Q: We can reduce our electricity bill by about $120 a month by installing solar panels on our home. The problem is that we would need to take out a home equity line of credit to pay for them. If we use the $120 a month to pay it off, we would pay off the loan in about 10 years. The warranty on the solar panels is 35 years. Given that electricity costs will only go up, is this a wise investment?
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A: You’ll have to judge for yourself. From what you’ve told us, there’s a fairly steep opportunity cost on your cash: You’ll have no savings on your investment for the next 10 years.
We wonder if you’ll incur any costs associated with the solar panels during that time that are not covered by warranty. If you expect any, you need to factor those expenses into your computations.
On the other side of the ledger, you may qualify for rebates or tax incentives on the installation of the panels. If so, you might find that the payback period is much shorter than the ten years you describe in your question.
According to the IRS.gov website, the Residential Energy Efficient Property Credit will give individual taxpayers a credit of 30 percent to help pay for qualified residential alternative energy equipment. Solar electricity equipment is included in this tax credit. If you have qualified costs of $10,000, you should expect to see a reduction in the federal income taxes you owe of $3,000. And if you don’t owe any taxes, you should expect your tax refund to increase by $3,000.
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