A much-needed win for the Solar industry. Inflation Reduction Act of 2022.
Edit: As of 8/7/2022, the United States Senate has officially passed the Inflation Reduction Act of 2022.
Here at solar.com, we pride ourselves on educating the public on everything solar. And folks – this is a biggy.
As part of the proposed Inflation Reduction Act of 2022, currently on track to hit the Senate floor in a week’s time, the federal solar tax credit is set to have some substantial changes that will benefit solar customers…are you ready for this…for another decade.
For perspective, the last extension was in the final days of 2020 for an additional two years through 2022.
Well, nearly two years later, here we are again. But this time, things are different.
A little bit of Context
Until the bill passes, the Federal Solar Tax Credit (known as the Investment Tax Credit or ITC) for 2022 is at 26% and is set to be reduced to 22% in 2023. It’s also set to be completely phased out for residential solar by 2024.
What began its journey as part of the Energy Policy Act of 2005 three administrations back has been through several extensions. At an initial rate of 30%, the tax credit would be reduced to nearly 10% by 2017.
After nearly 15 years of feeling that glorious 30%, the ITC incentive was reduced to 26% in 2020.
So how does another 8% sound?
With the rate decrease to 22% lurking in the shadows for 2023, the time for congress to act is now, with the approval of the Reduction Act of 2022.
Once passed, the rate would increase the incentive back to 30% for an additional ten years.
That’s right, through 2032, residential and commercially installed solar alike can reap a 30% tax benefit on installed solar and storage equipment.
This tax benefit will step down to 26% in 2033 and 22% in 2034
Yeah, that’s a lot of green.
The truth behind the scenes.
Not only is this a massive win for consumers looking to purchase solar, but the innovation such legislation generates will change how we consume electricity for decades to come.
More incentive to purchase solar will naturally increase the demand, fostering better equipment, installation experiences, and electrification technology.
“This is the type of far-reaching climate impact legislation that Americans, and specifically the clean energy industry, has been waiting for since helping to elect President Joe Biden and winning voting control in both the House and the Senate. If the IRA is passed into law it will provide broad, long-term support which provides investors and businesses with assurance of market regulations and incentives to spur major long-term investments broadly across many industries. This is great for the climate and for the economy.” – Kyle Cherrick, VP of Business Development, Solar.com
Let’s also not forget the job growth projected in the next decade or so. According to the bureau of labor statistics, demand for solar photovoltaic installers is projected to increase 52.1 percent between 2020 and 2030, as one of the fastest growing industries.
“As demand for solar and wind energy generation increases over the next 10 years, solar and wind energy infrastructure will need to be put in place. This requires a variety of workers, including solar PV installers and wind techs. Over 50 percent more of these workers are projected to be needed by 2029” [bls.gov]
We suspect this will likely amplify further due to the Inflation Reduction Act.
It also paves the way to grid parity, which essentially happens when solar or other renewable energy sources are less or equal in cost when compared to conventional energy sources like coal or other fossil fuels.
But “Hold your horses, I already installed solar this year?”
More good news. You’ll get 30% for anything installed in tax year 2022. To quote the bill exactly,
“In the case of property placed in service after December 31, 2021, and before January 1, 2033, 30 percent.”
So if you installed your solar system on New Year’s Day 2022, or surprised your loved one on Valentine’s Day this year with a brand new solar system, your incentive is 30%.
If you are currently pending installation, or in the process of getting binding quotes on solar.com – you’ll be eligible for the current 26% and the additional 4%, for a total of 30% once the legislation passes. Make sure to consult your tax professional regardless. If your contract says 26%, you should be getting 30%.
The time for solar is now.
From the sticker shock of a gallon of milk to the heart-pulsating feeling as you open your electricity bill, inflation has hit a 40-year high, and we are all feeling it.
Energy, in general, has seen a 12-month spike of 41.6%, the highest since 1980 after the fallout of the 1979 oil crisis. More specifically, electricity has suffered a 13.7% increase in the past 12 months. The highest since 2006.
The cold hard truth is that energy will continue to get more expensive, especially as the U.S. unofficially enters a recession.
But lo and behold the inflation-resistant power of solar. The more electrification homeowners adopt, the more resistant to traditional energies they become.
We assure you, the sun will not charge you 13.7% more next year than it did this year to provide energy to your solar system.
The stability of knowing the sun is also not going anywhere, anytime soon, will assure homeowners a fighting chance against the volatility of traditional energies. Sustainable energies like solar are key to reducing the consumer burden of inflation, hence why it was included in the Inflation Reduction Act of 2022.
So, are you convinced? Head on over to solar.com, answer a few questions and get ready to cash in on those solar tax incentives.
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