Often overlooked when considering the purchase of a Zero Energy (ZE) home are the considerable cost savings resulting from state and federal incentives as well as the elimination of energy bills. When these savings are taken into account, the monthly cost of ownership is dramatically reduced relative to a traditional home. As the example below illustrates, a ZE home purchased at $400,000 results in the same monthly costs as a $301,500 traditional home.
State and Federal Incentives
Currently, the buyer of a ZE home receives significant incentives from the state of New York and the federal government. The IRS provides a tax credit of 30% of the cost (after state rebates) of solar panels and geothermal heating/cooling. For a typical home in Green Acres, this means a total minimum federal credit of $19,500 as a result of a $20,000 7kW-solar system cost and $40,000 geothermal cost (plus an additional $1,500 maximum credit for superior windows, doors, and insulation). Added to this, New York provides a $5,000 tax credit for this size solar system on top of the considerable rebate that is applied already at installation. Taken together, a buyer will receive $23,500 in tax credits (note: the credit can be collected over multiple years if the buyer’s tax burden in the first year is less than $23,500. Also, it’s important to recognize that this is a dollar-for-dollar credit, not a write off!!). Let’s take a look at an example…
Example: Purchase of a $400,000 Zero Energy Home
- Mortgage interest rate = 3.7%
- Cost of oil/gas/electricity equates to $5,500 in utility savings as a result of ZE
- For illustrative purposes, the savings resulting from the federal and state tax credits above allow the buyer to place a higher down payment on the ZE home.
- The example below was used for a buyer at a federal marginal tax rate of 28%.
- A $400,000 ZE home is equivalent in yearly cost to a $301,500 traditional home. This cost is approximately $22,800 in mortgage, interest, tax (and for the traditional home energy utilities).
** The following analysis was prepared by Greenhill Contracting, Inc., not an independent financial expert. Each prospective buyer should check this information with their personal financial advisor to verify. ***
The logic above is applied to many different ZE home costs in the following table for reference: