Are Solar Panels Still Worth It?

Key Takeaways   

• Incentives and credits for installing solar panels on your home expire at the end of 2025. Just don’t rush to beat the deadline before you have considered the factors in this post below. 

• If you support renewable energy and plan to stay in your home for the long term, installing solar panels can be a rewarding investment.  

• But if you expect to move within a few years or your roof is aging, it’s likely not worth rushing to install before the credits expire. 

With many of the generous energy efficiency tax credits set to expire at the end of this year, clients often ask whether it’s still worth rushing to install solar panels, geothermal heat pumps, insulated windows, and more. As with so many things in finance and in life, the answer is: it depends. 

The Case for Solar Panels 

Let’s start with solar panels, since they’re one of the most expensive purchases (and biggest potential credits) available under the Residential Clean Energy Tax Credit and Energy Efficient Home Improvement Tax Credit programs.  

At first glance, it makes sense to install solar panels if you’re planning to stay in your home for many more years. Not only will you start saving on electricity from Day One, but you can also claim a federal tax credit of 30% of the cost of the system (if installed before 12/31/25). For example, if a system costs $30,000 to install, you will earn a $9,000 tax credit, bringing your net cost of the system to $21,000. And unlike many other tax changes and provisions, there’s no income limit preventing you from qualifying for the solar energy tax credit. Even better, you can carry the tax credit forward to next year if you don’t utilize it all this year. 

For example, if your current annual electric bill is about $2,500 annually before installing solar panels, your breakeven cost would be about 8.4 years with the $9,000 credit ($21,000 ÷ $2,500 per year). Without the tax credit, however, your breakeven rises to about 12 years ($30,000 ÷ $2,500 per year). So, your breakeven for installing solar panels starting in 2026 will take about 3.5 years longer. If you’re curious, solar panels have a lifespan of 25 to 30 years.   

When Solar May Not Make Sense 

If you’re planning to move within eight years, installing solar panels generally doesn’t make sense. Even if planning to stay put for 12 to 15 years, installing solar panels doesn’t make sense for many people due to the opportunity cost of not being able to invest the $21,000 to $30,000 elsewhere. For instance, that money could double on average every 7.5 years if invested in a properly diversified equity portfolio. So even with the great savings on your energy bill, that forgone loss of investment gains pushes your breakeven cost closer to 12 to 15 years.  

Another important consideration that many homeowners overlook is the age of their roof. If your roof is nearing the end of its useful life, you don’t want to install solar panels above. Otherwise, when it comes time to replace the roof, you’ll have to hire a contractor to remove all the solar panels and then reinstall them once the new roof is on. That ends up being very expensive.  

Financing Considerations 

Because the upfront cost of solar panels can be significant, clients sometimes ask us if it makes sense to finance the purchase over many years rather than paying for it all up front. In most cases, the answer is no. Interest rates are still pretty high. Even if they come down a bit as the Fed continues lowering rates, you’ll essentially be paying the same in interest -- if not more -- than you would have been paying for electricity.   

The Tax Credit and Carryforward Rules  

For homeowners installing solar panels, there is no “start of construction” clause like there is for commercial systems. That means your solar system must be fully installed before the end of 2025 to claim the 30% credit. Also, if you don’t have $30,000 in cash sitting around, you may have to liquidate some investments and pay tax on those gains, which is another consideration in total cost.  

As far as the carryforward of unused tax credits I mentioned earlier, as long as your system is put in place before Dec 31, 2025, you can carry forward any unused tax credit to next year. Further, the credits can also apply to vacation homes as long as the vacation home is not used as a rental. 

The state incentives in New Jersey include a tax exemption on solar equipment, a property tax exemption for the portion of increased home value attributed to solar panels, plus SREC performance payments paid over 15 years, and bill credits for extra solar power you send back to the grid. 

SUSI (Successor Solar Incentive) is the New Jersey solar incentive program that provides financial credits for solar energy generation by offering fixed-rate, 15-year payments based on a system's energy production, rather than on variable market-based Solar Renewable Energy Certificates (SRECs).  Homeowners receive a fixed monthly or quarterly payment for every unit of energy their system produces, with recent rates for Administratively Determined Incentive (ADI) participants set at $85 per SREC. This program can be combined with the federal Residential Clean Energy Credit, which allows for a 30% federal tax credit on eligible solar installation costs, to further reduce the overall cost of a solar system.   

Practical Considerations 

Keep in mind that you’ll likely need approval from your township or municipality before installing solar panels. Installation typically takes several days, depending on the size and complexity of your home. And since reliable contractors are currently in high demand, it’s best not to wait until the last minute if you’re trying to meet the year-end deadline. 

Final Thoughts 

If you support renewable energy and plan to stay in your home for the long term, installing solar panels can be a rewarding investment. But if you expect to move within a few years or your roof is aging, it’s likely not worth rushing to install before the credits expire. 

Everyone’s situation is unique. We’re happy to help you run the numbers—estimating the true cost of electricity, the total cost of a solar system, and your individualized breakeven analysis to see if going solar makes sense for you. 

Conclusion 

If you’re still wondering if it makes sense to beat the year-end deadline for solar panels and other energy efficiency incentives, reach out any time. I’m happy to discuss. 

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DAN SATZ MS, CFP® is a Partner at Novi Wealth