Jeff Caldwell – Branch Manager Overland Park, KS – (913) 317-1007
More often, homeowners are considering switching to whole-home solar power to take advantage of lower electric bills and the tax rebates and credits our counties and government provide. In fact, by 2025, the “Future Energy Jobs Act” and “Climate and Equitable Jobs Act” will require states to generate 25% of their energy from renewable sources. According to Forbes.com, this is projected to grow the solar market by more than 1,700% in Illinois alone.
If you live in Illinois, Missouri, or Kansas, going solar is a great option – especially since both climates offer the ability to get the recommended four to five hours of peak sunlight needed for solar power. St. Louis and Kansas City see more than 240 sunny days a year, making them ideal places for solar power. We’ll cover a few ways to save money when going solar and break down a few options to come up with the initial investment money.
Federal Tax Credits
Federal tax credits for home solar energy represent a significant incentive to promote the adoption of renewable energy sources and reduce the carbon footprint of residential properties. These credits are designed to financially support homeowners who invest in solar energy systems, making the transition to sustainable energy more accessible.
The Residential Clean Energy Credit equals 30% of the costs of new, qualified clean energy property for your home installed anytime from 2022 through 2032. ($1 credit = $1 less you owe in taxes the following year.) It’s important for homeowners to take advantage of these incentives for immediate financial benefits and contribute to the broader environmental goals of promoting clean and renewable energy sources. It’s always advisable to consult with tax professionals when looking at these types of credits, as they will have the most up-to-date information to help you maximize your benefits.
State Incentives
While you can use federal programs to claim tax credits for any solar project costs, some state programs are in place to help offset your costs as well.
Missouri Solar Power Incentives
In addition to the federal tax credit, the state of Missouri does offer a property tax exception. Basically, with this exemption, any increase in the value of your property due to the installation of solar power will not raise your property taxes.
Several power companies in the state also offer rebates in the form of net metering. Ameren, Columbia Water & Light, Evergy, and Liberty Utilities all offer net metering. Net metering is a billing arrangement that allows individuals with solar panels or other renewable energy systems to receive credits on their electricity bills for the excess energy they generate and feed back into the grid. The solar power incentives in Missouri will vary based on the utility company in your area.
Illinois Solar Power Incentives
Like Missouri, in Illinois, the increase in your home value will not be taxed due to investing in solar. While the state of Illinois does not offer a direct tax credit for solar panels, there are state-administered programs and rebates from power companies to help offset the cost.
Illinois Shines is a program that allows homeowners to collect credits for the power produced by their solar panels, and they can then sell these credits to local power companies. Illinois Solar for All is an income-based program to install solar systems with low to zero upfront costs.
Kansas Solar Power Incentives
Similarly to Missouri and Illinois, Kansas residents who invest in solar are exempt from such investments that increase their property value from affecting their taxes for up to 10 years from purchase.
In addition to federal tax credits, utility companies like Evergy offer credits to customers using solar and even offer clean energy incentives in Kansas City to offset energy use with no solar panels required.
Costs and Savings
The national average to install solar panels is $16,000, though costs are dependent on where you live and the type of system you want to invest in. This can be a significant up-front investment cost. So before deciding to take the plunge into solar, you may ask yourself, “How will I pay for my solar system?”. There are several options to consider, including cash, personal loans, home equity loans, and mortgage loans.
Let’s expand on the financing options.
- Cash — Yes, cash is always a good option. Still, with many money markets paying upward to 5% on your money or the option to invest your cash in other investments, it may be better to take advantage of a longer-term financing option.
- Personal or Home Improvement Loans — These can be another good source to finance the up-front costs of the system. The downside is that the interest rates are typically higher, and terms are shorter, thus making for a more expensive monthly cost. You will also want to take into consideration that the interest rates can sometimes fluctuate with these loans. Some states, like Missouri, have special financing programs like PACE to fund these specific projects.
- Home Equity Loans — With these, you can go for a longer term, but typically, an appraisal will be required. Many are interest-only payments that require a larger monthly payment to pay down the loan balance, and the interest rates typically fluctuate and are based on Prime Rate. The interest rates on home equity loans are close to 8-10% in this market and are often not fixed.
- Mortgage Loans — In our opinion, this is the best way to finance your new solar energy system for your home. If you are a homeowner, you can speak with a Homestead loan advisor about a cash-out mortgage. This is typically the most affordable option and will get you the funds needed for your new solar system. The benefit of using a cash-out refinance is that the rates are fixed, and terms go up to 30 years. This makes the payments very affordable. We can go up to 80% of the value of the home. Now, while you may wonder about giving up a low rate – the savings you will receive with solar energy per month may very well offset those costs.
Homestead Financial Mortgage has a unique program offered by HUD and FHA called an Energy Efficient Mortgage. If you are refinancing or purchasing a home, with this program, we can increase the price of the loan to include the cost of the solar system you want to install. The benefit here is that it allows homeowners, who typically do not have enough equity in their homes to do a regular cash-out loan, to get an estimate of the cost of the solar system and add it to the appraisal, showing what the new value of the home will be after the solar panels are installed. This is a fantastic option to ensure your home will be worth enough value to pay the cost of the solar system with your new Energy Efficient Mortgage through Homestead Financial Mortgage.
There are many reasons to go solar, but energy savings usually tops most people’s lists. You can save, on average, $1,500 a year if your system is generating enough energy to cover your home usage. You will see those initial savings on your first power bill, but you’ll really see the savings after several years of use when your savings have helped you recoup the cost of your initial investment.
Depending on the type of system you invest in, the number of credits and rebates you receive, and where you live, you could recoup your investment costs in anywhere from 5 to 10 years. This can lead to an additional 10 to 20 years of free energy before your solar system loses efficiency. Not only will you be saving money, but you will also be contributing to a cleaner environment while increasing the value of your property should you decide to sell.
Reach out to a Homestead loan advisor for more details. We’d love the opportunity to help you save money and increase the value of your home by going solar!