuters.com/article/us-usa-solar-subsidy-focus/expiring-u-s-solar-subsidy-spurs-rush-for-panels-idUSKCN1UE0CO