Do Solar Panels Increase Home Value? (2024 Guide) (2024)

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Installing solar panels helps homeowners reduce their carbon footprint and energy costs. Those long-term savings translate into added value for your home. According to the Appraisal Journal, your home value increases $20 for every $1 reduction in your yearly energy bills. This means that if your solar system helps you save $400 in a year, your home value increases by $8,000.

According to Zillow, this will result in a higher asking price when you sell your home. In the 2021 Zillow Group Consumer Housing Trends Report, 67% of potential home buyers ranked energy efficiency as a “very to extremely important” feature for a home.

These buyers were willing to pay an average of 4.1% — or $9,274 — more for homes with solar panels than for comparable homes. Averages were higher in some markets, such as New York, where solar-powered homes sold for 5.4% more, adding an extra $23,989 to the sale price. In the largest solar home study to date, the U.S. Department of Energy’s Lawrence Berkeley National Laboratory (Berkeley Lab) found that buyers were willing to pay $15,000 or more for solar-powered homes.

*The results presented in the calculator above are generated using estimates provided by Blue Raven, and the Appraisal Journal.The output value is an estimate and should not be used as a legitimate appraisal.

Your total home value increase depends on additional variables, including your local housing market, solar system condition and location. We’ll explore these factors in detail.

Electricity Rates in Your Area

Solar-powered homes help homeowners reduce their energy usage and save on energy bills. These savings are bigger in areas with higher average utility costs. According to the U.S. Energy Information Administration (EIA), the average household utility bill is $117.46 per month. However, some states exceed that monthly average, making them better housing markets for solar systems. The following states have some of the highest average monthly electricity bills in the United States:

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*Data from the U.S. Energy Information Administration (EIA).

Energy-efficient homes in places such as Orlando or San Francisco hold more value since the average monthly electricity costs are higher. Homebuyers benefit from long-term savings and sellers profit from the higher market value of their solar-powered homes.

Local Solar Market

Many states offer tax incentives to encourage homeowners to convert to solar energy. These make the transition to solar energy more affordable and help the state expand its solar potential. Solar-powered homes in solar-friendly states will sell at a higher market value than in states with little or no solar power growth.

According to the Solar Energy Industries Association (SEIA), the following states have the best solar markets:

• California
• Texas
• Florida
• North Carolina
• Arizona
• Nevada
• Georgia
• New Jersey
• Virginia
• New York

Owned vs. Leased Solar System

Homeowners must ensure they can legally transfer their solar system to the new owners when selling their home. Most solar companies have several payment options. Two options — full payment and solar leasing — give homeowners the greatest flexibility when selling a solar-powered home.

Full payment is the best way to guarantee a smooth transition for the new buyer. This requires a large up-front investment from the original owner to own their system, but makes it easy to include the system with the home sale.

With solar leases, the solar company retains ownership of the system. Solar leasing transfers require either a lease buyout or a transfer. With a buyout, the owner pays off the remaining balance for the system to close the lease. This allows the home buyer to start a new lease with the solar company. Depending on the time remaining on the lease, this could result in a large lump sum payment.

With a lease transfer, the current lease moves from the buyer to the new owner. The new owner takes over the lease and any remaining time on the contract. Most companies require a credit check to ensure the new owner can take over the lease. This could delay your home sale if potential buyers don’t meet the company’s requirements.

Solar System Condition

Your home value will increase considerably if your system is up-to-date and in excellent condition. Outdated systems in poor condition won’t attract buyers and could deter them. If you’re interested in selling your home with a solar system, ensure it’s in peak condition by performing regular maintenance and upkeep.

Age is another variable that could lower your home’s resale value. Most solar systems last 25 to 40 years with excellent maintenance and care. If your system is already 10 or more years old, the new owners might have 15 years of use after their purchase. Any homes with a solar system older than 10 to 15 years won’t benefit a buyer.

If you’re considering purchasing a home with a solar system, ask the sellers for full documentation on the system. They should provide details from the original sale, warranty coverage, technical issues and service repairs. You should receive a complete solar system history from installation to the present.

Major home improvements, including energy efficiency upgrades, add property value to your home. In turn, your property tax increases. Several states have laws in place to protect homeowners from additional property tax for solar systems.

According to the SEIA, 36 states have property tax exemption laws that allow residents to install solar energy systems without the added property tax. These tax exemption percentages vary from state to state. For example, Colorado and New York residents qualify for a 100% exception, but North Carolina homeowners get 80%. Check your state’s policies for property tax exemptions available in your area.

Investing in a solar system requires a large up-front cost. Although this prospect can be overwhelming, the system will eventually pay for itself from your long-term energy savings. There are also several rebates and incentives available to help offset the initial cost.

Solar Tax Credits and Incentives

Homeowners who own their solar system qualify for the federal government’s Solar Incentive Tax Credit (ITC), also known as the federal tax credit. This provides a tax credit equal to 30% of your solar panel installation costs and can be claimed during tax time. The rate will reduce to 26% in 2033 and 22% in 2034. It will end in 2035 unless extended.

Some states offer additional solar savings with state tax credits and exemptions. Similar to the federal tax credit, the state credit applies to your state tax liability. Other programs include sales tax exemptions that allow you to purchase your solar system without sales or local sales tax. These programs vary in availability and savings.

Net-Metering

Net-metering programs allow customers to sell their excess solar energy back to the grid for credits. These credits are applied to their future utility bills or paid out at the end of a calendar year. Some states have net-metering laws, while other programs are available through certain utility companies.

Solar Batteries

Solar customers can install solar batteries to store their excess electricity for later use. Stored energy can offset high electricity rates and keep your energy costs low. Solar batteries also provide power during cloudy days, blackouts or any time your solar panels are unavailable. Adding a solar battery to your system also increases your cost savings, making your solar system more valuable.

We recommend using the Database of State Incentives for Renewables and Efficiency (DSIRE) to check for available solar incentives, credits and net-metering programs in your area.

Solar panels raise home value thanks to their long-term energy savings, generating increased interest from home buyers. Real estate agents are more likely to mark up the price of a solar-powered home versus a comparable home.

Before purchasing a solar-powered home, it’s important to get the full details of the solar system to check its condition and history. If you’re a homeowner considering moving to solar power, we recommend getting quotes from at least three top solar companies to find the best rates. You can use the tool below to begin your search.