This Is the Average American's Solar Panel Cost

Is it something you should invest in?

As living costs continue to rise, many homeowners are grappling with sky-high utility bills. And even during periods when living costs are more moderate, the reality is that electricity bills can be astronomical for some homeowners, especially during the summer, when heat waves can result in perpetual air conditioner usage.

If you're tired of paying your utility provider a ton of money each month, you may be interested in outfitting your home with solar panels. That way, you can generate power yourself without having to rely on the grid -- and racking up costly bills in the process.

But as is the case with home improvements across the board, there are costs involved in installing solar panels. And you'll need to see if they're worth paying.

What homeowners pay on average for solar panels

The cost of solar panels will hinge on a number of factors, including the size of your home and the type of system you want to install. But Investopedia reports that the average upfront cost for solar panels is $3,500 to $16,000.

Clearly, that's a huge range. And so if you're truly interested in having solar panels installed, it pays to reach out to companies in your area that do that sort of work and obtain some estimates. That's really the only way to know what specific price tag you might be looking at.

Keep in mind, though, that if you pay for solar panels, you may be eligible for a tax credit that helps offset their cost. Systems installed in 2022 may be eligible for a credit of up to 26% of their cost, while systems installed in 2023 may be eligible for a 22% credit. As of now, these tax credits are set to expire in 2024 unless lawmakers renew them, so if you're serious about getting solar panels, you may want to start doing your research sooner rather than later.

How much money will solar panels save you?

The amount of money you save on energy costs will hinge on how much energy your solar panels can produce. But let's say your panels are able to power your home so you don't use electricity at all. If your average monthly electric bill is $200, you stand to save $2,400 a year. And from there, you can calculate your break-even period.

So, let's assume you end up spending $10,000 to have solar panels installed (and for the sake of simplicity, we won't include a tax credit in this calculation). Divide that by $200 a month, and it will take you 50 months, or a little over four years, to recoup your money and come out ahead financially. So if you think you'll remain in your home for well over four years, solar panels could be a good investment for you.

How to pay for solar panels

You may not have the money in your savings account to cover the cost of solar panels in full upfront. Many companies will let you finance your installation directly, or you can look at getting a home equity loan to cover that cost.

A personal loan is another option worth exploring to finance solar panels. But you may find that you're able to snag a lower borrowing rate if you go with a home equity loan.