What is the Solar Investment Tax Credit (ITC)?
The federal solar energy tax credit is a 10-year extended tax credit you can now claim on federal income taxes for a percentage of the cost of a solar photovoltaic (PV) system installed in 2022.
The bill includes $370 billion in spending for renewable energy and climate measures. As written in the Inflation Reduction Act of 2022, the tax credit will begin at 30% and step down to 26% in 2033 and 22% in 2034.
Additionally, leased or purchased battery storage systems would likewise qualify for a 30% credit. Add to that rebates for heat pumps (up to $8,000), heat pump water heaters ($1,750), induction stoves ($840) and upgrades to one’s home electrical system ($4,000), and you could potentially see how solar begins to pay for itself over time.
What Does It Cover?
Panels: The credit covers solar PV panels or PV solar cells.
Additional equipment: The credit covers other solar system components, including the balance-of-system equipment and wiring, inverters and other mounting equipment.
Batteries: The ITC covers any storage devices, such as solar batteries, charged exclusively by your solar PV panels. This claim works even if the storage is activated in a subsequent tax year to when the solar energy system is installed. Storage devices are still subject to the installation date requirement.
Labor: Labor costs for on-site preparation, assembly or original solar installation. Coverage also includes the permitting fees, inspection costs and developer fees.
Sales tax: The credit also covers any sales taxes applied to these eligible expenses.
How Does This Change Things?
The Inflation Reduction Act is essentially removing historically strict requirements and is allowing more storage energy projects to qualify you for a 30% tax credit, even if they are stand-alone facilities.
Batteries that connect to a solar power project will continue to qualify for the credit, even if they are no longer being charged by solar power.
Let’s also mention that solar power projects eligible for the full 30% tax credit can increase their tax credit by an additional 10% – to 40% in total – by purchasing domestically produced hardware.
How Long Do I Have to Take Advantage?
Starting in 2025 the Investment Tax Credit will be retired and turned into a much broader, technology-agnostic credit that applies not only to solar power, but to many emission reducing techniques.
The same terms apply for solar, which also gets a 30% transferable tax credit that lasts until September 30, 2031. After 2032, the credit will begin to decrease.
Right now, the federal solar tax credit is making the switch to solar a more affordable and cost-effective investment than ever.
These incentives can also mean an increase on the value of your home, as well as a 40% cut in greenhouse emissions from 2005 levels by the end of the decade.
Note: If you’re a resident or homeowner in the State of Illinois, you could be qualified for some special assessment state solar programs.
Ready to Make the Switch to Solar?
If you’re also ready to invest in a renewable future, Phoenix Exteriors is here to help you start your solar journey!
We have fully customizable solar kits and panels that will fit whatever needs your home may have. We want to help you save the planet and your wallet.
Ready to make the switch to solar?
Book a solar appointment with Phoenix here.
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Resources:
https://pv-magazine-usa.com/2022/08/12/whats-in-the-inflation-reduction-act
