With a monumental climate bill, now law, Americans have a new and improved set of incentives to electrify their homes and reduce their energy bills.
Home electrification is a win-win as it lowers energy costs and reduces greenhouse gas emissions from everyday actions. But the upfront cost of electrification has historically prevented many Americans from enjoying long-term savings.
With $369 billion set aside for climate investments, the Inflation Reduction Act (IRA) of 2022 is a total game changer. Namely, it offers tens of thousands of dollars in rebates and tax incentives to Americans that electrify with rooftop solar, and more.
This historic climate bill was signed on August 16, 2022, officially paving the way for substantial energy savings and emissions reductions.
Here’s how the Inflation Reduction Act of 2022 benefits everyday Americans—
What’s in the Inflation Reduction Act for solar customers?
One of the most valuable incentives in the Inflation Reduction Act is the 30% Residential Clean Energy credit extension, commonly known as the solar investment tax credit or ITC.
This incentive was scheduled to decrease from 26% in 2022 to 22% in 2023 before going away entirely for consumers in 2024. Effectively immediately, it’s back up to 30% for all solar projects installed from 2022 to the end of 2032.
Quick note: Although it’s referred to as the “solar tax credit,” it also applies to battery storage!
That’s right, through 2032, residential and commercially installed solar alike can reap a 30% tax benefit on installed solar and battery storage equipment. Yeah, that’s a lot of green.
Why the extra 8% in 2023 from the solar tax credit matters
Let’s say you decide to purchase a $25,000 rooftop solar array for your house this holiday season. If you start the process in November or December, you’d likely be looking at an installation date in 2023 (these projects take time to plan, permit, and schedule). Without the IRA, you would get a tax credit worth 22% of the total cost of the project, or $5,500.
Not a bad chunk of change.
But with the beef-up from the IRA, the incentive is back to 30% and pushes your tax credit up to $7,500 on your $25,000 project. That increases the incentive by $2,000 come tax season. Tax credit for $25,000 solar/battery project Keep in mind, the incentive is based on the tax year the project is installed and deemed operational. Consult a tax professional with questions about the solar tax credit.
Hold your horses. What if I already installed solar this year?
More good news. If you already had solar or battery installed in the tax year 2022, you’ll get the 30% tax credit instead of 26%. To quote the bill exactly: In the case of property placed in service after December 31, 2021, and before January 1, 2033, 30 percent.
If you are currently pending installation, you’ll be eligible for the current 26% and the additional 4%, for a total of 30%. That’s an extra $1,000 on a $25,000 project.
Make sure to consult your tax professional regardless. If your contract says 26%, you should be getting 30%.
Final note: At this time Montana & Wyoming do not offer state tax credits for solar.