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One (not very) weird trick to save $1,000+ on solar panels

Avatar for Ben Zientara
Published on 06/14/2019 in
Updated 07/17/2019
A rabbit made of solar panels coming out of a magician's hat

In short: The federal solar tax credit will decrease for solar panels installed after December 31st. The average homeowner would miss out on $1,000 (on average) if they wait until after the new year to install solar.

To see whether you’re eligible for the tax credit and how much you might save, read below.

The solar investment tax credit (ITC) was dreamed up back in 2005—a time when solar panels were very, very expensive. It was designed to provide 30% of the cost to install solar (up to $2,000 for homes) back as a credit on a homeowner’s taxes the year after installation. It was a modest success.

Then in 2008, at the height of the financial crisis, the tax credit was re-authorized and the $2,000 limit was dropped. That change resulted in an explosion of solar panel installation around the country that has not stopped since. It’s one of the reasons the solar industry has grown more than 8600% since 2006.

As part of another successful re-authorization in 2015, the ITC will get smaller beginning on January 1st, 2020. The initial reduction will be from 30% to 26% of total installation costs, with a second step down to 22% as of 1/1/2021. After 2021, the tax credit for residential installations disappears.

First things first: the solar tax credit can only save you money if you’re eligible

Wait. Hol’ up! Listen, this tax credit is not for everyone. It’s for homeowners with income. But not like, Rockefeller levels of income. According to calculations from SmartAsset.com, a typical family of four earning around $90,000 can expect to owe enough taxes to claim the average solar tax credit in one year.

Folks who earn less can claim the credit. If you have taxes taken out of your paycheck and typically get a small refund every year, you can probably expect to use the solar tax credit to get a bigger refund. Depending on your income, it could be a much bigger refund.

The catch is the ITC is not “fully refundable” meaning it can’t get you back money you wouldn’t have otherwise paid in. But even if you can’t take the full credit in the first year after installation, you can continue to use it to reduce your tax liability until the whole thing is used.

How installing solar panels this year will get you more back in your tax credit

OK, let’s get to the meat. To know how much you can save with the ITC, you have to know how much you’ll be paying for solar panels. We’ll cover the average cost below and then work out the average tax credit people claim. From there, it’s easy to see what you might be missing out on if you wait a year to install solar and lose that 4% chunk of the credit.

Stepping down the solar tax credit

Again, these are just averages, and there are a lot of variables that determine the price you’ll pay for solar. To find out how much you’ll save with the solar tax credit, you need to know a few things:

  1. System size in kilowatts
  2. How much you’ll pay, after rebates (the tax credit will be 30% of this)
  3. How much of the tax credit you can claim in the first year

Every home and homeowner is different, so if you’re ready to see your savings, get solar quotes from multiple installers today. If you want to learn more about averages, read on.

The average cost of solar panels

We run numbers for the average cost of solar panels in all 50 states, based on data from the National Renewable Energy Laboratory (NREL), state installation databases, EnergySage, and our installer partners.

On top of that, we find out how many solar panels are needed to power a house in all 50 states, based on electricity usage data from the U.S. Energy Information Administration and insolation data from

All this is a long, complicated way of saying we’ve done the math, and the average U.S. home needs an 8-kW solar panel system that costs about $26,000 before incentives.

The average solar tax credit (and the cost of waiting)

At $26,000 for a solar installation, the average solar tax credit at the full 30% is $7,800. If you wait until next year to install, the tax credit will be 26%, or $6,760. That means the average cost of waiting until 2020 to install solar is just over $1,000.

Of course, what really matters is not what the average cost of solar is, or what the average person might save from the federal solar tax credit. What matters is what this all means to you. And for that, you need an actual solar estimate.

Getting solar estimates for your home

To start your solar journey, we think it’s best to get quotes from trusted local solar installation companies. If you’d like to do some calculations first, Solar-Estimate.org has a great online solar panel calculator

Make sure any prospective installer can give you a total price and tax credit estimate. Also make sure they can install your solar panels before December 31st (it takes about 53 days to go from contract signing to turning on your system).

Now go out there and find an installer. Start by getting multiple quotes from installers we trust. Read reviews for solar installers and choose the most professional one. Pick an installer you think will be around for the long term.

And get ready to be a solar owner!

Last modified: July 17, 2019

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