Solar Financing for Homeowners

The perception of solar costs being prohibitively high lingers from the early days of the industry. In actuality, solar equipment has become more efficient and less expensive in the last decade, as it has been adopted by homes, business and utilities across the globe. In addition, solar financing has become readily available for homeowners.

Financing Options Available in New Mexico

The Sunny family lives in Albuquerque and is able to offset 100% of the electricity usage in their home with a solar array. After solar installation, their average electric bill is only $8. The Sunny family chose to finance the system with a solar loan from Nusenda Credit Union. Nusenda used the solar equipment as collateral for the loan and did not place a lien on the Sunny’s home. The family had some cash saved and also a home equity line, but the solar loan allowed them to save these resources for other home improvement projects or for an emergency. The Sunny family, like most of our customers, chose to finance the entire $20,000 cost of their solar array, meaning they had no out of pocket expenses for going solar.

Most solar financing options take into account that going solar means homeowners qualify for a federal tax credit that accounts for 30% of the system cost. As such, the lenders allow consumers to reamortize their loan for a lower monthly payment after they have received the benefit of their tax credit.

The Sunny’s loan with Nusenda has a 15-year term and a fixed 3.69% interest rate. Within 12 months of solar installation, the family claimed the 30% federal tax credit they qualified for by going solar. They chose to put the $6,000 received from the federal government back into their loan and reamortize it so they have a lower monthly payment for the balance of the loan. The Sunny family pays less for their solar loan than they were originally paying to PNM for their electricity bills. Their solar loan can be paid off at the end of the 15-year term or earlier. Once it is paid off, the Sunny family will have free energy for the warranted life of their solar array and beyond.

Busting the Myth that Solar is Expensive

When I interview Affordable Solar job candidates, they often express a preconceived notion that while solar is great for the environment, it is very expensive. When informed that the value proposition described for the Sunny family is typical for most of our customers, the candidates’ responses are always something like, “Wow! Why isn’t everyone going solar?” Of course, I can’t help but agree with that sentiment.

To see if you qualify to go solar with no money out of pocket, please fill out an information form here. You can join thousands of New Mexican homeowners that have benefited from both the reduction of their carbon footprint and the financial savings of solar.

How do taxes fit into the solar conversation?

Solar is an environmentally-friendly home improvement that can bring you tax benefits as well as save you money on your electricity costs.

Currently, the federal government offers an Investment Tax Credit (ITC) for putting solar on your home or business. The ITC provides a significant financial advantage for solar customers by allowing them to deduct 30% of the cost of their solar array from their federal taxes.

How does the solar tax credit work?

To illustrate, if your solar array cost $20,000, you would be eligible for a $6,000 federal tax credit. If you owe $6,000 or more in federal taxes during the same calendar year that your solar is installed, you can effectively “wipe out” that much of your tax liability by investing in clean energy.

If you pay less than $6,000 a year in federal taxes, you can carry forward the credit until it has been fully utilized. For example, if you owe $4,500 in federal taxes in 2018 and are eligible for a $6,000 solar tax credit, the credit would cancel out what you owe the federal government for 2018. The $1,500 left over could be carried over to reduce your federal tax liability in 2019 by that amount. On the other hand, if you overpay your taxes during the same year your solar is installed, your federal tax refund will be increased by 30% of the solar array cost.

How long is the solar tax credit available?

The federal solar tax credit is a tremendous benefit for individuals who choose to invest in solar for their home or business. However, like most tax credits, this one is time-sensitive. 2018 and 2019 are the last two years homeowners will be able to deduct a full 30% of their solar array costs from their taxes. Homeowners installing solar arrays in 2020 will only be eligible to deduct 26% of the cost of their system from their taxes, and in 2021 only 22%. After that, homeowners will no longer be offered a tax credit for installing solar.

As a homeowner, now is an excellent time to effectively save 30% on a solar system by taking advantage of the solar tax credit.