On Tuesday, August 16th, 2022, President Biden signed the Inflation Reduction Act (IRA) into law. This document is a whopping 730 pages of information regarding health care costs, corporate taxation, prescription drug pricing reform, and energy costs.
Currently, there is a $369 billion estimate by the Joint Committee on taxation targeting energy security and climate change. Furthermore, there is a focus on investing in domestic energy production and manufacturing. If everything in the Act is carried out, it is said that the US could reduce carbon emissions by roughly 40% by the year 2030!
The team here at Alliance Solar is excited about these new changes and the fact that the inflation reduction act passed. However, we feel it's important to boil down the critical parts of the document concerning solar to help both current and future homeowners and businesses utilizing solar energy receive important clean energy incentives!
First and probably most noteworthy for many individuals is the Federal Solar Income Tax Credit amount increase. Previously the ITC amount was 26% and was set to step down at the end of 2022. Yet, the recent passing of the bill has increased the Federal Income Tax Credit for solar projects to 30% until 2032. Per the Inflation Reduction Act of 2022 summary, approximately 7.5 million more families will be able to install solar panels on their roofs with the 30% credit.
Also, your solar project is under an umbrella if you don't know yet. You can receive a 30% tax credit on not just the panels but also a new roof replacement and tree trimming necessary for the project. You can even get the credit on a solar EV charger for your car! So there's no better time than the present to go solar.
Moreover, the 30% tax credit is retroactive for all systems installed in 2022, so if you had your project installed this year, reach out to your solar installation provider to find out how this increase will impact what you are eligible for!
This tax credit is also considered transferable and can be sold or transferred to other taxpayers utilizing a "transferable credit." Again, your solar professional should be able to help advise you on if this is something you need to consider or not, as many people can simply benefit from keeping the tax credit for themselves.
Please refer to the Inflation Reduction Act 2022 itself to learn about the entirety of rebates for home and business owners. In addition, you can also receive rebates and credits on energy-efficient home appliances, windows, heat pumps, and more. Learn more here.
The EV market has seen quite a few changes that shift existing tax credits and eligibility requirements. These changes are set to take effect in January 2023. More changes are also set to take effect in January 2024, making 2023 an ideal time to purchase a few different manufacturers' models. Make sure to look into which manufacturers' eligibility is valid before making any purchase decisions- the writers at The Verge provide a great breakdown of which cars are included in the EV tax credit and when. Overall, there will be up to 7,500 dollars in tax credits for new electric vehicles and 4,000 dollars for used electric cars.
At Alliance Solar, we offer electric vehicle chargers, so we often hear the question, "do electrical vehicle chargers qualify for the solar tax credit?" The answer to that is yes! Installing an electric vehicle charger for your use at home can be done with your solar project and is eligible for the ITC. Reach out and schedule a virtual solar consultation if you want to learn more about your options for adding an EV charger to your system!
Overall, the team at Alliance Solar is grateful that this Act is opening the door to more home and business owners going solar. Previously, it felt like there was a mad dash to get solar panels due to the tax credit decreasing each year. Now, new solar users can take their time going through the process and then sit back and relax with their free energy and a 30% credit at the end of the year.
Please note that there are countless other benefits and incentives for individuals from the Inflation Reduction Act. However, we have only highlighted a few significant parts related to solar and clean energy initiatives.
Final details and guidance from the IRS are expected in the coming months, and we look forward to providing more information as it becomes available. Check our social media pages and website to stay up to date!