What Is The Inflation Reduction Act and How Can It Help You Go Solar?

31 August 2022 Posted by Peter Almeida Uncategorized

The Inflation Reduction Act was passed by Congress on August 12, 2022, and its legislation involves several things, including reducing the deficit, access to health care, and the price of prescription drugs. Additionally, it addresses certain obstacles related to the energy industry and climate change, as one of its most important objectives. 

How Does This Act Affect The Solar Industry?

One of the most valuable incentives of the Law to Reduce Inflation is the extension of the 30% Solar Investment Tax Credit or ITC. This is retroactive to any solar panel system installed & placed into service as of January 1st, 2022. 

The Solar Investment Tax Credit (ITC), also known as the Solar Tax Credit, was first introduced by the Federal Government in 2006 to support the growth of solar energy, allowing home and business owners to deduct a percentage of the cost of installing a solar energy system from their federal taxes. The ITC applies to both residential and commercial properties and there is no limit on its value. Homeowners also can use the federal tax credit towards battery storage, installing new systems

What Does This Mean for Homeowners

If you install or are planning to install solar in 2022 and are expecting a 26% credit, you will now be eligible for the full 30%. The 30% income tax credit applies to residential and commercial solar energy systems and may now be transferred or sold to other taxpayers. There is no limit to the amount of the credit.

Here’s a timeline of the ITC:

  • 30% – Projects that finish construction between 2022 and 2032
  • 26% – Projects that finish construction in 2033
  • 22% – Projects that finish construction in 2034
  • 0% – Projects that finish construction in 2035 or later

And, it gets better…

Standalone energy storage systems are now eligible for the ITC as well! 

Let’s remember that, previously, battery storage systems were already eligible for a federal tax credit prior to the Inflation Reduction Act, but were subject to a very restrictive condition: only solar panel-charged battery systems were eligible. Now, this requirement has been removed.

In other words, energy storage systems were not eligible for the ITC unless they were connected to a solar panel system. But now they are!

The 30% credit also applies to energy storage whether it is co-located or installed as standalone energy storage. This enables the retrofit of a battery to a solar array while taking advantage of the credit.

When does the 30% ITC begin for battery storage systems?

The ITC for battery storage systems will begin to apply for projects in 2023. You will be allowed to claim the tax credit for a battery storage system even if you buy and install them a year or more after you install a solar system. Battery storage systems installed in 2022 are still subject to the requirement of being charged with solar power.

Are Energy Efficiency Upgrades included?

Yes! This law also includes home energy efficiency incentives that Americans can take advantage of to reduce their emissions and lower their energy bills. A key part of the new law is a set of targeted rebates for low- and moderate-income households. Households earning between 80% and 150% of the area median income can recover half the cost of specific energy upgrades, while those earning less than 80% of the median income can receive a full refund, up to a certain limit. 

Additional Tax Credits & Rebates Include:

  • Electric Vehicles (New & Used)
  • Electrical Panels
  • Heat Pumps
  • Electric HVAC
  • Energy Efficiency Appliances
  • Impact Windows & Doors
  • Insulation
  • Other Home Efficiency Projects

Bottom Line

For homeowners, the solar tax credit is just the icing on the cake when it comes to energy efficiency incentives. With a 30% tax credit, solar being at its cheapest price yet, and the additional home efficiency incentives available, if there has ever been a time to go solar, it is definitely worth doing so now. 

READY TO TAKE ADVANTAGE OF THESE GREAT SAVINGS?

SCHEDULE YOUR FREE SOLAR QUOTE & START SAVING MONEY!