A number of factors determine the final price of a PV system, including its size, component options and configuration, labor costs, local permitting costs and available incentives and tax credits.
The cost of a solar electric system is measured in dollars per watt. The average cost for a residential system is currently $3-5 per watt. That means the average 5-kW residential system will cost $15,000-$25,000, prior to tax credits or incentives.
What incentives and tax credits are available?
A one-time “Residential Renewable Energy” federal investment tax credit (ITC) is available for residential solar PV systems. The credit is based on a percentage of the total solar PV system cost. If the system is placed in service before Dec. 31, 2019, a federal tax credit of 30% of the total system cost is available. After Jan. 1, 2020, the tax credit will start to decline.
Federal Investment Tax Credit
| Placed in Service | Tax Credit Percentage |
| By 12/31/2019 | 30% |
| 1/1/2020 - 12/31/2020 | 26% |
| 1/1/2021 - 12/31/2021 | 22% |
Note: Homeowners must have the tax liability to utilize the credit, but a portion of the credit may be carried forward if not completely usable in the installation tax year.
State and Local Incentives
Depending on your local utility, there may be local solar rebates or incentives available. For more information on incentives, visit DSIRE.
Example of Purchased System
The average residential system is 5 kW or 5,000 watts.
System cost |
5,000 w x $4.00/watt |
$20,000 |
Federal tax credit |
30% x $20,000 |
$6,000 |
|
Total after tax credit |
$14,000* |
*State incentives may be available, depending on your utility territory.
What is the average payback period?
The average payback period for a residential solar electric system is between 6-9 years, depending on the cost of the system and the utility bill savings.
