How the New Inflation Reduction Act 30% Solar Tax Credit Works
It’s official, the 26% Solar Federal Income Tax Credit (ITC) has been extended and increased by President Joe Biden’s passing of The Inflation Reduction Act. This newly passed bill allows homeowners to shave 30% off of their residential solar installation costs through their federal taxes! Furthermore, the tax credit was set to expire in 2024, but has now been extended to 10 more years – all the way to 2032!
Will there be new solar incentives in 2022?
The new Phoenix solar installation incentives in 2022 have officially been increased from 26% up to 30%! And there’s even more good news for those who feel they just missed the boat this year… this is being made retroactive for any solar installations or clean energy home upgrades as early as January 1, 2022! So when filing your 2022 federal tax return next year, be sure to include any clean energy home upgrades for a 30% deduction.
What is the federal tax credit for solar in 2023?
As per Joe Biden’s new Expansion Decrease Act, the government tax break for sun oriented in 2023 will be an astounding 30% – that is immense! It used to be 30% really, and individuals were arranging to get sunlight based chargers introduced on their homes and organizations to exploit free government cash for sun oriented… however presently, it’s back! This is planned to stay in actuality for the following 10 years until 2032 (except if it is overruled eventually… so make certain to exploit the expanded tax reduction reserve funds and get your sun powered charger establishment booked pronto!
How does the 30 percent solar tax credit work?
Upon filing your tax return, you will be able to get a deduction of 30%. So for example, if you install a home solar panel system that costs $20,000, you will be eligible to receive a $6,000 tax credit on your taxes.
How is the Solar Tax Credit Paid?
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In the example above, you wouldn’t get a refund check for $6,000. What happens is your taxes owed would be reduced by that much in the year of solar panel installation. Now, if you reach a break even point in your taxes, but still have leftover credit, then it would rollover to subsequent years!
In other words, if your Phoenix home solar installation runs $20,000, and you install it in 2022, you are entitled to a $6,000 tax credit. Now, if you owed only $4,000, then the remaining $2,000 of credit would roll over to your next year’s taxes to help you out once again the following year. Pretty neat huh??
Biden Solar Tax Credit
President Biden signed The Inflation Reduction Act of 2022 into law on August 16, 2022. This effectively extended the solar tax credit (which was set to expire in 2024), and increased it from 26% to 30% – for 10 more years! Now those interested in residential solar installations do not need to fret about missing the boat, as many once thought.
The Inflation Reduction Act (H.R. 5376) has a broad range of measures aiming to reduce carbon emissions and help the fight against climate change. This was one of the first climate bills to come from unified Democrat Senate support. The bill states that the credit will begin to reduce to 26% in 2033 and 22% in 2034, leaving us 10 more years to save on home solar in Phoenix and throughout the USA!
The other neat thing about the bill is that there is no maximum deduction for the solar tax credit with the Inflation Reduction Act. This is huge! For those interested in saving the most amount of money, combining solar battery backup with your solar panel system would be a smart move, or even other energy-reducing projects like exterior windows, heat pump hot water heaters, better insulation, and more.
It would be smart to maximize your home energy reducing projects now in order to future-proof your electricity needs, reduce your expenses long term, and better the environment.
How long does the Solar Tax Credit Last?
With the passing of the new Inflation Reduction Act, the 30% solar tax credit will now be in effect until 2032, which is a significant advantage for both residential and commercial solar installation. Thereafter, it will be reduced for a couple of years until it expires. While this may seem like ample time, it’s crucial to act swiftly. This legislation, largely backed by Democrats and signed by President Biden, could be subject to change by future administrations.
Therefore, it’s important to move forward with installing solar as soon as possible, especially considering the current incentives. Whether you’re looking at standard solar installations or specific additions like a Tesla Charger installation in Phoenix, now is the time to act. Consulting with a reputable solar energy contractor can help streamline this process.
This is not the time to delay, especially when the rebate is high and solar equipment prices are competitive. Contacting solar companies near me can provide insights into the best solar solutions for your needs. Don’t wait for market shifts like supply and demand, inflation, or a recovering supply chain to potentially increase prices. Act now to take advantage of these favorable conditions.”
What Can You Write Off With The Solar Tax Credit?
With the new bill in effect, the Department of Energy has a similar list of expenses that are eligible to be covered with the solar tax credit:
- All of your solar panels as well as the equipment needed to run it; wiring, racking, inverters etc.
- All solar installation contractor’s labor for quote, design and installation
- All fees for solar permits, city & utility inspections, and any required developer fees
- Solar Backup Storage Batteries are also included in the credit! Already have a solar panel system installed, but want to add storage batteries to a solar panel system? No worries! You can even claim the tax credit for adding them, or if you just buy the solar batteries to install at a later date.
- Solar panel(s) used to power an attic fan
- Sales taxes on eligible expenses
Solar battery storage must store at least 3 kilowatts. Considering the average home solar panel system size around Phoenix is between 6 to 10 kw, it would only make sense to have at least that much to power your home overnight or in the event of an outage anyway.
Do solar leasing options qualify for the solar tax credit?
No, unfortunately not. You have to purchase outright or finance your solar panel system in order to qualify for the solar tax credit. Reason being, you don’t own it… therefore you can’t get a credit on something you do not own. This is just one more reason why solar leasing or power purchase agreements are a bad idea!!
Who can qualify for the federal solar tax credit?
The Federal Solar Tax Credit (ITC) really can help to make solar a lot more affordable, especially when you’re looking at solar companies in Phoenix and considering the various options they offer. But with so many solar installers in Phoenix providing different programs like solar financing, solar leasing, PPA’s (power purchase agreements), or even $0 down “free solar”, it’s crucial to understand your eligibility before committing to any solar panel installation program.
According to The Office of Energy Efficiency & Renewable Energy (EERE), here’s what you need to know about who qualifies for the solar tax credit:
You must own the solar panel system. This means that solar lease programs and Solar Power Purchase Agreements (PPAs) DO NOT QUALIFY you for the solar tax credit. In these cases, it’s often the installer who benefits from the credit. This is a key consideration when determining ‘Are Solar Panels Worth It in Arizona‘, as the financial incentives are a significant factor.
Your solar panel installation must occur between January 1st, 2022, and December 31st, 2032 – the newly updated timeframe as per the Inflation Reduction Act bill.
The system must be brand new original equipment; it cannot be used or repurposed from an existing solar panel system. This is particularly relevant when working with EV Charging Station Contractors, who may also offer solar panel installations.
Installation must be on your primary residence or a secondary home within the USA. This includes homes in Arizona, where the solar potential is high.
Newly built homes with solar panels also qualify, but only if the system was purchased outright or through financing. This is a smart move, especially in regions like Arizona, where you can design your home to optimize solar energy production.
Investment properties that you own and rent out can also qualify for the solar tax credit. However, there are differences in how it is claimed, so it’s advisable to consult with your accountant to properly claim the solar tax credit on an investment property.
Remember, when exploring options with solar companies in Phoenix, it’s essential to understand these qualifications to maximize the benefits of solar energy in Arizona.”
In conclusion...
As I’m sure you can see by now, the new 30% solar tax credit is a huge win for home and business owners alike, thanks to the new Inflation Reduction Act.
As Abigail Ross Hopper, president of the Solar Energy Industries Association, said, “With long-term incentives for clean energy deployment and manufacturing, the solar and storage industry is ready to create hundreds of thousands of new jobs and get to work building out the next era of American energy leadership. This is a crucial window of opportunity that we cannot miss.”
Contents
- 1 How the New Inflation Reduction Act 30% Solar Tax Credit Works
- 1.1 Say goodbye to expensive electric bills with $0 down solar from Watt Masters
- 1.2 How does the 30 percent solar tax credit work?
- 1.3 Biden Solar Tax Credit
- 1.4 Say goodbye to expensive electric bills with $0 down solar from Watt Masters
- 1.5 Say goodbye to expensive electric bills with $0 down solar from Watt Masters