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Do Solar Panels Increase Home Value?

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Solar panels come with numerous benefits, including increased home value. Our guide takes a closer look at how much installing solar panels can boost your home’s market value, factors that influence your final listing price, and the effects on your property tax. Plus, we’ll share how you can score additional savings with solar tax credits and incentives.

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How Can Solar Panels Increase My Home’s Value?

Home improvement projects such as new roofing or plumbing can increase your property value, and solar panel installation is no different. The U.S. Department of Energy’s Lawrence Berkeley National Laboratory (Berkeley Lab) conducted the largest-ever study of solar homes between 2002 and 2013 in eight states to determine how much adding solar panels to your home impacts home buyers. The study found that buyers in six of those states were willing to pay $15,000 more for homes with solar panels than comparable homes without them.

Additional studies have discovered that the added value from solar panels directly correlates to your long-term energy savings. The National Renewable Energy Laboratory (NREL) shared details from a study published in The Appraisal Journal, which is a quarterly academic publication for the Appraisal Institute, the largest professional association of real estate appraisers in the United States. This 2008 study concluded that home value increases by $20 for every $1 reduction in yearly utility bills. So a solar energy system that saves a homeowner $500 per year can increase home value by $10,000.

This added value allows sellers and real estate agents to increase the asking price for a home. Buyers benefit from an energy-efficient home, and sellers can profit from an increased resale value.

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What Factors Influence the Property Value of a Solar Home?

Installing solar panels won’t always result in a higher home value. Several external factors, including location, local electricity rates, and your solar panel system’s value, can affect your bottom line. Here’s a closer look at the variables that can increase or decrease your property value. 

Location

Not every state has the defined laws, solar installers, or the local support needed to make solar panels profitable for a homeowner.  Some areas actively encourage homeowners to convert to solar power, making a solar energy system more valuable in those markets. The Solar Energy Industries Association (SEIA) named the following states as top solar markets based on their solar energy capacity (in order):

These locations support homeowners in their transition to solar energy with laws and regulations that benefit solar customers. They may also offer additional solar incentives and credits that help lower your solar panel installation cost, ultimately maximizing your return on investment (ROI). 

Electricity Rates

Areas with high electricity rates benefit the most from solar panel installation. This is because solar power allows you to create your own energy more affordably, rather than relying on utility companies with expensive electricity rates. In turn, you’ll spend less on monthly energy bills.

Areas with high electricity rates include California, Colorado, Florida, New Jersey, and New York. This means that homeowners in San Francisco, Orlando, or Florida can sell their solar-powered homes at a higher price than homeowners in Chicago because residents in these cities will save more by using solar power.

Installing a solar battery can be another selling point. These batteries store excess energy your solar panels generate throughout the day to use at night or during power outages. You can also use the energy when electricity rates are highest to save more money. 

Solar System Age

Newer solar systems are more valuable than old ones because they’ll provide more years of future use and savings to a homebuyer. An older system could also be close to or near the end of its warranty coverage, meaning the buyer could be stuck paying for necessary upgrades, replacement parts, or a completely new system.

Solar systems usually last 25–35 years, possibly 40 years if they’re in optimal condition. We recommending staying up-to-date on maintenance to ensure your system remains valuable, as well as getting it assessed and serviced before a home sale.

If you’re considering buying a home with a solar system, be sure to get the full details on the system’s age and any repairs or upgrades that have taken place since its original installation. If you plan on selling a home with a solar system, it’s your responsibility to maintain the panels and the system before the sale. 

Solar Panel Ownership

Who legally owns your solar panel system significantly impacts your home value. If you bought your solar panels in full or have already paid off your loan, you can include them in your home sale. This is the most straightforward ownership transfer and the most high-profit option for the seller. 

The situation is more complicated for leased systems. Since you don’t legally own the system, the buyers must decide if and how they want to take over ownership. Leased solar systems can be transferred to the buyer with a buyout or transfer. 

With a buyout, you can choose to pay off the remainder of your solar lease, and the buyer has the option to start a new lease under their name. However, you’ll have to pay the remaining lease balance all at once, which can be hefty depending on your contract’s length and age.

The second option is to transfer the lease to a buyer willing to take it over. This is the most cost-effective option when selling a home with a leased system, as you won’t have to spend as much of your own money to complete the sale. However, the new buyer has to meet the qualifications for a lease, including a credit check.

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How Do Solar Panels Affect My Property Tax?

Because installing a solar panel system increases your home value, your property taxes will increase as well. However, many states have introduced laws that exclude solar equipment from property tax. These property tax exemption laws allow you to benefit from increased home value without paying more taxes.

There are 36 states with a property tax exemption and 25 states with sales tax exemptions for residential solar equipment. The exemption percentage varies significantly from state to state. For example, some states offer 100% exemption, while others may stipulate a limited number of years for your exemption. Take time to understand your state’s policy when considering going solar.


How Can I Save Money on a Solar System?

Installing a solar energy system requires a sizable initial investment. According to the National Renewable Energy Lab (NREL), solar panels cost an average of $3.16 per watt in 2022, which amounts to $18,960 for a standard 6-kilowatt system. The price can vary based on the type of solar panels you buy, system add-ons, additional services, and local pricing. However, you can save a significant amount of money thanks to solar incentives, rebates, and tax credits. 

Solar Tax Credits, Incentives, and Rebates

If you own your system, you can take advantage of all federal and state tax credits available. The federal solar tax credit allows you to claim 30% of your total solar system costs on your federal taxes. It will remain at 30% until the end of 2032. The credit lowers to 26% in 2033 and will reduce to 22% in 2034.

State tax credits can vary depending on each state’s laws. Additional rebates and credits may also be available from your utility company or city government. You can check the Database of State Incentives for Renewables and Efficiency (DSIRE) for the latest information about solar incentives in your area. 

It’s important to note that only new solar customers can claim these incentives. The original owners can only claim these credits one time. If you buy a home with a preexisting system, you cannot apply for these credits. However, you may be able to participate in ongoing rebates and programs, such as a net metering.

Net Metering

Homeowners can also benefit from net metering programs, which allow you to accrue credits for selling the excess energy your solar system produces back to your utility company. Depending on the program, these credits can accumulate over the year and be paid off to the customer or applied to electric bills. The credits can also be used when customers need to pull power from the power grid on low sunlight days or during a blackout. Terms and credit rates vary by state and utility company.


Our Conclusion

Installing solar panels is a big investment, but it can significantly increase your home value in addition to providing long-term energy savings. How much value solar panels add to your home can vary by your location, system health, and state and local policies. But whether you want to make your home more valuable for yourself or potential buyers, a solar panel system upgrade could be worth it.

If you’re looking to install a new solar system in your home, use the tool below to begin your search for a top-rated solar installer in your area.

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FAQ About Solar Panels

What are the benefits of a house with solar panels?

A house with solar panels has numerous benefits. Solar energy is a clean power source, helping to make homeowners less dependent on costly fossil fuels and improve their carbon footprint. Solar energy is also much more affordable than traditional electricity, lowering your monthly energy bills and potentially saving you thousands over time.

What is the cheapest way to buy solar panels for your home?

The cheapest way to buy solar panels is to pay for your system outright. Though this requires a large initial sum of money, you avoid paying interest on a solar loan, which would increase your cost in the long run. Unlike leasing, buying your system up-front also qualifies you for the federal tax credit and state solar incentives and rebates that can cut down on costs.

Will selling a home with a leased solar panel system affect my home value?

Selling a home with a leased solar panel system likely won’t affect your home value. Though home buyers may see the solar panels as a plus, selling a home with leased panels is more complicated than selling one with an owned system. You’ll either need to pay off the remaining balance of your lease before the house sale or transfer it to the new owner. If you choose the latter, you’ll need to find a seller who meets the qualifications for the lease agreement. Any delays or issues with either option mean it will take longer to sell your home.

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