Asking how to budget for solar panel installation costs is the first step to going solar.
Many people take one look at the price tag and call it a day. But solar is surprisingly affordable if you know how to budget.
In this guide, I’ll cover everything you need to know about budgeting for a solar panel installation. From understanding the true costs to maximizing savings.
Let’s get started!
Here’s what we’ll cover:
- Why budgeting is the key to your solar project
- What goes into the total solar panel installation cost
- Where you can cut costs and boost savings
- Financing strategies that make solar even more affordable
Why budgeting for solar panel installation cost is so important
Most people approach solar with a “Costs too much” mentality.
But that’s because they don’t budget correctly. Solar panels are a long-term investment that saves you money over time through reduced electricity bills.
The average solar installation cost is around $28,000 before incentives. Ouch.
Here’s the thing, though:
After you apply the federal solar tax credit and other incentives, that number comes down by a lot. Think $20,000 or less.
And that’s just the beginning of the savings…
What exactly is the true solar panel installation cost?
Before you can create a budget, it’s important to understand what you’re really paying for.
Solar installation cost isn’t just solar panels.
In fact, solar panels make up only 12% of your total solar panel installation cost.
The rest is inverters, mounting equipment, labor, permits, and installation. Wondering about the solar panel price per watt? The national average is $2.86 per watt for solar panels. The average cost of solar panels in Delaware may help you to get a better idea of what to expect.
Solar panel system prices range from $2.50 to $3.50 per watt installed. An average home solar system will be 6-8 kW. This means a solar system can cost between $15,000 and $28,000.
That’s right, the equipment only.
The good news is, solar panels actually pay for themselves over time.
How to breakdown the solar panel installation cost
Don’t panic over the initial numbers. When you budget for solar, it’s helpful to understand where every dollar goes. Here’s the typical breakdown of a solar panel installation cost:
Equipment costs
- Solar panels (12% of total)
- Inverter ($1,000 – $2,500)
- Mounting equipment ($2,400 – $2,800)
- Monitoring technology ($300 – $800)
Installation and soft costs
- Labor/Installation
- Permits/Inspections
- System design
- Electrical work
Keep in mind that your roof condition plays a role in your budget. Flat roofs or older roofs with more complications will cost more to install.
Tile roofs or metal roofs often require special mounting equipment.
Ground mounted systems are more expensive than roof-mounted systems due to higher labor and material costs.
Maximizing your solar savings
Budgeting gets really interesting when you consider the true cost of solar.
Because the sticker price isn’t what you actually pay. Not even close.
The federal solar tax credit lets you deduct 30% of your cost from your taxes. That $28,000 system? It becomes $19,600 after the credit.
But wait, there’s more:
Many states offer additional rebates, sales tax exemptions, and property tax exemptions. And some utility companies offer net metering programs to sell excess energy back to the grid.
Stack all these incentives together and your real out-of-pocket solar installation cost could be 40-50% less than the original sticker price.
Mind blown, right?
Smart ways to finance your solar budget
Ok, so now let’s talk about paying for your solar system…
There are three main ways to pay for solar:
- Cash purchase: Pay upfront and own the system outright. Best long-term return on investment (ROI). You own the system immediately and qualify for all tax credits. Fastest payback period.
- Solar loan: Finance the system with no money down. You still own the system and get the tax credits. Factor in interest payments in your solar budget.
- Lease or PPA: Little to no money down but you don’t own the system. Much lower monthly electricity savings but zero maintenance responsibilities.
The average payback period on solar panels is around 10.5 years. You have 15-20 years of essentially free electricity after that.
Your monthly electricity savings begin the moment you turn the system on. The average homeowner saves between $800 and $2,700 per year depending on your location and energy usage.
Solar panel financial incentives like the federal solar tax credit kick in the moment you file your tax return.
Calculate your real solar panel installation budget
Ok, let’s crunch the numbers and create a real solar panel installation budget.
Here’s how:
- Start with your current electricity bill: Multiply your average monthly electricity cost x 12 months to get your annual electricity spend. This is your baseline.
- Get at least three solar quotes: Contact multiple solar companies and request estimates. Compare their proposed system sizes, equipment quality, and total costs. Don’t just go with the lowest price tag…
- Analyze the cost per watt and value-added services: Some installers include monitoring, extended warranties, and maintenance in their package. Compare apples to apples.
- Factor in available incentives: Subtract the 30% federal tax credit and any state and local rebates from your total solar panel installation cost. This is your net investment.
- Divide your net cost by your annual electric bill savings: This is your payback period.
If it’s less than 12 years, it’s a great investment.
What to watch out for
Here are some common budgeting pitfalls to avoid when going solar:
- Overlooking ongoing maintenance and repair costs: Expect to pay $150-$300 per year for basic solar maintenance and cleaning. It’s not much, but worth budgeting for.
- Ignoring your roof’s condition: If you need a new roof soon, it’s best to do that before going solar. Include that cost in your budget.
- Falling for “zero down” solar loans: Loans are a great way to pay, but interest charges add thousands over the life of the loan.
- Not shopping around: Quotes vary by thousands of dollars between solar installers. Always get multiple bids.
Most importantly, take your time when budgeting for solar. Solar panels last 25-30 years, so you want to get it right the first time.
Bringing it all together
Budgeting for solar panel installation cost isn’t so bad.
First, understand the real cost after tax credits and incentives. Get multiple quotes to compare prices and services. Then select a financing option that works for your budget and goals.
Solar panel installation cost takes two primary factors into consideration:
- The current condition of your roof, or any work that needs to be done.
- The number of solar panels and wattage you need to cover your electricity usage.
Some key takeaways:
- Average solar system costs $20,000-$30,000 before incentives
- Federal tax credit reduces costs by 30%
- State/local incentives further cut costs
- Payback periods average 7-10 years
- 25-year solar savings can exceed $37,000
The best time to start budgeting for solar panels? Today. The federal solar tax credit and falling equipment prices make 2025 an excellent time to go solar.
Get your quotes, do the math, and build a solar budget that works for you and your home.